Balancing risk and reward

Not necessarily. As an allocation in a broader portfolio, international investing can actually help reduce risk by increasing diversification. Foreign markets often move based on different market cycles than those in the U.S. Investing abroad could help offset the effects of a down market specific to the U.S. by helping smooth out your overall returns and reducing volatility within your portfolio.

However, there may be unique risks associated with investing outside the U.S. such as currency risk, liquidity risk, geopolitical risk and potentially higher costs. These risks may be greater with investments in developing countries. 

Generally, the goal of long term investing is to take on enough risk so that your portfolio has the potential to grow but not so much risk that a dip in the market could completely derail your ability to achieve your goals.

A diversified portfolio holds a mix of stocks, bonds, cash and other types of investments. The key is to select investments whose returns don’t always move in the same direction at the same time and to the same degree. Diversification is important because it helps spread your risk across different types of investments, which may increase your chances for investment success.

Successful investing doesn’t mean avoiding all risk or completely ignoring risk. Rather, it is striking the optimal balance between the right amount of risk for you and your individual circumstances and the growth you need so that you’ll be able to achieve your retirement goals.