Investing in Foreign Stocks 

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Investing in Foreign Stocks



Investment Snapshot

* Foreign currency volatility can erase gains from investing in foreign stocks.
* Global investing has become easier for investors.
* China Life Insurance Company announced that it planned to sell 1.5 billion shares in an initial public offering (IPO) on the Shanghai exchange. Shares of China Life are listed in Hong Kong and as American depository receipts (ADRs) in the United States.

Investing in international stocks has become very much easier and more popular with many investors. European, Asian, and Latin American stock markets have provided investors with growth opportunities not matched by the American markets in the late 1970s through early 1990s and 2003 through 2006. This process of investing abroad has been facilitated by technological advances. There is an almost instantaneous flow of information about financial events, which also has increased the correlation of the foreign markets with the U.S. markets. In earlier years there was a low correlation between the foreign markets and the U.S, stock markets. However, a precipitous decline in the Hang Sen Index on the Hong Kong Stock Exchange affects not only the other Asian stock markets but also the European and American stock markets. Similarly, an early morning rally on Wall Street can spur stock markets in Europe to close at higher levels.

While economic and financial events around the world may be interconnected and move stock markets in the same direction at several points over time, over longer periods of time there is a relatively low correlation with stock market price movements. This correlation, however, has been increasing over the years.

KEY CONCEPTS
* Why should you invest in foreign stocks?
* The risks of foreign stocks
* How to invest in foreign stocks
* Is international investing good for me?




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