Investing abroad

1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18 

18. Conclusion

Even if your portfolio is invested entirely in UK companies, you probably have some exposure to foreign economies because the larger companies in your portfolio will be earning revenue from foreign operations.

The question is whether to increase your exposure beyond that level. There are three arguments in favour:

1. Some industries (e.g. hi-tech) are concentrated in the USA, and if you want serious exposure to them you have to go outside the UK.
2. Emerging market economies can grow at a faster rate than the relatively mature UK economy, so the potential for capital growth is greater.
3. Spreading your investments around the globe gives your portfolio more diversification. As one economy slows, another may pick up pace.

The counter-argument is that it can be difficult to research foreign stocks, there is a currency risk to take into account, emerging markets can be volatile, and the mechanics of dealing can be fussy. To some extent, all of these problems can be overcome by investing in ADRs or in investment or unit trusts.

Most private investors feel uncomfortable investing outside the UK. Hopefully this course will have shown that it does not necessarily entail greater risk and, arguably, is an essential part of risk reduction.

You have now completed the course. To test your knowledge, take the Assessment test.

1. Why invest abroad? 2. Risk and reward in foreign investment 3. Custody risk 4. Currency risk 5. UK companies are foreigners too 6. Foreign unit and investment trusts 7. Picking foreign trusts 8. How to make the most of trusts 9. Tracker funds for foreign markets 10. Foreign companies on the London exchange 11. American Depository Receipts 12. Investing in American companies 13. Investing in European companies 14. Investing in Asian companies 15. Investing in other markets 16. Dividends and withholding taxes 17. Markets go global 18. Conclusion

• Mobius on Emerging Markets