Get a better understanding of what international stocks are and how you can incorporate them into your trading or investing strategy.
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It's almost impossible to avoid international exposure in today’s globally interconnected economy. With more than half the world's market capitalization now lying outside the United States, international stocks present a wide range of opportunities simply unavailable with domestic stocks. Many leading stock exchanges are based outside of the U.S., offering investors potential to expand and diversify their portfolios with securities in both emerging and well-established markets. Global diversification can help you manage risk and position your portfolio for long-term growth.
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We believe a global perspective that incorporates portfolio allocations to U.S. and international stock markets along with global benchmarks for performance are vital to successful long-term investing.
A global perspective takes the decision about what country’s stocks to invest in and refocuses it on seeking to invest in great ideas that span the stocks of many countries. It requires measuring investment success differently and taking a long and broad view to help manage risk and keep tracking toward goals. The right mix of assets for you and your goals should be based on your risk tolerance, cash flow needs, investing experience and time horizon, among other factors.
Risks of international stocks
In addition to different trading regulations and protocol, international stocks also carry their own unique risks that investors should consider.
While currency fluctuation can work in favor of the U.S. dollar, it’s always a variable and investors should be prepared for favorable and unfavorable outcomes.
Investing in international stocks is investing in the people and governments where the foreign shares are located. Political or economic events in a foreign company’s home country may harm your investment.
International stock exchanges have their own rules and regulations for participating countries and organizations. Changes in governance and financial policies can create limitations on the access rights of foreign investors.
Taxes on international investments are often taxed at different rates than domestic holdings. Similar to regulatory changes, some foreign nations may also impose additional taxation on foreign investors.
International stocks FAQs
- Are international stocks more risky than U.S. stocks?
- How much international exposure should my portfolio have?
- What is 'home bias' when considering investing in international stocks?
- What is the difference between Developed Markets (DM), Emerging Markets (EM), and Frontier Markets (FM)?
- What tax withholding rates apply for dividends of international stocks?
Your approach to investing globally depends on what type of investor you are. In addition to ADRs and foreign ordinaries, investors seeking global diversification should consider exchange-traded funds (ETFs) and mutual funds with concentrations in international holdings as well as other non-traditional investments such as international REITs. You can invest in international stocks on your own with a Schwab One® brokerage account or call our Global Investing Services team at 800-992-4685 to speak with a dedicated broker about foreign trading.1 Our team is available between 5:30 p.m. ET Sunday and 5:30 p.m. ET Friday.
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