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International Funds

Started by Lee_S, 10/07/2007 11:15PM
Posted 10/07/2007 11:15PM Opening Post
The international fund in my 401K seems to be doing very well. But, it puzzles me. I'm puzzled about how currency fluctuations might affect it. If the dollar regains strength, will my international fund automatically decline? When I'm investing now, will I find that I've bought a relatively tiny stake in the foreign companies because the dollar is so low? Is it worth it to invest overseas anyway because there is so much growth potential in developing economies where the people are just now getting a chance to buy things?

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I have several telescopes, but none are semi-APO, APO, or in anyway valuable.
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Posted 10/08/2007 08:11AM #1
Lee Spain said:
The international fund in my 401K seems to be doing very well. But, it puzzles me. I'm puzzled about how currency fluctuations might affect it. If the dollar regains strength, will my international fund automatically decline?
Not automatically, any more than a falling dollar makes your U.S. investments decline -- other factors come into play, such as how rapid/gradual the decline is, specifically how the falling dollar impacts the various countries making up the international portfolio (which depend on such factors as what industry concentrations they have, their relative trade balance with the U.S. and so on)

I would say it is generally 'worth it' to be invested overseas to some degree regardless of the fluctuations in the exchange rates from one year to the next, just for diversification purposes, but I wouldn't throw in a whole lump of one's portfolio suddenly at one time. And there's the fact that many other economies will be growing faster than ours because they're growing from a much less developed level (though this is partially offset by a greater pace of "creative destruction" that causes more companies to go bankrupt as well as prosper) I mean, from an investor's point of view, it seems somewhat foolish to be concentrated in just one country, even if it is your own. If nothing else it can, like commodity stocks, serve as a partial hedge against dollar fluctuations on the international markets.