Investors seeking ongoing income from equities want to reflect on international stocks. Although much has been written regarding the lucrative dividend yields paid on domestic equities, there are various key pros to holding international securities, especially equities that pay dividends. Here are three of those pros:
1) Geographic diversification. Holding equities outside of the US allows the investor to benefit from the risk-reducing pros of diversification. Meant for instance, in 2007 when domestic markets lost roughly 10.5% (based on the returns recorded on the S&P 500), emerging markets gained 18.5% (as measured by the returns of the MSCI Emerging Markets Rid Index). In other words, investors are not as closely married to the success or failures of a specific economy when they diversify.
2) Better yield. Although yields on domestic equities are attractive proper now, the yields paid on securities that trade on international markets are actually more attractive than numerous people could imagine. As reported by Morningstar, there are six other regions of the world that pay better yields than the US. These markets include Australia, the UK, Europe (outside of the UK), Latin America, Canada and Asia (outside of Japan).
3) Better growth potential for the overall portfolios. Coincidentally, a number of of these international equity markets not only pay better dividend yields on average but they have outperformed the domestic markets on a Year to Date basis. This makes holding global equities more appealing from a growth and capital appreciation perspective as well.
Given the allure of better diversification, better dividend yields plus better growth prospects, ensuring that every given portfolio holds global or international equities seems benefit from a portfolio requirement rather than an option that is reserved only for the most risky investments. However, numerous dividend-seeking investors who are and risk averse can create a properly diversified portfolio. On the other hand, it is reasonable for investors to be afraid of the risks that a number of of these markets pose (such as the high-flying Latin American markets or Asian markets). To accommodate for those risks, investors would like to ensure a appropriate asset mix. In other words, investing in these international markets in moderation.
As always, seeking the pointers as well as pointers from a qualified financial planner or adviser in your area will help you achieve the appropriate balance within your portfolio without creating a situation where there is more unwarranted risk than necessary. Because while risks make sense in most cases, managing it makes more sense, further underlining the yearn for to seek also implement geographic diversification.
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