International equity investing has grown substantially during the past two decades and now represents a
a significant portion of investors’ total equity portfolios.
International equity represented less than 1% of individual equity allocations until recently. The rapid growth of acceptance of foreign investments occurred primarily for the following reasons:
- Deregulation of the financial markets of the major industrialized countries.
- Development and growth of global and multinational companies and organizations.
- The explosive growth of international capital flows and the concurrent abolishment of foreign exchange control.
- Advances in information technology.
Reasons for International Investing
One of the significant advantages of international investing is diversifying the source, magnitude, and timing of returns for the investor’s overall portfolio. Foreign equity markets primarily respond to the unique political, economic and financial factors associated with the countries where the foreign company operates. These factors result in share price movements that can differ in size and timing, versus trends in the investor’s domestic equity markets, in all but the most extreme situations.