Why should I invest in foreign stocks?

    Published: 06-16-2009
    Views: 11,581
    Financial Advisor David John Marotta explains why it may be a good idea to invest in foreign stocks.

    David John Marotta

    David John Marotta is the President of Marotta Wealth Management, a fee-only financial planning and asset management firm in Charlottesville, Virginia. He is an oft-quoted writer and speaker on financial matters and his weekly financial column can be found at www.eMarotta.com

    Host: Why should I invest in foreign stocks?

    David Marotta: The biggest reason to invest in countries outside the United States is to not have all of your investments in one country. If something happens in United States, you want to be diversified in other countries and your portfolio will have a smoother return because of it. If you were just to invest the way the global economy is you would invest two thirds outside the United States and only one third inside the United states. If you were just to look at the global capitalization of countries, you would invest half in foreign stocks and you would invest half in US stocks. If you look at each country's stock return and you look over the last 25 years, the United States has not been the best performing country ever. There is always another country that beats us and on average foreign stocks end up doing a little bit better then US stocks. Finally, foreign stocks dont move in sync with US stocks. Sometimes they move in sync and sometimes they dont. But the times they dont gives you a little bit of diversification and generally they only move in sync about 70%.