Are Foreign Investments Good for Your Retirement Plan?
By Douglas Goldstein, CFP® - helping olim handle their U.S. investments from Israel
Do you want to minimize risk in your retirement accounts? If so, consider diversifying your holdings to include foreign investments.
Investing internationally may boost your returns and minimize risk, as you’re “geographically diversified” and not relying on any single country’s economic performance. Geographic diversification can be achieved by buying foreign stocks, ETFs, mutual funds, REITs, and foreign corporate and/governmental bonds. Saving your pension in one country and keeping your assets in another country is another form of geographic diversification. If you want to know more about minimizing risk in retirement planning, download The Retirement Planning Book, at: Profile-Financial.com/rpb
Examples of global investment opportunities:
Owning Foreign Stocks: Most major stockbrokers can help you buy individual foreign stocks, taking care of any currency conversions if necessary. If you like stocks, also consider buying an “ADR” (American Depository Receipt). These investments trade like stocks in American dollars on U.S. exchanges but represent shares in foreign companies.
Exchange-Traded Index Funds: There are many ETFs that follow a variety of different foreign-based markets and sectors. They can be global, regional, or focused on a specific country. International ETFs may carry lower risk than individual stocks in specific foreign companies because they are diversified.
Foreign Real Estate: Buying real estate in foreign countries can be considered geographic diversification, but it usually requires a greater amount of investment capital than buying stock or mutual funds (i.e., you have to buy a whole property as opposed to just shares). To avoid the management hassles of owning physical real estate, consider buying international REITs (real estate investment trusts). Unlike owning a physical property, REITs pay dividends, mitigate risks among several properties, and are more liquid investments because they often trade on the stock market.
Risks associated with foreign investments
While investing some of your retirement portfolio in international assets can hedge your portfolio against swings in your domestic economy, it’s not risk-free. It’s important to remember that the added risks of currency and political uncertainties in other countries can impact your assets.
For more strategies about investing for retirement, download (for free) The Retirement Planning Book at Profile-Financial.com/rpb
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.