Investing in stocks of foreign companies offers many advantages including diversification benefits, lower correlations with home markets, etc. However, investors must focus on the long-term returns of overseas investments. They should not try to time the markets or trade often in looking to make higher returns in the short-term.
The chart below shows the annual total returns of foreign stocks during each of the past 25 years compared with the 25-year average annual total return (13.1%): (Click to enlarge)
Source: Standard & Poor’s. Foreign stocks are represented by the calendar-year returns of the MSCI EAFE Index. Returns shown include dividends reinvested.
In the short-term, as the chart shows, there is high volatility in international investing. However, over the long-term (such as 25 years) investors are nicely rewarded with a double-digit return.
Related ETF: iShares MSCI EAFE Index Fund (NYSEARCA:EFA)
Disclosure: No Positions