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Highlights
- Although one can build a profitable portfolio of national stocks, investing in a few robust international stocks can help diversify your portfolio risk, minimize losses and seize significant gains from the emerging global markets.
- International stocks, in simple terms, are the stocks that are listed and traded on the foreign stock exchanges outside your country.
- Finance professionals often advise investors to include a significant proportion of domestic stocks relative to foreign stocks in their portfolios to protect their money from unforeseen and dynamic changes in the global market.
International or foreign stocks can help investors tap global investment opportunities. Although one can build a profitable portfolio of national stocks, investing in a few robust international stocks can help diversify your portfolio risk, minimize losses and seize significant gains from the emerging global markets.
International stocks, in simple terms, are the stocks that are listed and traded on the foreign stock exchanges outside your domestic country.
If you are looking to explore stocks trading outside Canada, here are a few points to note about international investing.
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Open an international account
The first step here can be opening an international account, which will allow the online broker to manage foreign investments on your behalf.
However, brokerage fees are generally high when it comes to foreign investing. Plus, taxation differs from country to country. Thus, investors should carefully note the brokering charges and taxes to retain the earned profits.
Also read: How can Canadian investors smartly pick stocks?
Invest in ETFs
Investors can choose to invest in international exchange-traded funds (ETFs) focused on the best companies worldwide.
Following are some examples of international stocks:
- Alphabet Inc (NASDAQ:GOOGL), a California-headquartered interactive media giant
- Amazon.com Inc (NASDAQ:AMZN), a popular e-commerce company based in Seattle
- Alibaba Group Holdings Limited (NYSE:BABA), a China-based online retailer
- Walt Disney Company (NYSE:DIS), a world-famous media business with headquarters in California
How much should you put in such stocks?
Finance professionals generally advise investors to include a large proportion of domestic stocks relative to foreign stocks in their portfolios to protect their money from unforeseen and dynamic changes in the global market.
To be specific, international investing raging between 20 and 25 per cent of the total portfolio is considered ideal. However, investors should carefully take note of their risk appetite and decide based on proper fundamental analysis when indulging in foreign investment.
Should you invest in international stocks?
If you are well-versed with the Canadian market and ready to take the next step to further your investment journey, then international stocks can be a good option.
These stocks are known to have greater coverage than domestic stocks, which in turn can help in diversifying your portfolio risk better and capture significant gains from developing economies in the long term.
Also read: ETF vs Index Fund: Which is a better investment option?
