DIVERSIFYING YOUR PORTFOLIO INTERNATIONALLY

Adding international exposure to your portfolio may lead to important diversification and performance benefits. One factor to consider with respect to investing in select international markets is that about half the global equity market capitalization resides outside of the United States. Additionally, with the U.S. market currently experiencing what’s known as a “range-bound” environment, the time may be right for investors to consider diversifying their portfolios with international investments.

“Range-bound” means that U.S. market indexes are likely to fluctuate within a fairly narrow band. That’s why it may be a prudent strategy for clients looking to maximize their risk-adjusted returns to allocate a portion of their portfolios to international investments.

Potential Benefits of International Investing
Investing outside the U.S. carries several potential benefits:

• Exposure to non-dollar currencies.

• Access to potential growth opportunities in global and emerging markets.

• Increased diversity across industries and markets.

• May reduce portfolio fluctuations attributed to single-market movements.

Several major foreign equity indexes outperformed the S&P 500 in 2005*. The S&P 500 posted a total return of 4.9% for 2005. That compares, (in U.S. dollar terms) to Japan’s Nikkei 225 at 40.2%, Emerging Markets (MSCI) at 34.5% and Europe (MSCI) at 9.9%.*

Finally, international investing offers an opportunity for greater portfolio diversification – not just across individual investments, industries and asset classes, but also across markets and regional economies. Diversification may present investors with the potential to increase returns over the long term by cushioning the negative effects of market volatility – and fluctuations – on their portfolios.

For more information about international investing, please contact your Financial Advisor. He or she can also give you more information about professional investment management strategies, and how this approach may help you diversify your investment portfolio.

Statement of Risk
International investing presents certain risks not associated with investing solely in the U.S., such as currency fluctuation, political and economic change, social unrest, changes in government regulations, differences in accounting and a lesser degree of accurate public information available.
*The past performance of an index is not a guarantee of how individual investments will perform. Indexes are not available for investment and reflect an unmanaged universe of securities, which does not take into account advisory or transaction fees that will reduce the overall total return. Asset allocation alone does not ensure gains nor can it prevent losses from occurring in a portfolio or account.

Mr. Khara is a Financial Advisor with the Baum Consulting Group, UBS Financial Services Inc. The information contained in this article is based on sources believed reliable, but its accuracy cannot be guaranteed. This article is for informational and educational purposes only and should not be relied upon as the basis for an investment decision. Consult your financial advisor, as well as your tax and/or legal advisors regarding your personal circumstances before making investment decisions. UBS Wealth Management Research-Americas is provided by UBS Financial Services Inc.