More Profit Less Protection Abroad
A worldwide economic slowdown was underway even before Saddam Hussein rolled into Kuwait Since then, the sharp rise in oil prices has sliced the top off virtually every stock market in the world.</br></br>For investors in mutual funds that buy foreign stocks, the slide is a buying opportunity. Looking ahead, the growth potential of Japan, Germany and many other countries appears to be twice that of the United States.</br></br>But foreign markets offer far less investor protection than Americans are used to, even in industrialized Europe. The so-called ÛÏemerging markets,Û like Thailand, the Philippines and Brazil, can be crocodile swamps.</br></br>The way out of the swamp, if there is one, is to buy mutual funds and let them fight the crocodiles for you. If you donÛªt, here are some risks you face: ÐÊ Market domination. In many countriesÛÓamong them, Sweden, Italy and Hong KongÛÓa few firms or families control a large percentage of the market's value. That's not a fair playing field for outside investors.</br></br>ÐÊ Volatility. In general, foreign markets rise and fall more swiftly than American markets do, especially when measured in U.S. dollars, Sometimes the gyrations arise purely from supply and demandÛÓtoo much money chasing (or fleeing) too few stocks. Sometimes itÛªs currencyÛÓa falling dollar adds to the value of foreign investments; a rising dollar diminishes it. The