Continuing on

NEA Today, Feb 1999

Does it make sense to invest over?

Lots of investors have grown discouraged about international investing over the past five years. But the idea still has merit.

Investment markets move in cycles. Sometimes U.S. stocks do well, sometimes bonds outperform, and sometimes international stocks outperform those in the U.S. So a savvy investor diversifies across these asset classes.

Over the past five years though, the stocks of large U.S. companies have beaten all other groups of assets. At the same time, stocks in Japan, which once led the international parade, have fallen.

Further, a strong U.S. dollar has hurt investments made overseas by U.S. citizens. That's because when you invest abroad, your dollar is converted into that country's currency. When the dollar rises, your investment is worth less.

Finally, investments in emerging markets-Latin America, the Far East, and Eastern Europe-have fallen apart over the past year.

All of these things together have caused many U.S. investors to pull out of international investing. But that's shortsighted. It still pays to diversity. Sometimes things make the best investment sense just when they look their worst.

Many professional investors say that Europe is an attractive investment right now. Some investors with a high risk tolerance are even betting on Japan as a turnaround. The important thing to do as an investor is to take the long view.