edf40wrjww2CF_PaperMaster:Desc
Norway
“OSE All Share Index”
Good/Bad Investment
As the fall out from the recent US sub-prime mortgage crisis works its way through the US stock market, more US investors are increasing their international exposure as a “flight to safety”. In recent years, the international marketplace has becoming increasingly integrated making it easier for international funds to invest overseas. Today, according to Morningstar, the average U.S. fund now holds about 7.4 percent in foreign equities. Countries like Brazil, Russia, India, and China (BRIC) are on the short list of US investor favorites. Fast growing economies however come with increased risk of inflation, unstable governments, unregulated industries, possibility of the nationalization of assets, and corruption.
There are additional risks for US investors to consider. In many countries, only a few companies are available to foreign investment causing periods of massive overvaluation and volatility. Currency fluctuations are another risk; a falling US dollar makes investing overseas expensive and thus reducing your ability to fully invest in some securities in countries with strong currencies. Conversely, a strengthening US dollar may reduce the value of your investment aboard. A percentage move of the dollar versus the currency of the foreign country decreases the value of your investment by that same percentage point. Your best scenario would be to invest in a country of an increasingly strong currency.
Accounting for risks and evaluation of foreign securities, one may choose to invest in a foreign county with a mature, but still growing economy; a country such as Nor ...