To be ready to capitalize the economic recovery when it comes, you'll need to be able to jump on great opportunities wherever they are. But if you only choose to invest in a single country -- no matter how large that country is -- you could miss out on many investments that could prove incredibly profitable.
For a long time, the United States has been the largest economy in the world. U.S. gross domestic product still dwarfs the GDP of its nearest national competitor, Japan. But the collective strength of the European Union as well as the fast growth of emerging markets like China and India have made it clear that the U.S. is only one part of an increasingly global economy -- one in which the most promising new businesses can pop up anywhere.
Yet for many people, the idea of investing abroad conjures up visions of dictators nationalizing entire industries, potentially leaving foreign investors with nothing. Even among developed nations, political and regulatory realities can differ greatly from what investors are used to in the United States. That's a big part of why so many investors decide not to make international stocks more than a token part of their portfolios.
But in this month's edition of the Motley Fool Champion Funds newsletter -- which is available online this afternoon at 4 p.m. EST -- lead analyst Amanda Kish explains why it's important to have some exposure to international stocks in your portfolio. Without it, she argues, you can't have a truly diversified portfolio.
Of course, the nature of the global economy cuts both ways. In the past, one might have hoped to avoid the full impact of a recession in the U.S. by investing in overseas economies that didn't rely on American customers to keep their businesses going. But as world business has become more and more interconnected, a downturn in one major economy inevitably has repercussions around the world.
The financial crisis provides a perfect example. Banks in many financial centers, from Switzerland's UBS
At first, you may wonder why owning shares of companies based in other countries is really necessary. After all, plenty of American businesses, including ExxonMobil
To a large extent, the answer is no. Companies that already have global brand awareness and business contacts could transplant themselves nearly anywhere. But often, being local is a big competitive advantage -- and companies that have already existed in a rising market for decades have a huge head-start over outside competitors who've only recently entered that market.
The easy way to get exposure
As hard as it is to sort through the thousands of stocks available on U.S. markets, the job only gets bigger when you start looking internationally. Differences in language, accounting standards, and disclosure requirements can prove challenging to investors without a lot of experience.
That's why in this month's issue, Amanda's pointing her subscribers to strong international mutual funds that will do the heavy lifting for you. Whether you're interested in big, well-established companies across Western Europe such as Vodafone
Want to see which funds she thinks you should consider? It's easy. Although Champion Funds requires a paid subscription, you can take advantage of a free trial offer to enjoy everything the service has to offer. Sign up today and you'll have 30 days to see how Champion Funds can help you add the global exposure you need.
Don't pass up this chance to diversify your portfolio by investing abroad. International stocks could be exactly the ticket to get the higher returns you need to reach your financial goals.
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Fool contributor Dan Caplinger has been an international investor for a long time. He doesn't own shares of the companies mentioned in this article. Allied Irish Banks is a Motley Fool Global Gains selection. Coca-Cola is a Motley Fool Inside Value pick. The Fool owns shares of Allied Irish Banks. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy works at home and abroad.