The global economic downturn shouldn’t discourage you from including non-U.S. stocks and bonds in a diversified portfolio. In fact, exposure to non-U.S. markets may help increase long-term returns and reduce risk, making it easier to ride out the market’s ups and downs. So, if you invest only in companies based in the United States, it’s never too late to explore global opportunities.
Many investors incorrectly think they’re venturing into global markets when they buy stocks of iconic global — and U.S. based — companies like Microsoft and Coca-Cola. To gain the full benefits of diversification, it’s important to invest in companies based outside the United States. It’s not enough to simply invest in U.S.-based companies that sell products or services in global markets.
While investing in non-U.S. markets can lend diversification to your portfolio, you should consider the following:
*Global Economic Outlook 2013, May 2013 update (http://www.conference-board.org/data/globaloutlook.cfm).
Diversification is a technique to help reduce risk. There is no absolute guarantee that diversification will protect against a loss of income.
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