Armchair Millionaire Community Bulletin: How to Invest Internationally

Think that your investing opportunities end at the U.S. border? Think again--the world offers rich opportunities for those who invest internationally.

New York, NY (PRWEB) June 15, 2004 -- For many investors, it's much more comfortable to invest in firms that they know and whose products they use than in companies located abroad. However, if you keep all your investments here at home, you miss out on huge opportunities to increase your overall returns while lowering your risk through better diversification.

Armchair Millionaires have definitely taken the "invest abroad" message to heart. Here is just a little of what we heard when we asked them to tell us about their international investments:

"I've long owned a Europe large-cap fund and an emerging markets fund that invests in the Pacific and Latin America. When the US market is tanking, I'm glad I have them. So often on the days when the U.S. stock market is down, those other markets will be up." --JBQ

"While I have a small global exposure in some of my general mutual funds, I plan to expand my international outlook quickly. Why? Look at your everyday life--a TV made in Japan, a cell phone with headquarters in Finland, a coffeemaker owned by a German company, perfume conceived in France, running shoes made in China. In today's global economy, the boundaries blur quickly: My Toyota Corolla, the consummate Japanese car, is actually manufactured in North America!" --Bonnie T.

It's a big world out there, and the U.S. market now accounts for less than half of the total capital market around the globe. My checklist will get you started on tapping those opportunities.

The Armchair Millionaire's Checklist for Investing Abroad

Know your choices. Mutual funds are by far the easiest way to invest internationally. Your options include:
•International funds, which invest in countries outside of the U.S.
•Global funds, which invest all over the world, including the U.S.
•Regional funds, which specialize in one region, such as Europe or Latin America
•Country funds, which invest in just one country
•Emerging markets funds, which invest in countries with younger, less well-developed economies.

When possible, go with index funds. Like their counterparts here at home, international index funds offer key advantages over actively managed funds: broad diversification, low costs and generally better performance over time.

Know your benchmarks. Just as you keep an eye on the S&P 500 index here in the U.S. to judge the performance of your large-cap mutual funds, you'll need to look at some international benchmarks to understand how your international funds are faring. Morgan Stanley Capital International Inc. (MSCI) is the leading provider of international indices, tracking the stock markets of 50 countries. Here are three indices that you'll likely find the most useful:
•MSCI World Index, made up of equities from 23 developed countries, including the United States.
•MSCI Europe, Australasia, Far East Index. Known by its short hand "EAFE," this index tracks stocks in 21 developed nations in Europe and along the Pacific Rim.
•MSCI Emerging Markets Global Index, made up of stocks from many different developing countries around the globe.

Watch those costs. Pay special attention to expenses and fees, which are generally higher in foreign funds than domestic funds.

THE BOTTOM LINE: If you're investing for the long term, it makes sense to participate in growth all over the world, not just in your own country. With the help of international funds and the right market benchmarks, investing overseas can be a cinch.

This column appears each week on CNNMoney.com, the Web sites for CNN and Money Magazine.

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