How to Invest in International Markets (Beginner Guide)

Introduction

For most of your investing life, it is easy to think of the stock market as if it were one giant place.

You open your brokerage account.

You search for companies you recognize.

You buy shares.

And most of those companies happen to be based in your own country.

That feels normal.

But there is an enormous investment universe beyond your home market.

Companies in Japan, Germany, the United Kingdom, Canada, Switzerland, Australia, India, South Korea and dozens of other countries are building businesses, generating profits and paying dividends every day.

The question is:

Why should your portfolio ignore them?

International investing is not about abandoning your domestic investments and putting everything into foreign stocks.

It is about recognizing that your home country's economy represents only part of the global investment opportunity.

For a beginner, however, investing internationally can seem complicated.

You may wonder:

• Which countries should you invest in?
• Should you buy foreign stocks individually?
• Are international ETFs safer?
• What happens when currencies move?
• Will you pay taxes in another country?
• How do you know whether a foreign broker is legitimate?
• Do you actually need international investments if your domestic companies already operate globally?

These are much better questions than simply asking which foreign stock will make the most money.

International investing can provide diversification and exposure to different economies, industries and companies, but it also introduces risks that do not always exist—or exist to the same degree—in a domestic-only portfolio. The SEC specifically identifies currency movements, different market regulations, political conditions, liquidity, information availability and additional costs among the issues investors should consider.

The goal, therefore, is not to make your portfolio sound sophisticated.

It is to make it better diversified without making it unnecessarily complicated.

In this guide, you will learn how international investing works, the easiest ways beginners can gain global exposure, how currency affects returns, what to know about taxes and fees, and how to build an international strategy that fits into a sensible long-term portfolio.

Quick Answer

The simplest way for most beginners to invest in international markets is through a diversified international or global ETF or index fund rather than trying to select individual foreign companies.

You can gain exposure to developed and emerging markets through one investment, depending on the fund's mandate.

Before investing, consider:

• your investment goals
• time horizon
• risk tolerance
• portfolio allocation
• currency exposure
• fund fees
• taxes
• country and political risks
• and whether you already have international exposure through your existing funds.

You do not need to become an expert in dozens of foreign stock exchanges to invest internationally.

For many investors, a carefully selected diversified fund can do most of the heavy lifting.

What Does International Investing Actually Mean?

International investing simply means investing in assets connected to markets outside your home country.

That could mean buying:

• shares of a foreign company
• an international ETF
• an international index fund
• a global mutual fund
• foreign bonds
• or other securities with exposure to overseas markets.

There is an important distinction between international and global investing.

An international fund generally focuses on markets outside a particular home market.

A global fund may include both domestic and international companies.

For example, a U.S. investor might own a fund containing companies from the United States, Japan, France, Canada and other countries.

The exact definition depends on the investment product, so investors should always read the fund's objective and holdings rather than relying solely on its name.

The SEC notes that investors can obtain international exposure through U.S.-registered mutual funds and ETFs, ADRs, U.S.-traded foreign stocks and, where available, direct trading in foreign markets.

Why Would Anyone Invest Outside Their Home Country?

The strongest argument for international investing is not that foreign stocks will necessarily outperform domestic stocks next year.

Nobody knows that.

The stronger argument is diversification.

Suppose your entire portfolio is concentrated in one country's economy.

If that economy experiences:

• a prolonged recession
• political instability
• weak currency performance
• regulatory problems
• demographic challenges
• or a prolonged period of weak corporate earnings

your portfolio could be affected significantly.

International exposure gives you another source of economic activity.

Different countries experience economic cycles differently.

A country struggling with weak growth today may be experiencing rapid expansion several years later.

Likewise, an industry that dominates one market may be much smaller in another.

The SEC identifies diversification and potential growth opportunities in foreign economies as two major reasons investors consider international exposure.

But diversification is not a magic shield.

International markets can fall at the same time as domestic markets.

Global economies are deeply interconnected.

So the purpose is not to create a portfolio that can never decline.

It is to avoid making your entire financial future dependent on one market.

This is closely connected to how to build a diversified investment portfolio, because international exposure is most useful when it forms part of an intelligently diversified portfolio rather than becoming a standalone bet.

Do You Need International Investments?

Not necessarily.

This is where many investment articles become too simplistic.

You will sometimes hear:

“Every investor must own international stocks.”

That is too absolute.

Whether international exposure makes sense depends on:

• your existing portfolio
• your country
• your investment horizon
• your risk tolerance
• your financial goals
• and how much diversification you already have.

A U.S. investor holding a broad global fund may already have substantial international exposure.

Similarly, a Canadian investor may own companies that earn significant revenue outside Canada.

A multinational company can generate sales around the world even though its shares are listed in your domestic market.

The SEC specifically points out that investors may already have international exposure through multinational companies and domestic funds that hold foreign securities.

So before buying another international fund, look at what you already own.

You may discover that your portfolio is more global than you thought.

The Easiest Way to Invest Internationally

For beginners, diversified funds are usually much simpler than purchasing individual foreign companies.

An international ETF can potentially give you exposure to:

• hundreds or thousands of companies
• multiple countries
• numerous industries
• different currencies
• developed markets
• emerging markets

with a single purchase.

That changes the problem completely.

Instead of asking:

“Which Japanese company should I buy?”

you can ask:

“What percentage of my portfolio should be exposed to international markets?”

The second question is much more useful for a long-term investor.

International ETFs

Exchange-traded funds can provide a relatively convenient way to gain international exposure.

An ETF may track:

• developed markets
• emerging markets
• a specific region
• a particular country
• or a broad international index.

The major advantage is diversification.

Instead of betting your money on one foreign company, you own a basket of securities.

That does not eliminate investment risk.

But company-specific risk can be substantially reduced compared with holding one or two individual stocks.

If you are still learning how funds work, ETFs vs index funds: what’s the difference and which should you choose? is a useful next step because the two are often confused even though they can serve similar long-term purposes.

International Index Funds

An international index fund attempts to track the performance of a particular market or group of markets.

Rather than relying on a manager to constantly pick winners, the fund generally follows a defined index.

This can make international investing simpler and often reduces the need for individual stock research.

Global Funds

Global funds can combine domestic and international companies.

For an investor who wants broad geographic diversification through a single fund, this can be attractive.

However, you need to check the actual allocation.

A fund labeled “global” does not necessarily mean that every country receives equal representation.

The United States, for example, can represent a substantial portion of many global equity indexes.

Always look beneath the label.

What About Buying Individual Foreign Stocks?

You can invest directly in individual foreign companies, but beginners should understand what they are taking on.

Suppose you want to buy a company listed in Germany.

You now need to think about:

• the company's financial performance
• German market regulations
• the euro
• your brokerage arrangements
• trading hours
• foreign exchange
• taxes
• transaction costs
• dividend withholding
• accounting differences
• and the broader European economic environment.

That is a lot of moving parts.

You might still decide that the company is worth owning.

But you should understand that you are making a much more concentrated decision than simply buying a diversified international ETF.

The SEC warns that foreign companies may provide different levels of information, may use different accounting standards, and may not provide information in English.

For beginners, diversification is often the easier starting point.

What Are Developed and Emerging Markets?

International investing becomes easier to understand when you divide markets into broad groups.

Developed Markets

Developed markets generally include countries with:

• mature financial systems
• established capital markets
• relatively strong institutions
• developed economies
• and established regulatory frameworks.

Examples commonly include:

• Japan
• the United Kingdom
• Canada
• Australia
• Germany
• France
• Switzerland

The exact classification varies between index providers.

Emerging Markets

Emerging markets are generally economies with developing financial markets and institutions that may offer higher growth potential but also greater risk.

Examples may include:

• India
• Brazil
• Mexico
• Indonesia
• South Africa
• Taiwan

Again, classifications differ between providers and can change over time.

Emerging markets can be attractive because economic growth can be faster.

But faster growth does not automatically mean better investment returns.

Investors can also face:

• greater political risk
• currency instability
• lower liquidity
• regulatory uncertainty
• weaker investor protections
• and larger price swings.

International investing therefore requires accepting that higher potential does not come without additional uncertainty.

The Currency Risk Most Beginners Ignore

This is one of the most important differences between domestic and international investing.

Imagine you are a U.S. investor.

You buy a European stock.

The stock rises by 10%.

You might assume:

“I made 10%.”

Not necessarily.

The currency exchange rate also matters.

If the euro weakens significantly against the U.S. dollar while you own the investment, your dollar-denominated return can be reduced.

The opposite can also happen.

If the foreign currency strengthens against your home currency, currency movement can increase your return when measured in your home currency.

So international investment returns can effectively have two components:

Investment performance + currency movement

This does not mean currency risk is always bad.

It simply means you need to understand it.

The SEC specifically warns that changes in exchange rates can increase or reduce the return on international investments.

A Simple Currency Example

Suppose you invest $10,000 in a foreign market.

The underlying investment rises by 8%.

If currency movements are unfavorable to you, your final return in dollars could be lower than 8%.

If currency movements are favorable, your dollar return could be higher.

The exact result depends on the investment and exchange-rate movement.

This is why international investing should not be evaluated solely by looking at the foreign market's local-currency performance.

Should You Hedge Currency Risk?

Some international funds hedge foreign currency exposure back into the investor's home currency.

Others do not.

Currency hedging can reduce the effect of exchange-rate movements, but it also has costs and limitations.

There is no universal answer that says:

“Hedged is always better.”

For long-term investors, currency exposure may be viewed as another component of diversification.

For others, reducing currency fluctuations may better match their objectives.

The important thing is knowing what your fund actually does.

Do not assume an international ETF is automatically currency-hedged.

Read its documentation.

International Investing and Taxes

Taxes are one area where international investing becomes highly dependent on where you live.

A U.S. investor, for example, may face different tax considerations from an investor in the UK, Canada, Australia or New Zealand.

Foreign investments can potentially involve:

• dividend withholding taxes
• capital gains taxes
• foreign tax credits
• reporting requirements
• tax treaty considerations
• account-specific tax treatment.

The exact rules depend on your country of residence, the investment, the country where the investment is based, and sometimes the type of account you use.

This is one reason international investing should never be approached as simply:

“The stock went up, so I made money.”

Your after-tax return is what ultimately matters.

For U.S. investors, the tax treatment of foreign investments can involve U.S. tax rules as well as taxes imposed by the foreign jurisdiction. Other countries have their own systems.

If the tax consequences are significant, consult the applicable tax authority or a qualified tax professional rather than relying on a generic investing article.

International Investing Has Extra Costs

One of the easiest ways to lose part of an investment return is to ignore costs.

International investments can involve:

• fund expense ratios
• brokerage commissions
• currency conversion costs
• foreign transaction taxes
• bid-ask spreads
• custody fees
• dividend withholding
• and other expenses.

The SEC notes that international investments can be more expensive than domestic investments and specifically highlights transaction costs, taxes, commissions, currency conversion costs and potentially higher fund expenses.

This does not mean international investing is too expensive.

It means cost should be part of the selection process.

A slightly cheaper fund is not automatically better if it provides inferior diversification or a materially different strategy.

But if two broadly similar funds provide comparable exposure, unnecessary costs can become difficult to justify.

This is another reason index funds vs actively managed funds: which performs better after fees? matters when building a long-term portfolio, because investment costs compound over time just like investment returns do.

How Much Should You Invest Internationally?

There is no single percentage that is correct for everyone.

You will encounter recommendations such as:

• 10%
• 20%
• 30%
• 40%
• or even more.

But these numbers should not be treated as universal laws.

Your appropriate allocation depends on:

• where you live
• what you already own
• your risk tolerance
• your investment horizon
• your financial goals
• and your overall asset allocation.

For example, a Canadian investor and a U.S. investor may reasonably have different domestic/international allocations because their domestic markets have different characteristics and levels of diversification.

Instead of starting with a percentage you found online, start with your entire portfolio.

Ask:

“What am I currently exposed to?”

Then decide what is missing.

Before choosing an international allocation, it is worth reviewing how to allocate assets based on your risk tolerance, because geographic diversification should fit inside your broader asset-allocation strategy rather than replace it.

A Simple Beginner Strategy

Suppose you are starting with $500 per month.

You do not need to build a complicated portfolio containing:

• 17 country-specific ETFs
• individual foreign stocks
• emerging-market bonds
• currency funds
• and several regional funds.

That can create complexity without necessarily creating better diversification.

A simpler approach might be:

1. Establish your overall asset allocation.
2. Choose a broad domestic investment strategy.
3. Add diversified international exposure.
4. Automate regular contributions.
5. Rebalance occasionally.
6. Keep investing for the long term.

The objective is not to own everything.

It is to own enough of the right things that your portfolio is not unnecessarily dependent on one market.

Real-Life Example: Sarah's Global Portfolio

Consider Sarah.

She is 32 and invests $600 every month.

Initially, almost all of her investments are concentrated in companies from her home country.

She realizes something:

Her income already depends heavily on the economy where she lives.

Her job is there.

Her property is there.

Her future spending is there.

Her taxes are there.

And now most of her investments are there too.

She decides that adding international exposure could provide greater geographic diversification.

Instead of attempting to select individual foreign companies, she chooses a diversified international fund that fits her broader investment plan.

She does not expect it to outperform her domestic investments every year.

That is not the point.

Her objective is to build a portfolio that does not rely entirely on one country's economic performance.

That is a much more sensible reason to invest internationally than trying to guess which country will become the next market superstar.

Real-Life Example: David Makes the Opposite Mistake

Now consider David.

He reads several articles about a rapidly growing foreign economy.

Excited by the growth story, he puts 40% of his portfolio into a handful of companies from that country.

Initially, the investments perform well.

Then the market falls.

The currency weakens.

One company reports disappointing earnings.

Another faces regulatory problems.

David becomes nervous and sells everything.

His problem was not that international investing failed.

His problem was that he confused international diversification with geographic speculation.

Owning foreign assets is not automatically diversification if most of the portfolio is concentrated in one foreign country or industry.

True diversification requires looking at the entire portfolio.

What About ADRs?

American Depositary Receipts, commonly called ADRs, are another way U.S. investors can gain exposure to certain foreign companies through U.S. markets.

An ADR represents an interest in shares of a foreign company and trades in the United States.

This can make access easier than directly navigating a foreign exchange.

However, ADRs can still involve:

• currency exposure
• foreign-company risks
• fees
• dividend withholding considerations
• and differences between the foreign company and U.S.-listed securities.

The SEC recognizes ADRs as one of the common ways U.S. investors can obtain international exposure.

For beginners, however, a diversified ETF may still be simpler than researching individual ADRs.

What Should You Research Before Buying an International Fund?

Do not buy a fund simply because its name contains words such as:

• Global
• International
• Emerging
• World
• Asia
• Europe

Look deeper.

Check:

Geographic Exposure

Which countries does it hold?

How much is allocated to each?

Number of Holdings

Does it own hundreds of companies or only a small number?

Sector Concentration

Is it heavily concentrated in technology, financials, energy or another sector?

Expense Ratio

How much does the fund charge annually?

Currency Policy

Does it hedge currency exposure?

Fund Structure

Understand whether you are buying an ETF, mutual fund, ADR or another security.

Distribution Policy

If the fund pays dividends or distributions, understand how those are handled.

Tracking Method

If it follows an index, understand which index and how closely the fund tracks it.

Research matters because two funds with similar names can have very different portfolios.

The SEC recommends researching investments before committing money and emphasizes understanding the investment, its risks and the person or firm offering it.

The Broker Matters Too

International investing introduces another question:

Where are you buying the investment?

Your broker should provide access to the securities you want at reasonable costs and operate within an appropriate regulatory framework for your jurisdiction.

This becomes particularly important if you are considering a foreign broker.

For U.S. investors, the SEC warns that working with an overseas broker that is not registered with the SEC may mean you do not receive the same investor protections available through a properly regulated U.S. broker.

The same principle applies elsewhere:

Do not send money to an investment platform simply because it advertises access to global markets.

Verify who operates it, where it is regulated and what protections apply to your account.

International Investing Is Not Forex Trading

This distinction is important.

Buying an international stock is not the same thing as trading currencies.

If you buy shares of a Japanese company, your investment is primarily an ownership interest in a business.

You may have currency exposure because the company's shares, revenues or profits are affected by exchange rates.

Forex trading, on the other hand, involves trading currencies themselves.

Those are fundamentally different activities.

The SEC warns that leveraged retail forex trading can be extremely risky and can result in losses exceeding the initial capital in certain circumstances.

So if your objective is long-term wealth building, do not confuse global investing with speculative currency trading.

How International Investing Fits Into Long-Term Wealth Building

International investing works best when it becomes part of a larger financial system.

You still need:

• an emergency fund
• manageable debt
• an appropriate asset allocation
• a long-term investment horizon
• regular contributions
• diversification
• and disciplined behavior.

Buying an international ETF does not compensate for poor financial habits elsewhere.

A person who invests internationally but constantly sells during market crashes can still destroy their long-term strategy.

That is why how to stay calm during market volatility is relevant to international investing: overseas markets can experience sharp declines, and a diversified portfolio only works if you can remain disciplined when markets become uncomfortable.

Should Beginners Invest in Emerging Markets?

They can, but they should understand the additional risks.

Emerging markets may offer:

• faster economic growth
• expanding consumer populations
• developing industries
• and attractive long-term opportunities.

But economic growth does not automatically translate into superior stock-market returns.

Investors can also face:

• political uncertainty
• weaker institutions
• currency volatility
• lower liquidity
• regulatory changes
• capital controls
• and greater market volatility.

For a beginner, broad international exposure may be easier to manage than making a large concentrated bet on emerging markets.

The Biggest International Investing Mistakes

Investing in a Country Because It Is “Growing Fast”

A country's GDP can grow rapidly while its stock market performs poorly.

Economic growth and shareholder returns are related, but they are not identical.

Ignoring Currency Risk

Your foreign investment may perform well in its local currency while producing a disappointing return after conversion into your home currency.

Buying Too Many Funds

Owning five international ETFs does not necessarily mean you are five times more diversified.

They may hold many of the same companies.

Chasing the Best-Performing Country

Last year's winning market may not be next year's winner.

Ignoring Fees

Small annual costs can compound into meaningful differences over decades.

Treating International Investing as a Shortcut to Higher Returns

International diversification is primarily a portfolio-construction decision.

It is not a guaranteed return-enhancement strategy.

Panic Selling

Foreign markets can be particularly uncomfortable when you are watching both stock prices and currency movements.

Selling purely because a foreign market feels unfamiliar can turn temporary volatility into a permanent loss.

How to Start Investing Internationally Step by Step

If you are a complete beginner, keep the process simple.

Step 1: Define Your Investment Goal

Are you investing for:

• retirement
• long-term wealth
• a future purchase
• financial independence
• or another goal?

Your objective determines how much risk you can reasonably accept.

If you are still building your overall investment framework, how to start investing: a beginner’s step-by-step guide provides the broader foundation before you add international exposure.

Step 2: Review What You Already Own

Look at your existing:

• stocks
• ETFs
• mutual funds
• retirement accounts
• and other investments.

Determine how much international exposure you already have.

Step 3: Decide What Role International Investments Should Play

Are you trying to:

• diversify geographically?
• access emerging markets?
• reduce dependence on your domestic market?
• gain exposure to particular regions?

Be specific.

Step 4: Choose a Diversified Vehicle

For many beginners, a broad international ETF or index fund is simpler than selecting individual foreign stocks.

Step 5: Check Fees and Holdings

Do not stop at the fund's name.

Understand what you actually own.

Step 6: Understand the Tax Rules

Check the rules that apply in your country and account type.

Step 7: Invest Consistently

Once your strategy is established, consistency can matter more than constantly changing your portfolio.

For investors who prefer a systematic approach, how to use dollar-cost averaging to build wealth safely explains how regular investing can reduce the temptation to wait for a “perfect” entry point.

Step 8: Rebalance When Necessary

International exposure should remain consistent with your intended allocation.

Do not let one region become disproportionately large simply because it performed exceptionally well.

How Much Money Do You Need to Start?

You do not need thousands of dollars to begin.

Depending on your brokerage and the investment product available to you, you may be able to start with a relatively small amount.

The important issue is not whether your first international investment is $50, $500 or $5,000.

The important issue is whether the strategy is:

• affordable
• diversified
• appropriate for your risk level
• tax-efficient where possible
• and sustainable over many years.

If you are starting with a small amount, how to start investing with $100 shows why a small initial portfolio can still be a meaningful beginning rather than a reason to wait.

What Happens When International Markets Underperform?

This is where your investment philosophy gets tested.

Imagine your international fund underperforms your domestic investments for five consecutive years.

You may begin thinking:

“Why am I even investing internationally?”

That is exactly when you need to remember why you added it.

If you bought international exposure solely because you expected it to outperform, disappointment is inevitable.

If you bought it because you wanted broader diversification, temporary underperformance may be perfectly consistent with the strategy.

Different parts of the global market will lead at different times.

You do not need every part of your portfolio to be the winner every year.

You need the whole portfolio to serve your long-term objectives.

The Bigger Picture: Global Investing Is About Participation

There is a psychological advantage to thinking globally.

The world's economic growth is not produced by one country.

Innovation happens across borders.

Businesses expand internationally.

Consumer markets develop.

New industries emerge.

Entire companies can become global leaders without being headquartered in your own country.

International investing gives you a way to participate in that broader economic activity.

But the smartest approach is rarely to predict which country will dominate next.

It is to build a portfolio that can participate in multiple markets without requiring you to correctly predict the future.

That is a much more sustainable investment philosophy.

FAQ — How to Invest in International Markets

Is international investing good for beginners?

It can be. For many beginners, diversified international ETFs or index funds offer a simpler way to gain exposure to foreign markets than selecting individual overseas stocks.

How much of my portfolio should be international?

There is no universal percentage. Your allocation should depend on your country, existing investments, risk tolerance, time horizon and financial goals.

Are international ETFs risky?

They carry investment risk just like domestic ETFs. In addition, international investments can involve currency, political, regulatory, liquidity and country-specific risks.

Can I invest in foreign stocks through my regular brokerage account?

In many cases, yes, depending on your country, broker and the specific security. Some foreign companies are available through locally traded securities such as ADRs, while others may require access to foreign exchanges.

Do international investments have currency risk?

Often, yes. Changes in exchange rates can increase or reduce your return when measured in your home currency.

Are international stocks better than U.S. stocks?

There is no permanent winner. Different markets can outperform at different times. The stronger argument for international exposure is diversification rather than assuming foreign stocks will always produce higher returns.

Should I invest in individual foreign companies?

Beginners may find diversified international funds easier to manage because they spread company-specific risk across many holdings. Individual foreign stocks require considerably more research.

What are emerging markets?

Emerging markets are developing financial markets that can offer significant growth opportunities but generally involve higher levels of economic, political, currency and market risk.

Do I have to pay foreign taxes when investing internationally?

Possibly. Tax treatment varies according to your country of residence, the investment, the foreign jurisdiction and the type of account. Dividend withholding taxes and other international tax considerations can apply.

Is international investing the same as forex trading?

No. International investing usually involves owning securities connected to foreign businesses or markets. Forex trading involves trading currencies and can involve substantially different risks, particularly when leverage is used.

Can international investing protect me from a market crash?

No. International diversification cannot guarantee protection from losses. Global markets can decline together, particularly during major worldwide economic shocks.

Should I invest internationally every month?

Regular investing can be a practical strategy if it fits your overall plan and budget. Automating contributions can also reduce emotional decision-making.

Conclusion

Investing internationally can sound more complicated than it actually is.

You do not need to follow every foreign stock exchange.

You do not need to become an expert in Japanese accounting.

You do not need to predict which country will have the world's fastest-growing economy next year.

And you certainly do not need to turn your portfolio into a collection of dozens of complicated funds.

For most beginners, the better approach is much simpler:

Understand your goals.

Know what you already own.

Build an appropriate asset allocation.

Add diversified international exposure where it makes sense.

Pay attention to fees, taxes and currency risk.

Then give the strategy time to work.

The real value of international investing is not that it guarantees higher returns.

It is that it can help you look beyond the borders of the economy where you happen to live.

Your portfolio does not have to predict which country wins.

It simply needs to be positioned so that you can participate in more of the world's investment opportunities without taking risks you do not understand.

That is what good international diversification is really about.