Money & Investing - Banks.com

As worries about a volatile stock market (which is up right now as oil prices drop) and a US dollar that is weakening overall (although rallying today) abound, some folks are thinking about diversifying into international funds.

Advantages to international funds

One of the main advantages to adding international funds to your portfolio is the fact that it increases your diversification. Diversity provides protection when properly applied. Additionally, Trees Full of Money provides two more reasons to consider international funds:

1. Protection as the US dollar declines in forex trading overall. International funds allow you to invest in instruments denominated in currencies other than the US dollar. As the US dollar loses its prominence in the world, it is likely to decline overall. This means that international assets will appreciate against the dollar, giving your portfolio an advantage. Of course, the flip side is that if the dollar appreciates, you could find your international funds losig value.
2. Emerging market access. In the US, dramatic economic growth is rare. This is because the United States is already pretty well established as an economic power. Other economies, though, in emerging markets like India and China, are growing rapidly and are likely to continue growing in the near future. International funds that invest in companies and assets in emerging market could see very solid — maybe even explosive — growth. Of course, with this prospect also comes the very real risk of larger losses.

International funds could make a very good addition to a balanced investment portfolio, if properly used. Just be aware that there are risks involved, and make sure that you have the risk tolerance for it.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions.

Tags: investing idea, international funds, investing blog, investment portfolio,
diversification, investments, forex