The question: I know many people advocate for including international investing in a stock portfolio. But if the S&P 500 companies do a lot of their business overseas, doesn’t that mean those companies are, in part, like investing in foreign companies?
Jorgen Vik
The answer: There is something to your argument. The traditional way to categorize U.S. and foreign investments is by considering the location of the headquarters. Coca-Cola is in Atlanta but sells a whole lot of drinks all over the world.
You can turn this on its head, though. There are lots of foreign companies that do business in the U.S. Think of all the Samsung phones or foreign-made cars you see here.
I think another argument for including foreign companies is just to increase your investment opportunities. Why limit yourself to only companies headquartered here?
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And, in part due to currency fluctuations, you may find that foreign stock companies may further diversify your investments. Sometimes, U.S. stocks tend to do better, and other times, foreign stocks do better. According to J.P. Morgan, for over a decade, U.S. stocks have done better overall. I suspect that is why many prefer U.S. stocks these days.
However, whenever foreign may come back on top, it may be too late to shift out of some of your U.S. stocks. If you wish to catch the full potential rise of foreign or U.S. stocks, you should be invested from the outset. It’s like the old saying, “It’s not about timing the market, but time in the market’.
Jorgen Vik is a certified financial planner and partner with SKV Group LLC. Investment products and services are offered through Wells Fargo Advisors Financial Network. SKV Group is a separate entity from WFAFN.
