How to invest in foreign markets

Investing in foreign markets offers an opportunity for greater diversification and possibly higher profits than in domestic stocks. It also entails greater risks of several kinds, such as exchange rate or currency risk and, in many countries, risk of expropriation or other adverse govermental action. The rule of law is lacking in many other countries and/or the courts are corrupt and may not be relied on to enforce business contracts. Government officials in many countries seek bribes from foreign companies operating under their jurisdiction. Paying a bribe to an official of a foreign government is a felony under the U.S. Foreign Corrupt Practices Act which means that U.S. companies may operate at a disadvantage compared to companies chartered in countries which do not have laws against bribery. Therefore, investing in foreign markets should be approached with caution.

Ordinary investors by all means should allocate a portion of their portfolio to investments outside the United States. Vanguard offers several attractive Index funds which are appropriate vehicles for diversifying one's portfolio with investments outside the United States. The first one I would look at is the Vanguard Total International Stock Index Fund which invests primarily in European, Pacific and Emerging Market equities. It's a simple, low cost and relatively safe way to participate in markets outside the United States. Here's a link to a description of this fund's investment strategy. https://personal.vanguard.com/VGApp/hnw/FundsStrategyAndPolicy?FundId=0113&FundIntExt=INT

Vanguard offers a number of more specialized international mutual funds focusing on particular regions of the world. These funds offer the possibility of higher returns but at the price of greater risk.

All of Vanguard Mutual Funds are no-load, low-cost and tax efficient for investments outside your IRA or 401k plan. For long term investments these are all critical considerations which will contribute significantly to your investment returns.

Here's a link to Vanguard's website. It contains a wealth of useful information. https://personal.vanguard.com/VGApp/hnw/home

Disclaimer--I have no financial interest in promoting Vanguard. My comments are based solely on my experience for the past 15 years as an investor in Vanguard funds.