FINANCIAL FOCUS: GLOBAL INVESTING: OPPORTUNITIES AND CAUTIONS

This "Financial Focus" column is prepared by Edward Jones Investments, headquartered in St. Louis. Jones includes branches throughout the nation, including Cape Girardeau and Jackson.

Why invest beyond America's borders when U.S. stocks have been performing so well? Because although U.S. stock returns this decade have dwarfed average annual returns over the past 70 years, at some point this trend will come to an end. To minimize the impact of a downturn in the U.S. stock market, the ideal portfolio will be invested in stocks of several countries.

Even if the U.S. market maintains its high-flying '90s pace, keep in mind that two-thirds of the world's market capitalization is now outside the United States, and more than three-fourths of the world's goods and services are produced in other countries. The world is becoming a borderless economy, with countries more interdependent than ever before.

The most convenient way to invest globally is through global mutual funds, which spread your money across many countries. For stock buyers, American Depositary Receipts (ADRs) for foreign company shares are purchased on U.S. exchanges, but the information available on foreign companies is often not as thorough or up-to-date as with American companies. However, if you own stock in a U.S. multinational company doing substantial business overseas, you'll participate in multiple foreign economies with the convenience and comfort of owning shares in an American company.

Where are the best global investments today? Asia's recent economic crisis chased many investors away, but this condition won't last forever, and a good global fund manager will know when and where to go back in.

Also, Europe is a powerhouse. Its Old World countries are developed, the euro is beginning to provide currency stabilization, and many stock markets, such as those in Italy, France and Germany to name a few, have been outperforming the U.S. market.

Emerging markets usually have strong potential but also carry high risk. Government-owned companies are rapidly being privatized, economies are being transformed from agricultural to industrial, middle-class ranks are growing and demanding more goods and services, and massive infrastructure development is taking place. On the flip side, fluctuating currencies, political upheaval and economic turmoil in these countries can all affect stock and bond prices.

The narrow focus of emerging market mutual funds creates more risk than broadly diversified global funds with a blend of U.S., European, Asian and Latin American markets. And when shopping these funds, check the manager's track record. Look for a seasoned manager who's tuned to the currency trends, economies, trade relationships and political status of foreign countries in order to make the best investment decisions with your money.

Remember, foreign investing carries some risks, such as political and currency risk, that don't come with domestic investing. However, the key to minimizing these risks is diversification. With that in mind, just how much of your portfolio should be foreign? For average investors, 12 percent is a good rule of thumb. But before opening your checkbook, review your needs with your investment professional.

The Southeast Missourian does not recommend that readers buy or sell stocks featured in this column, which is provided for informational purposes only.