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Are Foreign Investments Good for Your Retirement Portfolio?

Foreign investmentsDo you want to minimize risk in your retirement accounts? If so, consider diversifying your holdings to include foreign investments.

Investing internationally may boost your returns and minimize risk, as you’re “geographically diversified” and not relying on any single country’s economic performance. Geographic diversification can be achieved by buying foreign stocks, ETFs, mutual funds, REITs, and foreign corporate and/governmental bonds. Saving your pension in one country and keeping your assets in another country is another form of geographic diversification. If you want to know more about minimizing risk in retirement planning, download The Retirement Planning Book.

Examples of global investment opportunities:

Owning Foreign Stocks: Most major stockbrokers can help you buy individual foreign stocks, taking care of any currency conversions if necessary. If you like stocks, also consider buying an “ADR” (American Depository Receipt). These investments trade like stocks in American dollars on U.S. exchanges but represent shares in foreign companies.

Exchange-Traded Index Funds: There are many ETFs that follow a variety of different foreign-based markets and sectors. They can be global, regional, or focused on a specific country. International ETFs may carry lower risk than individual stocks in specific foreign companies because they are diversified.

Foreign Real Estate: Buying real estate in foreign countries can be considered geographic diversification, but it usually requires a greater amount of investment capital than buying stock or mutual funds (i.e., you have to buy a whole property as opposed to just shares). To avoid the management hassles of owning physical real estate, consider buying international REITs (real estate investment trusts). Unlike owning a physical property, REITs pay dividends, mitigate risks among several properties, and are more liquid investments because they often trade on the stock market.

Risks associated with foreign investments

While investing some of your retirement portfolio in international assets can hedge your portfolio against swings in your domestic economy, it’s not risk-free. It’s important to remember that the added risks of currency and political uncertainties in other countries can impact your assets.

For more strategies about investing for retirement, download (for free) The Retirement Planning Book.

Douglas Goldstein, CFP®, investment advisor, is the co-author with Grandmaster Susan Polgar of Rich As A King: How the Wisdom of Chess Can Make You a Grandmaster of Investing and director of Profile Investment Services, Ltd. which specializes in cross border investing and financial planning.

Profile Perspectives is a personal finance blog based on articles Doug Goldstein, CFP®, director of Profile Investment Services, Ltd., published in The Jerusalem Post. The information posted is purely informational and does not constitute investment or tax advice. Advertisements on the site are neither endorsements nor recommendations. Consult your professional advisors before making any investments based on articles or advertisements. Securities offered through Portfolio Resources Group, Inc., member of FINRA, SIPC, MSRB, FSI. Accounts carried by Pershing LLC., Member NYSE/SIPC, a subsidiary of The Bank of New York Mellon Corporation.

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