Many people invest only in US government or corporate securities because we live here and feel more comfortable.

As with other things in life, often we can achieve more if we are willing to look a little farther afield and explore the uncomfortable. The key is to understand the advantages, disadvantages and what best fits your situation.

Why consider investing outside the US? At the end of 2010, US companies were only 42% of global equity. International bonds are now the world's largest asset class. By not looking outside the US, we give up over half of our investment possibilities. Just as new, smaller companies are often faster growing, less developed countries have faster growing populations and markets. If we tap into this growth we can obtain higher returns. Developing countries, as with smaller companies, have greater risk of failure or loss. Adjusting for the risks, the returns and growth rates of developing countries are higher than developed markets.

Finally, geographically diverse companies and countries do not react the same way to global economic and political conditions. In investment language, they are not correlated. If we hold this diverse group of investments for the long term, we would expect to have reduced swings in portfolio value. To achieve this, we must choose investments that are truly diverse. Developed countries such as Canada will behave similar to the US; Malaysia will react differently to economic conditions.

There are disadvantages and risks. It is more difficult to get reliable information on events and company operations. You need to be aware of currency, political, liquidity and local market risks. It is also helpful to understand the culture and costs involved with investing in the country. Some investors ask; Why not just invest in a US company that works internationally? In 2010, the 50 largest US companies did 48% of their business outside the US. However, their performance moved almost in step with companies who operate only in the US. You can gain some additional return this way but you miss on true diversification.

How much should you invest overseas? As with all investment choices, it depends on your ability to take risks, investment goals and risk tolerance. There have been a number of studies that indicate that having 30% to 40% of your portfolio in international investments will increase returns while reducing portfolio value swings. Prior to investing internationally, you should evaluate your situation to determine a prudent portfolio mix for you.

The average investor can participate in international markets by using mutual funds or Exchange Traded Funds (ETFs). These investments are an easy way to achieve diversification, make purchases in US dollars and choose an active or passive investment style. Similar to purchasing US investments, researching the funds allows choosing those whose goals are the same as yours. If you are looking for fast growth you may want to look at emerging countries such as Columbia, Thailand, Turkey, Chile, Hungary or the Philippines. You could also look at specific regions such as South America or Southeast Asia. The most diversified group would be an emerging market index such as MSCI Emerging Markets. There are funds that passively follow these indexes and those that actively manage investments.

Long term trends point to a decreasing US share of the global pie. Many developing countries have higher growth rates and stronger financial structures than developed countries. If you want to better manage your portfolio risk and potentially increase your returns, consider increasing your international allocation to better match the global market.