77% of the 40,000 publicly traded companies in the world are located outside of the United States. This is a pretty good sign that there are good places to invest outside of the United States. If you look at it another way, 51% of the world's total market capitalization of $38 trillion is in the international arena. Mutual funds in the United States have $491 billion invested abroad.
Since there are so many possible investments outside of the U.S., investing abroad is a great way to diversify a stock portfolio. Some people say that the United States and international markets are getting more and more alike in how they do. But even though news or events around the world tend to have the same effect on world markets, international and domestic markets tend to act differently over time. This helps to smooth out the ride in a diversified portfolio.
Look at how the Morgan Stanley Capital International Europe, Australia, and Far East Index, which tracks the progress of stocks in developed markets in Europe, Australia, and the Far East, has done compared to the S&P 500, which is thought to be a good example of the U.S. stock market as a whole. When one is doing well, the other usually falls behind, and this has been true since at least 1970. Also, when the MSCI EAFE has done better than the S&P 500, it has done so by a bigger amount than when the results are the opposite.
In fact, the U.S. stock market has never been the best place to invest in the world over the past 10 years. During that time, international indices have been the only ones to do well, and the S&P 500's returns have sometimes been much lower than those of international peers.
About half of the money in global funds is invested in the United States and the other half is invested in the rest of the world. This makes them a good way for people who have little or no experience investing internationally to test the waters. American Century Global Growth is a good example. Its managers look all over the world for the best growth investments for the fund's shareholders.
Before you invest, you should carefully think about the fund's investment goals, risks, and fees and costs. You can get a prospectus for the fund by calling American Century or going to its website. The prospectus has this and other information about the fund and should be carefully read before investing.
