It’s Good To Invest In International Businesses Around The World, Both Big And Small
If you’re a working adult in America, then you know you need to be saving up for retirement. So few companies are offering pensions anymore, and even if you’re working for one, can you honestly say you’ll be there long enough to wind up drawing that benefit in full for your entire stretch of golden years? Even government positions with pensions might be a little risky, as pension benefits are sometimes reduced, cut, or even not paid from time to time.
Social Security faces a similar predicament. The amount of money coming into the system is decreasing while payouts are rising, given that people are living longer and there are so many retiring. While it’s likely that politicians will find a way to save the program for the future generations, there are likely to also be things like raises in the retirement age, as well as benefits reductions in some cases. All these can be unpredictable until they actually happen.
That leaves the onus for saving for your retirement largely on your own shoulders. Fortunately, there are great ways to do it. If you work for an employer with a 401(k) plan or something similar, you should certainly take advantage of the possibility, particularly if there are any matching contributions. Never leave free money on the table. You can also use IRAs as tax shelters to let investment money grow over time.
A typical portfolio designed for long-term investing will have retirement as the eventual horizon, but other goals, such as college educations and buying a house might be something you save up for along the way. Such a portfolio is likely to focus heavily on domestic stocks and bonds, but it’s not wise to go exclusively with only companies that are inside America’s borders. Investing in international businesses around the world, both big and small is a very smart thing to do with your investment money, and for many good reasons.
For starters, international investing can serve as a tremendous counterweight to the domestic economy. The recessions of the American economy don’t always line up with global downturns. There are actually times that the American markets are healthy and robust when the rest of the planet is sluggish, giving you a chance to take domestic earnings and position them to capitalize on the looming planetary comeback.
Likewise, the political gridlock and dysfunction of the federal government are sometimes a drag on the American economy when the international arena is doing quite healthy and growing all over the place. A generation ago, the United States accounted for one-third of all economic activity and wealth across the planet. A decade later, it was down to a quarter, and that was after many years of growth. The rest of the planet is simply growing faster, in general.
Splitting up your international investment money across businesses both big and small is another wise decision, once you make the choice to invest overseas. Big international businesses have proven that they have figure out a product or service that there is a demand for, and they know how to deliver it to multiple markets. Small businesses, on the other hand, are the ones that are more likely to deliver you tremendous profits if they grow rapidly, although there is a lot more risk involved considering how many of them do not actually wind up making it. It’s a balance of both that proves proper diversification within international investment, much like international investment itself helps diversify or balance domestic investment.
How much you decide to invest in international businesses of various sizes is up to you, as financial experts will offer opinions ranging from 10 percent of your portfolio to as much as 50 percent. The choice is honestly yours, but if you have a financial advisor you work with, talk to them about what they think you should do, based on your tolerance or aversion to risk and the specific goals you’re saving up for. Also remember that if you don’t feel like researching the seemingly endless number of international company stocks around the world, you can use ETFs and mutual funds to get access to specific factors or market segments without all the legwork.