Are you an investor that is still ignoring foreign opportunity through exchange traded funds (ETFs)?

The foreign equity asset class is the one area many investors neglect when considering their portfolios, according to Investopedia. By not investing abroad, investors can miss out on big returns as well as minimized risk that comes from diversification.

ETFs allow investors to put their money overseas without single stock-picking skills. Many ETFs invest in a basket of stocks from different regions, countries and asset classes. They also offer access to commodities and foreign currency, along with single-country specific investments. All country-specific ETFs will carry significant country-specific risk. This means that the performance of the investment will be very dependent on the country’s overall state. In addition, you can choose between emerging or developing markets. Depending on your objectives, it’s good to have different ETFs to maximize the risk-to-reward ratio.

Despite the global market capitalization being invested 43% in the U.S. and 57% overseas, U.S. retail investors continue to be too concentrated in their own equity market. The average defined contribution plan participant only invests 5% internationally, according to JP Morgan. You might think the wealthier clients would be smarter and invest large chunks of money abroad, but that’s not the case, although there is an increase. Mass affluent retail investors only invest 10% internationally, and ultra net worth individual investors put 22% abroad. We have no reservations having our clients invested 50% in overseas markets. Hopefully the average investor will realize that abroad is the place to be investment-wise before it’s too late.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.