| Investing in the stock market can be an enormous | | | | invest in foreign stocks, you should be aware of |
| amount of fun, as well as highly profitable if you know | | | | several risks that are involved before making a final |
| what you're doing. But investing in the same stocks | | | | investment decision and I'm going to talk about two or |
| year after year are can get to be a little boring, | | | | three of those risks in this article today. |
| especially if you invest in the same safe blue-chip type | | | | The first risk is currency fluctuation. If you want to buy |
| stocks that many responsible investors tend to invest | | | | the stock of a company that resides in a country |
| in. | | | | whose currency falls against the dollar, then any gain in |
| Many people choose to shake things up a little bit and | | | | share price is reduced by the currency loss. |
| invest in foreign companies. There are many legitimate | | | | The second risk is information. We get used to having |
| reasons to do this besides the excitement and fun of | | | | clear information handed to us here in the United |
| diving into new territories. One very legitimate reason is | | | | States because we have the securities and exchange |
| diversification. You can invest in many different stocks | | | | commission who make sure the companies don't lie to |
| on the US stock exchanges, but the fact of the matter | | | | us. Many foreign companies do not have such |
| is, they are all still American stocks and thus | | | | oversight checks and balances and foreign |
| un-diversified to a large degree. This is because | | | | governments often don't require as much information |
| market forces affect all stocks to some degree or | | | | be given to shareholders as the United States does. |
| another. So for instance, if the US economy goes | | | | Finally the third risk has to do with volume. In America |
| down, all stocks on the stock exchange in the United | | | | millions, sometimes billions of shares are traded every |
| States will drop in varying degrees. | | | | single day making it easy to get in and out of a |
| Another perfectly legitimate reason to invest in foreign | | | | particular stock. Many foreign stock exchanges do not |
| stocks is - increased growth potential. Many staid | | | | have such high volume making it harder to buy and sell |
| blue-chip stocks in America move very little when it | | | | shares within specific price ranges. Sometimes, in fact, |
| comes to price from one year to the next. They've | | | | large purchases in a single stock can sway the entire |
| already used up their growth potential. This is not the | | | | stock market of the country which is something you |
| case for many foreign stocks especially stocks in | | | | need to be aware of. |
| emerging markets such as China or India. | | | | Investing in the stock of foreign companies can be |
| Investors looking for oversized gains have done quite | | | | exhilarating as well as profitable. Just be sure to do |
| well in the past investing in these foreign stocks of | | | | your homework and watch out for the three risks that |
| emerging market companies. | | | | I mentioned today and you should be just fine. |
| No matter what your specific reason is for wishing to | | | | |