Identification

• International investments manage risks, while providing for long-term growth. International investments may open fresh markets for increased sales, while your home economy struggles with recession.
  
  

Types

• Multinational corporations, such as Coca-Cola, expand into multiple countries to make overseas sales. Smaller investors, however, lack the capital to make direct investments into foreign countries. These investors may buy shares of stock within multinational corporations or buy global mutual funds for international exposure.
  
  

Considerations

• Foreign exchange markets lay the groundwork for international business. Consumers trade for foreign currency to buy international goods, while businesses convert overseas profits back into domestic currency to spend at home.
  
  

Warning

• Unfavorable exchange-rate fluctuations reduce your net income. Buyers lose purchasing power for overseas goods and investments when domestic exchange rates deteriorate. Sellers, however, suffer when domestic exchange rates advance. At that point, overseas profits are less valuable.
  
  

Strategy

• You may use currency derivatives, such as options, futures and forwards to manage exchange-rate risks. Currency derivatives establish predetermined exchange rates for set periods.