Tread Carefully With Foreign Stocks

by Alan Lavine and Gail Liberman

 Foreign stocks are outperforming U.S. stocks due to economic growth and the decline of the dollar. But many money managers are expect a foreign stock correction.

So if you’re considering investing outside the United States, here are some tips.

• Stick with American Depository Receipts (ADRs) if you want to invest in individual companies. These are stocks that are traded in U.S. dollars on the New York Stock Exchange. Usually, they are widely followed by Wall Street and independent analysts. So you can get good information about a company’s earnings, financial strength and stock values.
• Diversify. Don’t put all your eggs in one basket. Own stocks in different countries and industries. Financial research shows that you need to own about 20 stocks to protect yourself in case one company does poorly. Mutual funds are an attractive way to do this.
• Invest regularly instead of making big bets.
• Avoid chasing after hot markets, like China. Kate Weingart, Ph.D., author of “Working in China (AuthorHouse),” warns serious labor unrest in that country could hurt its financial system and stock market.

Alan Lavine and Gail Liberman are husband-wife personal finance columnists, journalists and authors. They are the authors of "Rags To Retirement," published by Alpha Books. Their columns appear in newspapers throughout New England and the Southeast, as well as online. Their commentary on mutual funds and personal finance is carried by 200 radio stations nationwide every Sunday over Business News Network's Charles DeRose Financial Advisor Show. Al and Gail’s new book is "Rags To Retirement:  Stories from people who retired well on much less than you think," published by Alpha Books.

More articles by Al and Gail can be found here.