"It was like riding a tiger, not knowing how to get off without being eaten."
This painful quote isn't Indian poetry or a memorable movie line. It's part of the confession that Satyam
For foreign investors, the stings don't end there.
Liars, tigers, and Wall Street bears -- oh, my!
Shares of Baidu
Baidu cleaned up its act. Satyam is cleaning house. However, the damage is done to stateside investors who felt they had hot leads on fast-growing companies in China and India, respectively.
Don't watch your wallet, watch your passport
Financial bombshells abroad are enough to spook already nervous investors. Many took on risks in buying companies with names they sometimes couldn't pronounce, in countries they have never visited, and got burned.
It's hard enough to get a handle on what local companies are doing, even more so to become proficient in international customs and corporate governance several time zones away.
Does this mean it's time to sell all of your foreign stocks and take a "Buy American" attitude?
No way. Don't even think about it.
Satyam is being called "The Enron of India," but that phrase acknowledges that we have crooks within our own borders, too. Rogue traders have dealt European bankers like Credit Suisse
In other words, the occasional blowup will happen in every portfolio, no matter where the jurisdiction lines are drawn. It is up to you, the investor, to do your part by diversifying to make sure gains from your winners outweigh the head-shaking stinkers that will happen to all of us.
Diversify, diversify, diversify
Besides reducing the downside risk any one position presents to your portfolio, there's a silver lining to diversification: One company's fatal misstep is another company's golden opportunity.
If Satyam clients leave the disgraced IT outsourcing provider, it will be a blessing to rival Infosys
But these days, rather than buying a collection of thriving foreign companies, frightened investors are painting troubled and successful firms with the same brush. That's unfortunate for them, particularly given that some of the world's most successful investors, like Peter Lynch and Sir John Templeton, made fortunes buying a wide variety of stocks all around the planet.
So, for instance, when you see that a few of last year's biggest IPO disappointments were online educators in China, you shouldn't hold that against New Oriental Education and Technology
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Longtime Fool contributor Rick Munarriz thanks his parents for being able to see so much of the world when he was young. He does not own shares in any of the companies mentioned in this story. New Oriental Education and Allied Irish Banks are Motley Fool Global Gains recommendations. Sohu.com and Baidu are Motley Fool Rule Breakers selections. The Fool owns share of Allied Irish Banks and has a disclosure policy.