Retirement & Financial Planning Report

In some ways, the question is not whether you’ll invest in foreign economies but how you’ll invest. If you invest in Coke or Boeing or almost any major American corporation you have a stake in foreign business because these companies sell outside the U.S. Indeed, you already may well have some international exposure if you invest through mutual funds. According to Morningstar, the average domestic stock fund focusing on large companies has about 4% invested in foreign stocks — even funds that track the S&P 500 Index have over 2% of assets outside the U.S. Moreover, some large-company funds have larger foreign commitments.

Therefore, you probably already have an international component to your portfolio, especially when you consider the foreign sales of the domestic companies you own. You need to decide if you’re content to have that sort of a foreign stake or if you’re going to invest some money directly in foreign securities.

If you decide to buy foreign stocks, don’t overload. You shouldn’t hold more than 30% of your portfolio in foreign stocks and even that large a stake is not necessary. Many investors are well served a 10%-15% allocation.