Whether you're looking to invest in individual stocks or a basket of companies — there are a number of ways to add international exposure. And there’s also a lot of reasons to do it. For one thing, a large portion of the population lives in emerging markets; therefore, there is an enormous consumer market in developing nations. These markets may be developing, but are eventually going to catch up with the rest of the developed world. International exposure also gives investors access to stocks in the advanced nations outside of the U.S., providing diversification which is important to cushion the blow if one area of their portfolio tanks.

International Investing Does Have Risks 

It is important to note that international investing poses unique risks. One just has to open the newspaper to hear about political and economic instability in this country. There’s also the currency exchange rate risk and the potential for there to be a big change in market value. Not to mention that not all international markets are liquid enough to trade shares easily. (Read more, here: The 3 Biggest Risks Faced By International Investors.) But even risk-averse investors can get some international exposure and still sleep at night. From mutual funds to ADRs, here’s a look at how all types of investors can get some international exposure in their portfolio.

For investors who like to pick stocks or want control over their foreign investments, there are many stocks they can purchase on local exchanges outside of the U.S.  However, often investors will need a broker to conduct the transaction, and there isn’t a guarantee they will be able to purchase the shares how they want to. Investors can also try to set up a brokerage account in the region where the company resides and buy shares in the local market. That too is complicated and is one of the reasons people with less money to invest may not benefit too much from buying foreign stocks direct. Another option is to purchase an American Depository Receipt of a foreign company in the U.S. With ADRs you get international exposure, but the stock trades just like any other stock in the U.S., reducing some of the risk.

Mutual Funds, ETFs Are a Good Way to Get Exposure

Investors who want international exposure but don’t want to pick individual stocks are in a good position as well. There are a bunch of mutual funds that will give them access to foreign stocks across different industries and regions. A global fund is going to have investments around the world including in the U.S., while a regional mutual fund will invest in specific geographic locations. Country funds are specific to an individual country while a global sector fund invests in a particular sector internationally. There are also funds that give investors a diversified basket of foreign investments.

On the ETF front, there are just as many types of ETFs as there are international mutual funds. Investors can choose from global or world ETFs, regional ETFs, developed markets ETFs and emerging market ETFs. Another more risky ETF is the single country one. It can give investors more exposure to a specific country, but because the investments are in one country, it can be tied more to the economic and political stability of the country. (Read more, here: Evaluating Country Risk For International Investing.)

When it comes to choosing a mutual fund and ETF to invest in, investors have to first figure out how much they can allocate toward international investments. Once that’s done, investors have to look at the investments of the funds and ETFs as well as the costs associated with it. It may turn out that there’s a cheaper ETF that performs as well as an actively managed mutual fund, enhancing the return on the investment.

The Bottom Line

Investing in international markets is a good way for investors to diversify their portfolio to cushion the blow if one area was to underperform. When it comes to foreign stocks, investors have a lot of ways to invest. They can purchase them directly through a broker, purchase an ADR in the U.S., buy a mutual fund that invests in different intentional companies or go with an ETF to get that exposure and diversification offered by investing internationally.

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