Download International Diversification: Still a Viable Strategy?

International Diversification: Still a Viable Strategy?
Despite the developing "global economy," some investors still believe that owning U.S. securities is
sufficient -- that international securities would just duplicate their efforts. But a closer look at economic
and market trends reveals numerous reasons for continuing to diversify with investments from around the
world.
Unique economic environments -- There are still significant differences between countries' markets and
economic sectors. For example, the financial services and energy sectors represent a much larger percentage of
international market capitalization than U.S. market capitalization. On the other hand, the technology and health
care sectors represent a larger percentage of U.S. market capitalization.
Valuation variations -- When international stocks are less expensive than U.S. stocks, value-oriented
investors and investors looking to diversify growth-oriented portfolios may find attractive opportunities
in foreign markets.
Currency considerations -- During the 1990s, the rising value of the U.S. dollar curtailed the returns of foreign
investments. More recently, however, the dollar has weakened versus the euro, a trend that some analysts
believe could be sustainable. A weaker dollar could enhance the dollar-based returns of foreign investments.
Finally, keep in mind that many of the world's top companies are headquartered overseas. If you decide to
tap into that wider universe of investment opportunity, consider the potential advantages of an international
stock mutual fund. Be aware that foreign investments entail special risks, including currency fluctuations
and differences in regulations and accounting practices.
Article written by S&P Capital IQ and provided courtesy of Morgan Stanley Financial Advisor
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The author(s) are not employees of Morgan Stanley Smith Barney LLC ("Morgan Stanley"). The opinions expressed by the authors are solely their
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with respect to the purchase or sale of any security, investment, strategy or product that may be mentioned.
Diversification does not guarantee a profit or protect against a loss.
International investing may not be suitable for every investor and is subject to additional risks, including currency fluctuations, political factors,
withholding, lack of liquidity, the absence of adequate financial information, and exchange control restrictions impacting foreign issuers. These
risks may be magnified in emerging markets. Because of their narrow focus, sector investments tend to be more volatile than investments that
diversify across many sectors and companies.
Please consider the investment objectives, risks, and charges and expenses of the mutual fund carefully before
investing. The prospectus contains this and other information about the mutual fund. You may obtain the
appropriate prospectus by contacting a Morgan Stanley Financial Advisor. The prospectus should be read
carefully before investing.
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