But when it comes to putting money in the market, most people tend to think only of investing in the U.S.

That’s because so many familiar companies are here, not to mention important indexes like the S&P 500, the Dow Jones Industrial Average, and the Nasdaq. The U.S. is also the biggest economy in the world.

Still, it’s important to consider foreign investments too. Why? For one thing, it might be a good thing to invest where most people aren’t–by some estimates U.S. investors hold only 15% of their equities overseas.

Fact: Three quarters of all listed stocks are international, and they account for almost half of the total market value of all companies globally, according to research.

Why invest in foreign companies?

Here are two other reasons to consider investing in foreign stocks:

• International stocks can help you diversify. The basic idea behind diversification is to make sure you don’t have all your eggs in one basket. You can diversify by holding stocks in different sectors and industries, as well as in companies of different sizes. (You can also diversify by holding bonds.) And international stocks are another way to diversify your portfolio. Think of it this way–not all economies perform the same way at the same time. While the U.S. is the largest economy globally, and what happens here often has an impact on other economies, there isn’t always a direct correlation. So other economies, and the companies that make them up, can perform well while the U.S. experiences a slowdown, and vice versa.
• Growth potential. The U.S. is considered a mature economy, which means its annual growth potential typically hovers in the single digits. In contrast, many economies in developing countries and elsewhere have the potential to grow at more dramatic rates. In fact, emerging economies have been responsible for two-thirds of global growth in the last 15 years, and half of all consumer consumption, according to research.

How do you buy foreign stocks?

U.S. investors can buy foreign stocks through various ETFs and mutual funds that specialize in overseas investments. In that case, you’ll be buying shares in a fund that invests in a basket of stocks.

Investors can also purchase individual stocks of foreign companies trading in the U.S.

Typically U.S. investors invest in foreign stocks through something called an American Depositary Receipt, or ADR.  It’s essentially a certificate issued by a U.S. bank that specializes in trading, which represents shares of the foreign stock, and it trades on a U.S. exchange like a regular stock.

It’s important to know that one ADR doesn’t necessarily represent one share, it typically represents a batch of shares. So, for example, if you purchased  $100 of a foreign company’s ADR, it would be worth a corresponding number of shares held by the ADR.

You don’t have to worry about the technical mechanism so much. The ADRs will appear just like a regular stock offered by your broker or trading app.

What are the fees and tax implications of foreign stocks?

If your foreign stock pays a dividend, you’ll owe taxes on it—both in the country where the company is located, and here in the U.S. To avoid double taxation, the U.S. federal government offers a tax refund for the foreign tax, but you’ll still owe taxes on the dividend amount in the U.S.

From time to time, the bank that holds the ADR may charge administrative fees for handling the foreign shares, often charged as a percentage of each share you own. You can find out more about those fees by checking the prospectus for the stock’s ADR.

Go around the world with Stash

Stash lets you buy fractional shares of stocks of some foreign companies. You can also purchase ETFs that represent different parts of the world, from Europe to Asia.

Special note: This material has been distributed for informational and educational purposes only, and is not intended as investment, legal, accounting, or tax advice. Please consult a tax professional for answers to specific questions.

The post Foreign Stocks: Should You Invest in Them? appeared first on Stash Learn.

On Sunday, roughly two million people in the Spanish region of Catalonia voted to separate from the rest of the nation and form its own country.

The vote was immediately declared unconstitutional by Spain’s top courts, and police moved quickly to squash protests by voters in favor of secession. The vote even prompted King Felipe VI of Spain, who usually stays quiet on political matters, to condemn the move to secede.

The vote in Catalonia would be roughly equivalent to a state like Texas voting to secede from the U.S., which from time to time it has seemed to consider doing.

Why does the vote in Catalonia matter?

Politics affects economies and stock markets. Following the Catalonia vote, something called the IBEX, which is roughly equivalent to the S&P 500 in the U.S. but contains 30 of the largest company stocks in Spain, fell about 3% on Monday.

The euro, the common currency of the European Union (a bloc of 28 countries, primarily in Western Europe), also reportedly fell 0.5% on Monday, the day after the vote.

Catalonia is responsible for roughly 20% of the country’s economy, and a quarter of the country’s exports

Spain has only recently emerged from a crushing, decade-long recession that has left nearly 20% of citizens there unemployed. Catalonia, a small region in the northeast of Spain, is an economic powerhouse, responsible for roughly 20% of the country’s economy, and a quarter of the country’s exports.

One of the country’s most vibrant cities, Barcelona, is located there. And while the rest of Spain has suffered from high jobless rates, its unemployment rate is reportedly lower at 13%.

Catalonia vote: Part of a trend

The Catalonia vote is part of wave of separatist and nationalist sentiment sweeping Europe.

Greece has toyed with the idea of leaving the European Union due to a debt crisis that began more than a decade ago. In 2016, Great Britain voted to leave the European Union in an event that has come to be known as Brexit.

The roots of the Catalonia vote are complex and longstanding. The region has its own language and culture, and was also key in the Spanish Civil War in the 1930s.

The post Catalonia’s Vote to Secede from Spain: What It All Means appeared first on Stash Learn.

If that debt limit isn’t increased, the federal government won’t have enough money to pay creditors for what it’s borrowed. As a result, it will also have trouble funding many of the services we all rely on every day–from health services, to the national parks we hike in. Social security payments could also be delayed, as too could payments to troops, and government workers.

And that inability to pay would also create a lot of uncertainty in the economy.

So what is the debt ceiling?

The debt ceiling is a borrowing limit set by Congress. (The last limit was $18 trillion dollars in 2015, when Congress temporarily agreed to lift the debt cap until this year). You can think of it almost like a credit line on a credit card. Once we’ve spent to the limit without paying off the balance, the nation can’t spend any more.

The debt limit is important because, to keep functioning, the federal government has only two sources of income to fund operations: from income taxes and from selling bonds, known as U.S. Treasuries. Unfortunately, there’s always a shortfall between how much money the U.S. takes in from taxes, and how much it spends to keep running. The shortfall is known as the country’s deficit, which adds each year to our national debt, which is just shy of $20 trillion.

To make up for the shortfall, the U.S. borrows, in part by issuing Treasuries, and this borrowed money is used to keep the lights on.

(You can find out more about the biggest buyers of U.S. Treasuries here.)

Default and Other Consequences

Failing to raise the debt limit will have some pretty dramatic consequences, according to various experts–and the federal government itself.

“It would cause the government to default on its legal obligations – an unprecedented event in American history,” the U.S. Department of Treasury writes on its website, adding that default  could create another financial crisis that could put the U.S. “right back in a deep economic hole, just as the country is recovering from the recent recession.”

One immediate effect of a default would be a change in the credit rating of the U.S. Nations get credit ratings, much the way people get credit scores, for the way they handle debt.

That’s what happened in 2011, when Congress last battled over increasing the debt limit. The U.S. had its rating downgraded by one of the three companies that score bond debt, which rattled U.S. markets.

Further downgrades could make future borrowing for the U.S. more expensive, which in turn could drive up people’s taxes, and increase interest rates in the U.S., according to financial analysts.

Congress Must Decide

Unfortunately, increasing the debt limit isn’t a simple matter. It’s actually the subject of a big political struggle in Congress, with a bloc of legislators opposed to an increase without significant spending or regulatory cutbacks and concessions.

Nevertheless, Secretary of Treasury Steven Mnuchin has said he thinks the debt ceiling will be increased.

“I have had discussions with the leaders in both parties in the House and Senate and we are all on the same page,” Mnuchin told Reuters recently. “The government intends to pay its debts and the debt ceiling will be raised.”

Credit rating agencies and the markets will be watching closely.

The post The Debt Ceiling: What It is and Why It Matters appeared first on Stash Learn.

You have a standard of living that’s higher than most of the world, with all that entails: advanced manufacturing and services, jobs with a higher income, a stable political system, infrastructure that allows you to move around with ease, even electricity and water when and where you want them.

These things are not always a given for the rest of the globe.

Many other countries are far less affluent, and many are what’s known as emerging economies. In these countries, manufacturing may not be as developed, on average people earn dramatically less money annually, and things like infrastructure may be more rudimentary.

But both developed and emerging markets represent unique investment opportunities.

Here’s a closer look at both.

Developed nations

There are roughly 30 developed nations. In addition to the U.S., these include the Western European countries such as the United Kingdom, France, and Germany. In Asia, Japan is considered an advanced economy.  And in North America, besides the U.S., Canada is also considered a developed nation.

Much of the west began industrializing in the 19th century. As a result, developed nations have some of the most advanced factories and manufacturing processes in the world. They also have more built out infrastructure, from airports to railways and highways. Access to new forms of infrastructure–like the Internet–may also be higher.

One of the biggest differences between a developed nation and an emerging economy is what people earn, sometimes referred to as per capita income. In the U.S., for example the average annual per capita income is $56,000. In India, annual per capita income is only about $1,600. Consequently, developed economies tend to consume more products and services.

Emerging economies

There are also roughly 30 emerging market economies primarily in Africa, Eastern Europe and Asia. Some of the largest emerging nations are referred to as the BRIC nations of Brazil, Russia, India, and China.  But there are as many as two dozen others, including Malaysia, Mexico, South Africa, Taiwan, Turkey, and Vietnam.

(China is something of a paradox. It’s the world’s second largest economy, but it’s also considered a developing nation.)

Generally speaking, these countries are less affluent, and the standard of living tends to be lower. Literacy may not be as high as in developed countries, and there also can be less political and economic stability. The currency of these countries can also be subject to dramatic swings, which can affect investments.

Manufacturing tends to be less advanced, and it tends to focus on components that find their way into finished products made elsewhere. Many of these countries also supply natural resources that are necessary in manufacturing, such as petroleum, wood and non-precious metal.

Why the distinction matters

Generally speaking, your investments may be safer in industrialized countries with developed economies. But growth potential for companies in these countries may be smaller.

By contrast, for emerging nations whose industrialization process is just beginning, the potential for fast growth is much higher, although risks are too. By some estimates, as much as three quarters of global growth and consumption could be driven by emerging economies.

At the same time, developing economies are often more dependent on circumstances in more developed nations. Economic boom times in Western Europe, for example, could also give a lift to emerging economies. When recessions hit developed nations, that can have a negative impact on developing nations, because demand falls.

Investment experts recommend having a diversified portfolio that balances risk with holdings in different regions and different kinds of economies around the globe.

The post Developed vs. Emerging Economy: What’s the Difference? appeared first on Stash Learn.