Tread carefully with foreign stocks
- 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.
Spouses Gail Liberman and Alan Lavine are syndicated columnists. Their latest book is "Rags to Retirement (Alpha Books)." You can e-mail them at MWliblav@aol.com.
To read more columns, please visit the column archive.