Global Investing

Given the impressive performance in worldwide markets over the past few years, I'm receiving many more questions about companies that reside outside of the U.S.

In my opinion, three primary things are responsible for this heightened interest: 1) investors always chase performance, 2) economies outside of the U.S. look stronger and appear to have better forward potential, and 3) a sense that the best days are behind the U.S. in terms of worldwide economic dominance. While the last one is controversial and highly contested by many Americans, the reality is that this country faces large economic risks unlike any time in its short history. While I'm confident we will eventually meet those challenges, I also don't think we shouldn't stick our heads in the sand and just have faith that things will work out without making some tough decisions in the years ahead. Enough said.

Fortunately for investors there are now numerous ways to research and screen for companies outside of the U.S. One method is simply to find an ETF that represents the country you want to invest in and either buy that, or take a closer look at the top holdings for potential research candidates. The same goes for mutual funds that focus their investments on a specific area. In fact, when evaluating ETFs or funds, it is a good idea to understand the composition of that ETF/fund as well. Frankly, if you don't think the top holdings of any ETF or fund look like great investment opportunities, then why would you own the fund or ETF that does?

Those of you who like investing in individual stocks versus ETFs and mutual funds, also have numerous ADRs to choose from. In fact, I recently found a very helpful resource that I would like to share with you. JPMorgan's ADR website is a useful tool for those who wish to research and invest overseas. For example, say you want to find the names of ADRs listed in Russia. In fact, let's go another step and act like we want to find telecom stocks within Russia. This website makes it very easy. All you do is go to http://www.adr.com, click "ADR Universe" and enter "Russia" and "Telecommunications" in the windows and click the submit button. You'll then find a list of ADRs to use for your research in both the area of the world you are interested in as well as the sector. Nice, huh?

One word of caution. Those of us who've been following the markets for awhile know that investing in overseas companies is no less risky than investing in companies here. You still have to do lots of research, avoid the ever-present temptation to chase hot areas worldwide, and be prepared for eventual worldwide hiccups that always follow when everyone thinks a certain area of the world offers a "can't miss" opportunity. In other words, the same rules that apply here apply worldwide. Please don't let the returns over the past few years convince you otherwise.