Money Rehab with Nicole Lapin - Economy Anxiety? Here's How to Invest in Foreign Markets

Episode Date: April 9, 2025

Consumer confidence in the U.S. is shaky right now—and with ongoing tariff drama and mixed economic signals, it’s no surprise investors are feeling uneasy. But here’s the thing: the U.S. is not your only option. Today, Nicole explains why looking beyond U.S. borders could be the smartest move for your portfolio right now. From “blue-chip” countries like Japan and Germany to emerging markets like India and Mexico, Nicole breaks down the best global investment plays, how to access them (spoiler: ETFs are your friend), and the tax traps to avoid. Diversification isn’t just smart—it’s essential.

So, I have written, count them, five books now. But each time I'm in the writing process, I stay at an Airbnb. I love to stay at an Airbnb. When I was actually first launching this show, I was at an Airbnb in Arizona. It was so peaceful. It was stunning. I could be productive and comfortable. The Airbnb was also surrounded by a ton of javelinas. If you know Arizona, you know they're like wild pig creatures, but honestly I love them too. Being away for work, for fun, or both is a perfect opportunity to host your space on Airbnb. And if you think that hosting is overwhelming, I have a solve for you. With Airbnb's co-host network, it's easier than ever before to host. It's also a great way to earn some extra cash, which I know we all love. Now you can hire a quality local co-host to take care of your home

and your guests. They can do everything from creating your listing to managing reservations to messaging guests and even providing on-site support. So if you've got a secondary property or an extended trip coming up and you need a little help hosting while you're away, you can hire eight co-hosts to do the work for you. Find a co-host at airbnb.com slash host. You know what I say about financial progress? Every step, even baby steps, get you closer to the finish line of your financial goals. When you open a time checking account, you are one step closer to a better financial

future. With no maintenance fees, fee-free overdraft up to $200, or getting paid up to two days early with direct deposit, making financial progress has never been easier. And if you ever want your pay before payday, you can use my pay to get up to $500 of your pay before payday with no mandatory fees or interest. Learn more at chime.com slash mnn. When you go to chime.com slash mnn, you'll see all the reasons I love Chime. Like, did you hear me say that Chime allows you to overdraft up to $200 with no fees? Chime also has no monthly fees or maintenance fees,

and Chime has over 50,000 fee-free ATMs. I approve. Make progress toward a better financial future with Chime. Open your account in just two minutes at chime.com slash MNN. That's chime.com slash MNN, as in Money News Network. Chime feels like progress. Banking services and debit card provided by the bank corp NA or Stride Bank NA. Members FDIC, spot me eligibility requirements

and overdraft limits apply. Fees apply at out of network ATMs. My pay eligibility requirements apply. I'm Nicole Lapin, the only financial expert you don't need a dictionary to understand, it's time for some money rehab. Well consumer confidence is continuing to drop in the US and it's just too early to tell what these tariffs are actually going to do to the financial health of the country. One of my favorite economists, Mohammed Al-Aryan, says it's a 50-50 chance whether tariffs will be good or bad. If you're feeling uncertain about where the economy is headed, you should know that you can invest in other economies too. So today, I'm going to be

telling you about investing in foreign markets, why you should, how to do it, and how to avoid any nasty tax surprises. But before I do, let me just be clear here. The United States is still the best economy in the world. Nvidia alone, for example, even after having a rough couple of weeks, is worth over $2.7 trillion dollars. And that is more than the entire GDP of all of Canada. Warren Buffett, one of the most successful investors of our time, is notoriously bullish on US stocks as well. So I'm not saying by any means that you should abandon your US stocks. Please don't. But if your portfolio is too US-centric,

it might be time to think global. In the early 2000s, for example, US stocks were asleep at the wheel while emerging markets like Brazil and India were booming. And let's not forget, the United States is also not the only country with a stock exchange. Global financial hubs like London, Tokyo, Frankfurt, Hong Kong, and Toronto each have major stock exchanges where thousands of companies list their shares. Some of the world's biggest corporations like Nestle, Alibaba, Samsung are headquartered outside of the United States and trade on their home exchanges. So if you're only investing in the S&P 500, you're actually missing out on a huge slice of the global

economy. Diversifying across countries helps protect you when one market hits turbulence. And let's be honest, that happens more often than we'd like. The last couple of weeks have not been fun, have they? So let's study abroad, shall we? Just like individual companies, when it comes to whole countries, there's a risk and reward spectrum. Let's start with the safest foreign markets to invest in. And when I say safe, I mean the countries that have the most stable political systems, strong legal protections for investors, and an economy that doesn't just rely on one industry or export. So think of these as your blue-chip countries. Japan, Germany, Switzerland, and Canada are notable ones, although Canada is a little more complicated lately with all

the tariff whiplash stuff. But Canada has a stable banking system, a resource-rich economy, and strong ties to the US, which makes it a great stepping stone for first-time global investors. Japan is also a good option because it has a mix of tech innovation, industrial strength, and investor protections. The yen is also considered a safe haven currency during global economic downturns. You may have seen this if you follow me on Instagram, but I did a video about this. In his latest letter to shareholders, the Warren Buffett himself called out the opportunity that he's seeing in Japan. Six years ago, Berkshire Hathaway started purchasing shares in five Japanese

companies and he says he expects Berkshire's steak in those companies to grow over time. All right. Noted, Warren. And then there's Germany, the economic powerhouse of the European Union. Germany's manufacturing and export driven economy is one of the strongest in the EU, and it has the longest standing reputation for fiscal responsibility. But we also can't discount Switzerland. Switzerland has a stable government, strong financial regulations, and a reputation for economic consistency. It's neutral in more ways than one. These countries are not likely to offer cuckoo bananas growth, but that's the point here.

They offer lower risk and more stability. Now, if you're willing to stomach more risk for the chance of a higher reward, emerging markets might be your speed. In the early 2000s, the four big emerging countries were collectively called the BRICS. Brazil, Russia, India, and China. India is definitely still a top contender, but I'm hearing more lately about Mexico, Indonesia, and Vietnam. Maybe the new BRICS are actually the VIMIs? I don't know. I'm just coining this here, right here, right now. If it catches on, remember you heard it here first.

Anyway, India still makes the list simply because it's the fastest growing major economy in the world. It has a young population, a growing middle class, and a booming tech sector. A lot of investors are calling it the next China. Mexico has also risen up the ranks thanks in large part to nearshoring. Nearshoring is an economic trend that consists of relocating business operations to nearby countries or regions, often with the intention of reducing costs and improving efficiency. This became a higher priority during COVID when import challenges from other parts of the world disrupted the supply chain significantly. As a result, Mexico is becoming a manufacturing hub for North American companies. Plus, it has trade agreements in place with the US and Canada that make it very attractive to investors.

Again, tariffs have shaken all of this up a little bit, but in the last five years, Mexico has been looking good. Vietnam is a rising star in Southeast Asia. It's benefiting from the global pivot away from Chinese manufacturing and foreign direct investment is flowing in. Indonesia is also a bright spot. With a population of over 270 million, Indonesia is one of the largest untapped consumer markets in the world. Its digital economy is also growing rapidly. But remember, emerging markets come with more volatility. So you'll want to weigh that against your risk tolerance and your investment timeline. So when you determine which foreign

markets you want to invest in, how do you actually do it? There are a few ways, but obviously I'm going to start with my favorite, ETFs. These are by far the easiest and most popular way. Funds give you exposure to international markets without having to buy individual foreign stocks. For safer markets, two of the top funds, get ready for some alphabet soup by the way, are Vanguard's Total International Stock ETF with the ticker symbol VXUS. iShares has a similar one with a ticker symbol EFA. VXUS is up 5.2% over the past year and EFA is up 4.35%. For emerging markets, the higher risk higher reward kind, there's an iShares emerging market

ETF with its symbol EEM or Vanguard has a similar one with the ticker symbol VWO. EEM is up 8.6% over the last year and VWO is up 10.28%. I'm going to pause here just for a sec to unpack something. First, obviously, the historical trend for emerging markets is higher than the safer markets. We were anticipating that, right? As I said, higher risk, higher reward. If one of these countries has a major meltdown, the yield is not going to look as pretty. Second, the safer foreign markets are not performing as well as the United States markets. VOO, which is an ETF that I talk a lot about on this show that mimics the US stock market, is up over 10% over the last year. So again, the United States,

great investment. We're just talking about diversification here. Beyond funds, there's American Depository Receipts, or ADRs. ADRs basically let you buy shares of foreign companies that trade on US exchanges like Samsung or Nestle. They're priced in US dollars, they follow US regulations, and they're easy to access on platforms like Public, Fidelity, Schwab, any brokerage. If you want something even safer, the right foreign bonds could be up your alley. You can buy them through international bond funds like the Vanguard Total International Bond ETF, which is ticker symbol BNDX. These often include government and corporate bonds from developed

countries. Because investors love bonds for their low-risk profile, you're probably not going to want to pick bonds for countries considered emerging markets. It makes more sense to go with these steadier economies instead. And last and honestly least, you can invest directly in foreign markets. This is the most complex of them all and usually best for more advanced investors or someone who has deep knowledge in that area. Buying directly on foreign exchanges might give you more options, but it also comes with currency risk, higher fees, and regulatory hoops that really have never been worth it for me personally.

Ok, so those are the big opportunities. Now we have to talk about taxes. Investing internationally can have tax consequences. You know the IRS always wants a piece of that pie. So if you think foreign investing can help you avoid capital gains taxes, think again. Capital gains from selling international investments are still taxed in the US, just like your domestic gains. Seems kind of unfair, but so it goes. Some countries withhold taxes on dividends before you even get them. The good news here? The US has tax treaties with a lot of these countries, so you might be able to claim a foreign tax credit on your US return. If you have foreign

assets directly, not through US-based funds, you might have to fill out different tax forms like the FBAR or FATCA reports. Another reason why making direct investments abroad? Not so fun. If you're investing via ETFs, you are usually off the hook for this. So to recap, investing in international markets gives your portfolio more balance and opens up opportunities you just can't find in the US. When it comes to investing in countries, there are safer bets, like Germany or Japan, and higher reward plays, more risky plays, like India or Vietnam. You can go the easy route with international ETFs or you can get

fancy with foreign bonds and ATRs. Just remember, no matter where you invest, Uncle Sam will find you. For today's tip, you can take straight to the bank. Here's one more ticker to check out. Vanguard has an ETF with the ticker symbol VEU that is quote, all world with the exception of US stocks. The fund includes about 2200 stocks of companies located in 46 countries, including both developed and emerging markets around the world.

Just remember currency fluctuations can impact your returns. So please keep an eye out on the strength of the US dollar relative to the countries you're investing in. countries you're investing in. Money Rehab is a production of Money News Network. I'm your host, Nicole Lapin. Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes. Do you need some money rehab?

And let's be honest, we all do. So email us your money questions moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at moneynews and TikTok at moneynewsnetwork for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.