Reply
 
Thread Tools Display Modes
  #1  
Old 01-13-2019, 08:50 PM
PhillyGuy PhillyGuy is offline
Guest
 
Join Date: Sep 2011
Location: Pennsylvania U.S.A.
Posts: 1,420
Does International Investing Help the Country You Invest In?

Does buying a basket of stocks from a particular country (and maybe gradually selling it 10-30 years later) help the country you invest in? If so, why?

The obvious example for the U.S., of such a basket, is one of the index funds that track the S&P 500. It seems from this next link that equivalents, purchasable in my country (U.S.), exist for many other countries that may need the economic boost more due to a higher poverty rate -- if there really is such a boost:

https://www.ishares.com/us/literatur...etfs-en-us.pdf

I'm presuming that none of these index funds invest in new issues. If they did, I'd see a direct help to companies in the various countries involved. But it still feels to me that buying the index fund should somehow help the country in question, and also that later selling the stock shouldn't totally erase the effect. The thing is -- I can't think of reasons to support those feelings.

Of course, companies, on stock exchanges, are often multi-national, diluting the effects I am asking about. But diluted or otherwise, what is the effect?

IMPORTANT: I have not researched the legitimacy of my link. It is purely to illustrate the question, and in no way a recommendation.
__________________
For the record, I could be wrong.
  #2  
Old 01-13-2019, 08:58 PM
OldGuy OldGuy is online now
Charter Member
 
Join Date: Dec 2002
Location: Very east of Foggybog, WI
Posts: 5,102
In my opinion such investing only helps indirectly. It may raise the stock price which may let the company issue more or borrow more money and then invest whichever proceeds in something productive.
  #3  
Old 01-13-2019, 09:32 PM
Riemann's Avatar
Riemann Riemann is online now
Guest
 
Join Date: Nov 2015
Location: Santa Fe, NM, USA
Posts: 6,505
Quote:
Originally Posted by PhillyGuy View Post
I'm presuming that none of these index funds invest in new issues. If they did, I'd see a direct help to companies in the various countries involved. But it still feels to me that buying the index fund should somehow help the country in question...
It doesn't really make any difference whether you invest in the primary market rather than the secondary market, because the cost of capital that other investors will demand in the primary market derives from the valuation of secondary market assets.

Regarding specific investments:

That is a legitimate link - iShares is Blackrock, one of the two leading U.S. managers along with Vanguard.

Single-country ETFs like the ones you linked to have relatively expensive fees. The iShares ones are generally the best for fees & liquidity, in the 0.4%-0.7% range. The indices that they follow exclude small cap stocks (and therefore exclude most new issues). Unless you particularly want to invest in one specific country, they are not the best choice.

Sticking with Blackrock, their "core" ETFs are
(a) much lower fees
(b) diversified across many countries
(c) include all stocks that it's possible to buy, i.e. including small caps & new issues
IXUS = all global markets ex-USA
IEFA = all developed markets ex-USA/Can
IEMG = all emerging markets

Or there are equivalent Vanguard ETFs that are almost identical
VXUS
VEA
VWO

All the above are huge, liquid, cheap funds that are suitable for a long term investment horizon, they will be around for decades.

Last edited by Riemann; 01-13-2019 at 09:37 PM.
  #4  
Old 01-13-2019, 09:52 PM
Riemann's Avatar
Riemann Riemann is online now
Guest
 
Join Date: Nov 2015
Location: Santa Fe, NM, USA
Posts: 6,505
I suppose what might "help" a specific country more would be direct investment in a small startup business, or a venture capital fund doing a similar thing - much riskier propositions that might have difficulty raising capital. But obviously this is not going to be the kind of thing that's practical for the typical U.S. investor unless you're wealthy and have a lot of time to dedicate to researching the investment, dealing with complex tax & legal issues, etc. .
Reply

Bookmarks

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is Off
HTML code is Off

Forum Jump


All times are GMT -5. The time now is 07:19 PM.

Powered by vBulletin® Version 3.8.7
Copyright ©2000 - 2019, vBulletin Solutions, Inc.

Send questions for Cecil Adams to: cecil@straightdope.com

Send comments about this website to: webmaster@straightdope.com

Terms of Use / Privacy Policy

Advertise on the Straight Dope!
(Your direct line to thousands of the smartest, hippest people on the planet, plus a few total dipsticks.)

Copyright 2018 STM Reader, LLC.

 
Copyright © 2017