Investing internationally is a great way to boost your portfolio returns, but it does involve a significant amount of risk. Today, many people are hesitant to take on too much risk because they still remember the recession of 2008. Moreover, the coronavirus pandemic has added even more uncertainty to the economic market.

At the same time, investing in international markets can actually reduce risk by diversifying the assets of your portfolio. Not all markets are affected the same way by economic disturbances, so investing in different ones can be a smart move. Of course, you will need to be calculating in how you invest in other economies. Some important tips to keep in mind when it comes to international investing include the following:

1. Learn about the growth of outside markets.

Risk-averse people tend to stick with investments in the markets they know and understand. If this sounds like you, you should know that with some research, you can learn about the opportunities in other markets with considerable growth and start to feel comfortable enough to invest.

Too often, individuals focus their investments on developed countries because they seem like a safer option, but even these markets can be subject to significant peaks and valleys. Further, developed economies have generally become outpaced by the top emerging markets in terms of growth. For example, the United States only accounts for about 20 percent of the global gross domestic product. Investing in other emerging economies is a way of getting exposure to fast-growing markets while hedging against the natural volatility of developed markets.

2. Think about investing as a long-term endeavor.

You may have shied away from riskier markets with a lot of volatility out of fear of losing big. However, it’s important not to write off these riskier markets altogether.

Immediate volatility only affects people who intend to sell investments shortly. When you think about your investments in the long term, it often makes sense to choose the riskier options, at least for some portion of the portfolio.

If you have short-term goals, you should look for other options, but in terms of long-term investments, markets with greater volatility often have a higher return potential over time. This strategy can be stressful since it may seem like the investments lose money quickly, but you should remember that you can wait it out until the value returns and then grows.

3. Understand the risks involved in international transactions.

Investing internationally carries its own unique risks; understanding them can help relieve some of the anxiety involved with entering new markets. Learning about these risks can help you vet opportunities and feel more confident in making purchases.

One unique risk relates to currency. Since all currencies fluctuate in terms of relative value, that adds an additional layer of risk. For example, imagine investing in a foreign company that reports an earnings growth of 20 percent. However, the local currency used by that company also depreciates by 10 percent in relation to your home currency. Therefore, the earnings growth rate is really 10 percent.

The other risks to consider are political and financial. Political situations can significantly affect the value of investments and also cause changes to monetary policy that cause financial risk. Emerging markets, for example, may hike interest rates to contain inflation, which in turn can hurt investment value.

4. Rebalance the portfolio at regular, set intervals.

Many investors build a portfolio and then forget about it as it grows over time. However, investments grow at different rates, so the makeup of a portfolio will change over time. Assets that performed well will become overrepresented, while those that underperform will become underrepresented. Be sure to check periodically and rebalance your portfolio to maintain the distribution you want and control risk.

This rebalancing becomes especially important when you invest in foreign markets, as their growth patterns are different than in the US. Failing to rebalance can leave you at increased risk if these investments start to represent a large portion of the portfolio. You may also have too little exposure over time, which will limit growth potential.

5. Aim for consistency rather than buying into hype.

As you become more familiar with foreign markets, you may hear some hype about certain investments and feel compelled to invest in them. While some professionals can make money through short-term investments driven by hype, it involves taking on a great deal of risk. Most investors are better served by consistency.

With consistency, you figure out up front the level of risk you want and maintain it over time with slight adjustments as your financial situation changes. Consistency also leads to greater control.

Though you may see negative headlines about foreign markets where you have investments and feel compelled to sell, holding on to those investments and waiting for them to recover is generally a better plan than trying to capitalize on timing.