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The Importance of Global Economics to Your Portfolio

How is your foreign portfolio doing?  This is a question you may or may not know. Most people have mutual funds focused on foreign investments or potentially foreign stock. You likely have exposure to foreign markets and do not even realize it. There are so many different factors such as trade barriers, products or services your companies sell in these countries, and political considerations.

 

Within any portfolio, it is probably a good idea to have some foreign stocks. This is where understanding global economics can be such a good idea. When you can understand an economy, it is much easier to see if you are picking good foreign stocks. You do not even have to pick individual stocks but can buy mutual funds based upon countries. This can allow you to better diversify your portfolio.

 

If you have any stocks for large, multi-national companies, you most likely already have foreign exposure and do not even realize it. Think of any large company such as G.E. or I.B.M. A large portion of their revenue comes from abroad. The impact of different countries’ economies can have an impact on the results these companies report and ultimately on your portfolio then. Here is a longer view of the global economy: http://en.wikipedia.org/wiki/Global_economy. You can further get an idea of the different factors going into the global economy.

 

A good idea is to look at this video. Here is some good advice from the Motley Fool on how to pick foreign stocks. http://www.fool.com/investing/international/2008/12/15/get-out-of-the-us.aspx. This can give you good information on how to pick foreign stocks.

 

Hopefully you can see how global economics is important to understand. There are so many different factors that can go into global economics. This post was simply to give you an idea of why you should understand how global economics work.

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