The foreign labels on the things you buy should signal two things to you as an investor. One, to maintain your current buying power, you need a certain amount of international exposure. Two, there are some great companies producing world-class products overseas. That spells opportunity.

"It used to be that the United States dominated the world economy, so it was appropriate for U.S. investors to ignore the rest of the world," says James J. Atkinson Jr., chief executive of Guinness Atkinson Asset Management Inc. in Woodland Hills, California. "But you can't make that claim anymore."

Indeed, though the U.S. stock market remains the biggest in the world, foreign markets now account for about 55 percent of the world's stock market capitalization. Concentrating all your dollars in the domestic markets means you are ignoring more than half of the world's investment opportunities.

In an environment of global companies, global distribution, and global consumerism, many experts maintain that every investor ought to have a portion of his portfolio invested globally, too.


What may be the most compelling reason of all to invest in foreign markets is this: A host of independent studies suggest that international investments have had an unusual effect on diversified portfolios. They reduced overall risk and modestly increased the potential return, according to Ibbotson Associates in Chicago. Ibbotson has tracked a ...

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