Investing in US markets

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1. Diversification

There are many reasons for investing abroad, but one of the main ones is diversification or, put another way, placing your eggs in several different baskets.

The theory behind geographical diversification is quite straightforward:

• If you invest 100% of your capital in companies which do all their business in the UK, and the UK economy stalls, so will their profits and so, other things being equal, will the value of your portfolio.

whereas

• If you split your capital in two, and invest 50% in companies which derive their profits from other economies, and those economies are still doing well when the UK goes into recession, then that part of your portfolio should hold up even when the UK part is in the doldrums.

Spreading your investments between markets which rise and fall at different times (which are 'non-correlated', to use the jargon), should reduce your overall risk and boost your overall returns.

There are no guarantees, of course. You've got to choose the right markets, and the right investments in those markets, for diversification to work the way it's supposed to.

1. Diversification 2. Opportunity 3. Special features of the US market 4. You are already investing abroad! 5. Opening an account to deal in US securities 6. Inputting orders 7. Cash management 8. Currency factors 9. Tax 10. Trading on margin 11. Short selling 12. Types of investment - introduction 13. Shares (common stocks) 14. Indices 15. Bonds 16. Offshore mutual funds 17. Exchange-traded funds 18. ADRs 19. Options 20. Researching US companies - the basics 21. National newspapers 22. Regional newspapers and specialist magazines 23. Business TV 24. Company annual reports 25. Corporate web sites 26. EDGAR 27. Financial portals 28. Broker research 29. Charts 30. Conclusion

• The NASDAQ Investor
• Investing in Latin America