Safe and Smart Way to Invest Globally

Increasingly, many of the best returns come from investments abroad.  There is a lot of attention to emerging markets, and to China and other Asian markets.  But there are also huge risks in investing in these countries and regions, even if you do it through tailored mutual funds.  One of the most significant risks results from the lack of knowledge and true understanding of the differences between and among the many countries.  Most fund managers and hawkers of ADRs and foreign stocks know little to nothing about the underlying fundamentals of foreign markets, much less about aspects of their culture and history that have direct bearing on profits,  product acceptance, and productivity.  One is, essentially, acting blindly and being led by ignorance.  But there is a way, and it is the easiest of all. 

Very simply, unless you have lived abroad in the country in which you are investing, the best way to make sure that you are making a wise investment is to buy the stock of large American companies doing business abroad.  In most cases, these multinational companies have offices in the countries or regions in which they are operating and, by force, are fierce students of the cultures and realities on the ground.  With increasing globalism, more and more large American companies operate abroad and more and more of their profits come from their foreign operations.  As an example, government figures indicate that profits from operations abroad of American companies are growing at an impressive rate (almost 14%) at present, nearly double the rate of profits from their American operations.  And, whereas about 7% of profits came from foreign operations in the 1960s, that figure in the first quarter of this year is now 29%. 

 

There is no question that investors need to build portfolios giving serious attention to the global economy.  And, there is no question that a smart investor should take advantage of the fact that American corporations operating abroad are in the best position to make the right decisions and to reap the best returns for their investments.  The data confirm that when selecting an American company operating abroad , given the large proportion of profits now being earned abroad, that you are taking hefty positions and the same time as you are investing wisely.

Ari Socolow
Ari Socolow: Ari Socolow is the Chief Economist and Editor-in-Chief at BestCashCow. He is particularly interested in issues relating to financial literacy and bank transparency. Since co-founding this website in 2005, Ari has been frequently cited in the media as an expert on local and national savings accounts, CD products, mortgage and loan products and credit card rewards products.

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