"The world is smaller, smaller every year."
-- Franklin Roosevelt, March 1, 1945

President Roosevelt had little idea, back in 1945, the degree to which his words would be true today. Our world has shrunk considerably. We can now pick up a phone and speak with almost anyone anywhere. We can sit in Iowa, reading news from Bangladesh on our computers. We see live footage of Iraq on TV. We buy all kinds of products made in all corners of the earth. And we can, via a quick contact with our brokerage, buy shares of many foreign companies.

But why might you consider investing abroad? Let me count the reasons.

Easy as one, two, three
First off, doing so can hedge your bets. The United States of America, wonderful though it is, isn't always in periods of great economic growth. Sometimes we're firing on lots of cylinders, and sometimes we're not. But we don't have to settle for purely lackluster returns (or losses) during stock market downturns if we've parked some of our money abroad.

After all, even at our best, we're not the fastest-growing economy anymore. Right now that's China, with India also growing briskly. According to an Associated Press article, "China's economy is projected [by the World Bank] to expand 9.6% next year and 8.7% in 2008." According to financialexpress.com, "The Indian economy grew 9.2% in the second quarter of 2006-2007." According to the folks at Knowledge@Wharton, "India clocked GDP growth of 9.1% in the first half of the current financial year, foreign direct investment is at an annual run rate of $12 billion (compared to $7.7 billion last year), corporate earnings are set to grow 25% this year and foreign institutional investors are thronging India's bourses."

The United States, in contrast, is growing its economy by around 2% to 4% these days. Wharton Professor Jeremy Siegel is expecting 2.5% growth for 2007. Want more comparisons? Singapore's economy is expected to grow by around 8% this year. Mexico, Taiwan, and South Korea's expectations are in the 4% to 5% range, potentially twice as high as American levels. Even Britain is looking for annual growth of around 3% in the near future.

Wonderful businesses
Once you drill down from the top level of the economy into each country, you'll find lots of wonderful businesses with strong stock performances. For example:

  • BP (NYSE:BP), Britain's energy giant, has seen its stock grow by an annual average of 13% over the past 20 years, enough to turn $5,000 into more than $60,000.
  • German chemical company BASF (NYSE:BF) has seen its stock nearly triple in value in just the past five years.
  • The stock of Japanese vehicle titan Honda Motors (NYSE:HMC) has gained an annual average of 15% over the past 15 years, enough to turn $5,000 into more than $40,000.
  • Nokia (NYSE:NOK), the Finnish cell-phone behemoth, has enjoyed an annual average stock price gain of 21% over the past decade, which includes the recent boom-and-bust market.
  • Infosys Technologies (NASDAQ:INFY), a giant in outsourcing, among other things, has seen its stock rise by an annual average of 28% over the past five years.

What to do
So if you're now interested in investing abroad, good for you. Don't just leap in blind, though; international investing can be trickier than domestic investing. Most nations don't have corporate financial reporting requirements as stringent as ours, for example. And most nations are not as stable as we are. Still, great money is being made out there.

One route you might take is investing in American companies that generate a lot of their income overseas. That's a winning combination. Intel (NASDAQ:INTC), for example, gets more than 80% of its revenues from outside the U.S. More than 40% of Dell's (NASDAQ:DELL) revenues come from abroad, as well.

Another option is finding some top-notch mutual funds focused on international investments. Many of these have racked up average annual gains in the high teens. You might also find some winning individual stocks by exploring the holdings of successful international mutual funds (though their lists of holdings aren't always too recent).

If you're feeling daunted, don't fret. That's reasonable, since few of us are as comfortable thinking of sending our dollars far away as we are investing here at home. If you'd like some globally savvy sorts to help you identify potential winners abroad, I invite you try out our brand-new service, Motley Fool Global Gains, which is dedicated to finding you the best international investments. It's headed up by longtime Fool Bill Mann, who has a lot of international experience under his belt, along with considerable investing smarts. Try it for free and see what you think.

Longtime contributor Selena Maranjian owns shares of no company mentioned. Intel and Dell are Inside Value recommendations. Dell is also a Stock Advisor pick. The Motley Fool isFools writing for Fools.