International investing is only appropriate for investors who have a high tolerance for risk.
Five Misconceptions About Retirement
January 23, 2008
Myth: International investing is only appropriate for investors who have a high tolerance
for risk.
Reality:
While investing globally does carry political risk and exchange- rate risk relative to
domestic stocks and bonds, international investing can reduce overall risk in portfolios by adding
a layer of diversification to your domestic holdings. By limiting your investments to those
domiciled in the U.S., you may be missing opportunities in a significant part of the world’s total
market capitalization. Since studies have shown that approximately 90% of investment returns
can be attributed to asset allocation, it is important that your portfolio is well diversified,
rebalanced periodically, and that your asset allocation and overall risk is reviewed as your
financial situations change.
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