NEW YORK — Manny Mashhoud has done well investing in U.S. stocks for two decades, but the Glendale insurance executive fears that the country's economy could be restrained for several years by high unemployment and the lingering trauma of the recession.
So he's sharply boosting his investments in overseas markets and is even setting up a brokerage account so he can buy and sell stocks directly on foreign exchanges.
"The advantages of the foreign markets substantially outweigh what we have here," Mashhoud said.
Sharing that sentiment, many Americans -- though still raw from the 17-month bear market that ended in March -- are pouring money into mutual funds that buy foreign stocks, especially in emerging markets such as China and India.
The shift, applauded by many financial advisors, has paid off this year. But there's mounting concern that investors are rushing overseas too aggressively.
As a plunge Thursday and Friday in many overseas stock markets shows, international investing poses a whole new level of risk. The latest tumble came in reaction to a sudden debt crisis in the Middle East emirate of Dubai.
Some experts warn that the growing love affair with overseas assets could end badly.
"It's a scary trend," said Chris McIsaac, an executive at mutual fund group Vanguard. "We've seen bubbles before in different sectors of the market and we all know what happens to bubbles."
In Dubai, part of the United Arab Emirates, state-owned conglomerate Dubai World on Wednesday asked for a delay in repaying some of its $60 billion in debt, sending shivers through investors who feared that it could set off a wave of falling dominoes in the way the collapse last fall of Lehman Bros. did.
Over the next two days, key stock indexes sank more than 6% in Hong Kong, more than 5% in Shanghai and South Korea and more than 3% in Japan and India.
On Wall Street, which was closed Thursday for Thanksgiving, the pain wasn't as severe. On Friday the Dow Jones industrial average slumped 154.48 points, or 1.5%, to 10,309.92.
Even before the global financial crisis and recession, U.S. investors were increasing their ownership of foreign stocks. Such a move was something that many financial professionals had long advised.
The move abroad generally makes sense, financial advisors say, because many international economies -- especially ones that are still industrializing -- are expected to grow far more rapidly than the U.S. economy.
