Investing globally is a topic that is widely discussed these days. But investing globally can easily become a “buy high and sell low” debacle in your portfolio if not done well.

Investing globally is a topic that is widely discussed these days. But investing globally can easily become a “buy high and sell low” debacle in your portfolio if not done well.


As you think about how you add to your holdings, let's go over a few basics. When you hear the term international investing, that refers to investments that are devoid of any U.S. holdings. When the term global investing is used, that may include foreign or domestic holdings.


The next thought is that of sizing the opportunity. From all of the economic reports that I've seen in the last few years, it appears that certain foreign markets have larger growth prospects than the U.S. over the next few decades. That makes a lot of sense to me as a consumer. What would we Americans do without television, Internet, automobiles and all of the modern creature comforts of home and business? Add the attraction of modern-day comforts to economies that have a higher savings rate than the U.S. and you can almost see the buying frenzy that may erupt as these comforts become ubiquitous. This alone, however, does not make a terrific profit opportunity for investors.


There are risks that come with investing globally that are somewhat unique to those we deal with here in the U.S. The average American investing abroad doesn't even consider most of these potential deal-killers. The risks are currency, political instability, liquidity, transparency and inflation. Each one is fairly material in its own right, but if you get a few working in harmony against you, your investment can get crushed.


Political instability is the risk that we see most of in the news - especially when you get into the less developed nations around the world. Here in the U.S., we view events like 9/11 as isolated. Thankfully for us, they are. But in many emerging countries, it seems like the norm. 


Can you even remember a week in which there isn't news about rigged elections, dictators, and assassination plots in some remote spot on the globe? It seems rather obvious, but it may not be good for your portfolio to be invested in countries where people are killing each other for a bottle of water.


Hopefully, these risks haven't overshadowed the opportunities available by investing globally. And if you're still game, the only questions left are what countries, what asset classes and how much of your portfolio has exposure to these opportunities. These are decisions that may be best made by a professional.


John P. Napolitano is the CEO of U.S. Wealth Management in Braintree, Mass. He may be reached at jnap@uswealthcompanies.com.


The Patriot Ledger