Big Returns in a Small World

The new year can do strange things to an investor. After the clock struck midnight on Jan. 1, after all the year-end buying and selling wound down around me, I sat looking at the contents of my portfolio -- contents that seldom change. And as I looked, I noticed something:

Where is my diversity?

Oh, I own retail stocks and tech stocks and even a little company from the waste-management sector. But one thing that ties them all together is that they're all American. And not to sound unpatriotic, but I'm not at all sure this is a good thing.

There's a plethora of reasons why I should be looking for new investments outside my country's circle of competence. Here are some of my favorites.

Investing in international companies gives me another way to recession-proof my portfolio, for starters. If the U.S. economy tanks and I have all my money sunk into U.S. companies -- no matter the industry -- then I'm bound to take a hit, at least in the short term. But if I pepper my portfolio with some global stocks -- good global stocks, though I hope that goes without saying -- I'm insuring myself against some additional fallout.

Furthermore, going global exposes me to new markets and ventures that I never would have considered stateside. If I can find a solid, growing international company that's reasonably priced, one I wouldn't mind holding for the long term, I'm a happy person. If it gives me an opportunity to become an early adopter to a market or industry that's on its way to the forefront, and if it gives me an opportunity to learn something new along the way, so much the better.

But none of this would mean a thing if international stocks consistently lagged their American brethren. The good news? They're movin' on up. Take the iShares MSCI EAFEIndex (AMEX: EFA  ) ETF, for instance, which holds such well-known international companies as BP (NYSE: BP  ) , GlaxoSmithKline (NYSE: GSK  ) , Total SA (NYSE: TOT  ) , Toyota (NYSE: TM  ) , Vodafone (NYSE: VOD  ) , and HSBC Holdings (NYSE: HBC  ) . The ETF, which tracks the international large-cap index, has beaten the S&P 500 by more than nine percentage points annually over the trailing-three-year period. Not too shabby!

The Foolish bottom line
In this age of worldwide industries and international companies with household names, "going global" doesn't have to mean incurring massive risk and uncertain results. In fact, researching and investing in international companies can be another safeguard to your portfolio, adding additional diversity and the benefits that accompany it.

Are you interested in getting into the global market, but don't have the time to research companies yourself? Check out Motley Fool Global Gains, where Fool senior analyst Bill Mann does his homework and recommends two new international picks each month. A free trial is yours if you click here.

Hope Nelson-Pope is the Fool's online coordinating editor. As evidenced by her diversity woes, she owns none of the companies mentioned here -- yet. Glaxo and Total are Income Investor recommendations. Vodafone is an Inside Value pick. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 523220, ~/Articles/ArticleHandler.aspx, 10/24/2016 2:41:38 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,223.78 78.07 0.43%
S&P 500 2,150.80 9.64 0.45%
NASD 5,303.19 45.79 0.87%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2016 2:25 PM
BP $35.80 Down -0.45 -1.23%
BP CAPS Rating: ****
EFA $58.10 Down -0.09 -0.15%
iShares MSCI EAFE… CAPS Rating: **
GSK $40.71 Down -0.43 -1.03%
GlaxoSmithKline CAPS Rating: ***
HSBC $38.09 Down -0.14 -0.37%
HSBC Holdings CAPS Rating: ***
TM $115.40 Up +0.13 +0.11%
Toyota Motor CAPS Rating: ***
TOT $48.46 Up +0.18 +0.36%
Total CAPS Rating: ****
VOD $27.72 Down -0.06 -0.20%
Vodafone CAPS Rating: ****