Guide to International Investing
Frequently Asked Questions
What is international investing?
International investing is the act of investing your money in securities of companies or markets located in other countries around the world. International investing allows you to diversify your portfolio and take advantage of opportunities for growth.
What are the pros and cons of international investing?
Diversification and growth are two pros of international investing, but the cons lie in the risks associated with foreign investments. You may not have access to information like you do with U.S. securities, there may be other costs and fees, you’ll likely have to work with a broker or investment advisor, and more. Consult a financial professional before taking part in international investments.
Which markets are open for international investing?
You can invest in international markets around the world, including Asia, Europe, Latin America, Canada, and more.
How can you start investing in international stocks?
You’ll need a brokerage account in order to begin investing in international stocks. Brokerage firms like Charles Schwab, Fidelity, Etrade, and more all offer investors access to international stocks. You can also invest in international stocks through mutual funds and exchange-traded funds (ETFs). Do your research before opening an account and only invest money you can afford to potentially lose.
Eurobonds are international bonds issued in a currency other than that of the issuer. Despite their name, eurobonds don't have to be given in euros. These bonds come in diverse forms.
The MSCI EAFE is a popular stock market index that's commonly used as a benchmark for major international equity markets. Large and mid-cap companies from developed countries worldwide, excluding the U.S. and Canada, are included in the index.
The Fragile Five is a group of countries that rely heavily on foreign investments for growth. The group that makes up the Fragile Five has shifted over time, but they all have certain traits in common.
CAC 40 Index
Similar to the Dow Jones Industrial Average in the United States, the CAC 40 consists of the 40 largest equities by market capitalization and liquidity. While the CAC 40 is almost exclusively French companies, their multinational reach makes it one of the most popular European indices for foreign investors.
Exchange Rate Mechanism
Exchange rate mechanisms, or ERMs, are systems designed to control a currency's exchange rate relative to other currencies. They are a key monetary strategy used by central banks.
MSCI All Country World Index
The MSCI All Country World Index (ACWI) is a market-cap-weighted global equity index that tracks emerging and developed markets. It currently monitors nearly 3,000 large- and mid-cap stocks in 49 countries.
Dax 30 Index
Germany's Deutscher Aktien Index, or DAX 30 Index, is a stock market index that consists of the 30 largest German companies trading on the Frankfurt Stock Exchange.
Euro Stoxx 50
The EURO STOXX 50 is a leading index of Europe's blue chip companies that is now a part of Qontigo, an investment intelligence company created by the Deutsche Börse Group. Similar to the Dow Jones 30 index in the U.S., the EURO STOXX 50 includes 50 blue chip stocks across 8 eurozone countries.
TSX Venture Exchange
The Toronto Stock Exchange (TSX) is like Canada's version of the New York Stock Exchange. In this manner, the TSX Venture Exchange (TSX-V) is like the NASDAQ Small Cap or OTCBB exchanges.
The cyclically adjusted price-to-earnings ratio is a variation of the classic price-to-earnings ratio that attempts to provide better long-term guidance on how a stock price compares to the underlying value of the company.
American Depositary Receipts
An American depositary receipt (ADR) is a security that represents indirect ownership of shares of a foreign company that isn't directly traded on U.S. exchanges. American banks purchase the shares through their foreign branches. Then, they make them available to investors in the U.S.
Vanguard Total International Stock Index
The Vanguard Total International Stock Index fund provides broad- and low-cost exposure to non-U.S. stock markets around the globe. It includes developed as well as emerging markets, with thousands of equities in its portfolio.