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.

China’s Internet conglomerate Tencent Holdings overtook Facebook by size on Tuesday, with a market capitalization of $534.5 billion, compared to Facebook’s $519 billion, according to reports.

Tencent’s share price has surged following strong third quarter earnings, reported last week, with profits increasing nearly 70% in the quarter.

What’s Tencent?

Tencent is a tech conglomerate offering Internet services, an online advertising platform, and mobile games, among other things. It’s perhaps best-known, however, for its WeChat messaging service, which has close to 1 billion users who send about 38 billion messages each day, according to Reuters.

Market cap, is the total dollar value of a company’s shares. It’s often used to evaluate a company’s overall size

Tencent was founded by entrepreneur Ma Huateng in 1998. It has invested in numerous U.S. startups, including Snap and Tesla. Ma has an estimated net worth of $42 billion, according to CNN.

Earlier this month, Tencent caused a stir when it snapped up 12% of Snap after the U.S.-based messaging app company reported less than stellar earnings.

Tencent is now the fifth-largest publicly traded company in the world, according to Reuters. It ranks behind Apple, whose market capitalization of $873 billion makes it the most valuable company in the world, as well as Google parent company Alphabet, Microsoft, and Amazon.

[infogram id=”5624b090-27a2-48c8-b10f-fac165874e59″ prefix=”qmT” format=”interactive” title=”Tencent Chart”]

Largest publicly traded companies by market cap.

What is a market capitalization?

A market capitalization, or market cap, is the total dollar value of a company’s shares. It’s often used to evaluate a company’s overall size.

Market cap is determined using a simple calculation: You multiply the company’s share price by the number of shares available for sale. In this case, Tencent’s share price was about 440 Hong Kong dollars. It has about 1 billion shares outstanding.

That gives Tencent a market cap of roughly 4.17 trillion Hong Kong dollars, or $534.5 billion, according to CNBC. It’s the first Chinese company to reach the $500 billion market cap mark, beating out rival Alibaba, the Chinese eCommerce company.

The post China Social Media Giant Tencent is Now More Valuable Than Facebook appeared first on Stash Learn.

The MCSI Emerging Market Index, which is a composite of some of the biggest company stocks in developing nations is up 30% for the year. But tech stocks in the same index are up 54% over the same time period, which means they’re increasing at a rate nearly twice as high as the total index, the Wall Street Journal reports.

There are also roughly 30 emerging market economies primarily in Africa, Eastern Europe and Asia

The tech gains in the emerging nations reportedly represent a turnaround from previous years, as the major industries that drove index gains were commodities, financial services, and utilities. In the 1990s, technology stocks only made up 5% of the index, today they represent more than a quarter.  

It’s been a strong year for tech stocks in the U.S. as well, with the S&P North American Technology index up 26% for the year.

A few of the big drivers of emerging market gains are China’s eCommerce platform Alibaba, Internet services company Tencent Holdings, and electronics powerhouse Samsung.

Source: Wall Street Journal and FactSet

What are emerging markets?

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.

While investments in developed nations carry the potential for rapid growth, there’s also more risk involved for a variety of factors related to the stability of these economies, including currency fluctuations and the potential for political unrest.

The post Why Tech Stocks Are Driving Gains in Emerging Markets appeared first on Stash Learn.

Robotics and artificial intelligence are exciting new fields that are currently enabling machines to work alongside people in a variety of manufacturing industries including automotive and electronics production.

Robots and artificial intelligence will drive $15.7 trillion of global economic gains by 2030

Pretty soon, robots and other thinking machines will be helping everywhere, assisting in health care, energy production, even farming.  

Robots, robots, everywhere

A new study from consultancy PriceWaterhouseCoopers (PWC) about artificial intelligence predicts the world is on the cusp of enormous change, driven by robots and the next generation of thinking computers. The study forecasts enormous productivity gains for economies across the globe as robots and artificial intelligence enable greater efficiency.

The two countries expected to benefit most from advances in artificial intelligence are the United States and China, also the two largest economies in the world. But emerging markets have an opportunity to ramp up really fast.

Here are some highlights from the report:

Robots and artificial intelligence will drive $15.7 trillion of global economic gains by 2030. Roughly half of these gains will come from increases in productivity. The other half will come from increased consumer demand as products become more specialized and targeted to individual buyers.

While all economies in the world will experience the economic impact from smarter machines, China and the U.S. will experience 70% of the total GDP gains. PWC estimates the U.S. will see economic increases worth $3.7 trillion. China will see nearly twice as much economic gain, valued at $7 trillion.

Emerging market economies, or nations whose economies are still developing, stand to gain the most from robotics and artificial intelligence. Think of it this way: advanced economies like the U.S. already have extremely sophisticated systems in place for manufacturing, production, and delivery of services.

Developing nations have a huge opportunity to become market leaders by adopting artificial intelligence in processes more quickly.

The post Robots and Artificial Intelligence: It’s the Way of the World appeared first on Stash Learn.

Diversification is an investing strategy where you attempt to minimize risk by putting your money in a variety of securities. The general theory is that in so doing, you’re spreading your risk in the event markets suddenly drop. Even during good times when markets tend to rise, diversification can help you benefit from stock increases if specific areas of the economy really power ahead.

Most people take diversification to mean owning a strong sampling of stocks, bonds, mutual funds, and ETFs that gives them exposure to a variety of company sizes and business sectors.

Sure, you can have a diversified portfolio of U.S. companies, but you can also add some world flavor to the mix.

Global diversification

Global diversification essentially means purchasing asset classes and sectors both inside and outside the U.S. One of the easiest ways to do that is by purchasing shares in an ETF or mutual fund that gives you exposure to overseas securities.

For example, you can invest in funds that invest in companies in emerging markets, such as Brazil, China, Mexico, and South Africa. Or you could choose funds that will let you invest in securities in more developed countries, for example in western European countries like France and Germany, or more advanced Asian countries such as Japan.

Recommended Reading: Jargon Hack: Emerging Markets

Finding balance

By diversifying globally, you can potentially balance the performance of your portfolio.  For example, some economists and other financial experts believe the value of U.S. stocks may be too high, after years of steady gains, according to a recent story in Forbes.

At the same time, some analysts forecast that western Europe is poised for growth in the coming years, after many years of recession and sluggish stock market growth.

Similarly, emerging markets have the potential for important stock market gains–by some estimates, as much as three quarters of global growth and consumption could be driven by emerging economies in the coming years. While stocks in emerging markets have taken a trouncing in recent years, there are indications they’re making a comeback in recent months.

If growth in U.S. stocks levels off or decreases, it’s quite possible you’ll find increases in other countries.

Key takeaways

Global investing carries its own risks, of course. Emerging market stocks in particular are subject to volatility due to market events, currency swings, or political turmoil. Over the long run, however, global diversification can help you balance out gains in one part of the world with losses elsewhere.

The post Global Diversification: Improve Your Portfolio by Investing in More Places 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.