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I live outside the US, and diversify my investment by buying Exchange-traded notes, which are a combination of the X most succesfull stocks in my local stock exchange. Should I also diversify my investment abroad, or it is safe enough to assume my local stock exchange will, on average, be successfully over the years? There is a cost (money + attention) to diversifying abroad, so the answer can't be an automatic "yes", but rather some conditions (including sum of investment, ...?) |
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To have a decent shot at answering that question I'd need to know some more information.
I can give you a much better answer with answers to these questions. |
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Diversifying your asset classes and rebalancing on a periodic basis (say half-yearly) is a good thing for most amateur investors (who don't have a day job related to investing. Some of the asset classes you can diversify into are debt or money market funds, equity funds, stocks, cash, gold, property, commodities and equity markets in other countries. If you are are in a developing country, investing in a developed country's stocks can provide stability. Conversely, if you are in a developed country, investing in a developing country's stocks (either directly or through funds) can give a higher return (and higher volatality/risk as well). You will need to arrive at your asset mix, based on what kind of return you are aiming for and what risk you can tolerate. Unfortunately, as in most cases to such type of questions, the answer is "It Depends" |
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Invest in other countries when you think your money will be treated better in other countries. That's a bit of a glib answer, but you have not only the foreign economy to consider, but also exchange rates. A great economy but a weakening currency won't cut it. |
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