Kevin McCormally: I am Kevin McCormally of Kiplinger's; I am here with Manny Schiffres, the Executive Editor of Kiplinger's Personal Finance Magazine, to talk about Foreign Investing. Manny, we have heard a lot about how some of the foreign markets have gone crazy in the last two years, leaving the U.S. market at the dust. Should everybody who invest in stocks have some money invested overseas?
Manny Schiffres: I think that's an accurate statement Kevin. Remember the U.S. market only constitute about 40% of the overall market capitalizations of the world's stock markets. So if you have no money overseas, you basic putting way too much of your money in U.S. stocks.
Kevin McCormally: But is it a lot riskier to invest in Europe or Asia than it is right here?
Manny Schiffres: If you are investing in developed markets, the major European markets, Japan and you do so through a managed program like a Mutual Fund, it isn't much riskier. The only additional risk really is this the currency risk and that means that if the dollar appreciates your money that's invested in Euros or Yen gets translated into fewer Dollars and I actually like that, it's been working the other way, investors here being benefiting from a weaker dollar.
Kevin McCormally: So you would say that Mutual Funds are the way to go if you want to invest internationally. How many funds would you need, is one enough?
Manny Schiffres: I think not. I think most of us will be better served by at least several international funds. Just as in the U.S. market, there is a dichotomy between value funds and growth funds and funds that's invested in large companies and funds that's invested in small companies and then there are also somewhat riskier funds that invested in various emerging markets and in individual countries.
Kevin McCormally: You say that the U.S. companies are about 40% of the worldwide, should 60% of your money be invested abroad?
Manny Schiffres: Well, theoretically yes, but for most U.S. investors that's probably little bit too much. I would suggest that's somewhere in the order of 25-30% of your stock money be in Foreign Stocks.
Kevin McCormally: What about the role that big U.S. Multinationals play. Is that kind of a foreign investments or a domestic.
Manny Schiffres: You can look at that either way. I think because the money they earn overseas is indeed foreign, you can look at that as a foreign play, but there are crisis at the U.S. stock market. So I wouldn't put too much stocks so to speak and then being foreign.
Kevin McComally: Okay, thank you very much.
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