1. Decide what percentage of your portfolio to allocate to international investments. International investments should be one component of your overall asset allocation plan. What percentage you allocate to global investments will depend on several factors, including your risk tolerance, time horizon for investing, and comfort level with foreign investments. Consider allocating at least 10% to global investments, since less than that will typically have little impact on your total return.

2. Determine whether you want to invest based on countries or companies. There are two basic approaches to international investing:

• A top-down approach analyzes various markets to determine which countries or regions of the world are likely to experience above-average investment returns. Based on that analysis, individual investments in those countries are selected.

• A bottom-up approach analyzes specific companies, selecting those that exhibit strong fundamentals. Which country that company is located in is typically not a factor.

3. Get familiar with the available investment options. There are numerous investment vehicles in the international arena. Understand the basic choices so you can make informed decisions about which alternatives are most suitable for you.

4. Understand the risks involved in international investing. In addition to the risks associated with domestic investing, international investments have unique risks:

• Political and economic trends. A wide variety of government decisions can impact a country’s investments, including nationalizing industries, changing investment regulations, or adopting more stringent trade policies. While these risks may not be as significant a concern for major industrialized nations, the risks can be significant for emerging markets.

• Currency fluctuations. A foreign investment’s return is based on two factors: the investment’s actual return, and the impact of currency fluctuations. If the U.S. dollar declines compared to the other country’s currency, your investment will increase in value since more dollars are now needed to purchase the investment. An increase in the U.S. dollar compared to the other currency means your investment will decline in value.

• Market volatility. While market volatility also occurs in U.S. markets, it tends to be more pronounced in foreign markets, especially emerging markets.

• Information. It’s generally more difficult to find information about foreign investments. Also, financial reporting practices in other countries are different than those in the U.S., making comparisons between foreign and U.S. companies difficult. Disclosure requirements are typically not as extensive.

• Transaction concerns. Transaction costs can be significantly higher in foreign countries and delays in settling trades are not uncommon. Many foreign stock markets are thinly traded, making liquidity a concern.

5. Review specific investments. Once you have decided how much to allocate to this area and have become familiar with international markets and the alternatives available, you can start investigating specific investment options.

6. Monitor your investments. You should periodically review your international investments, along with your other investments, to ensure conditions at that company or in that country have not changed dramatically.