In general, stock trades by voice mail are a no-no

Q: A stock I owned was downgraded and quickly lost value on a Friday afternoon. I called my broker to discuss the wisdom of selling before it declined further. He was out of town but left a message that I should call the company's 800 number and set a minimum. I called my broker again on Monday morning, leaving a message to sell if it went over a certain price. Later in the day, I found that the stock was sold at $1.75 over my minimum about 45 minutes after my call. I regard this as an unauthorized sale and wonder what recourse you could suggest.
Name withheld, Bristol, R.I.

A: Security trades cannot generally be accepted via voice mail, says Robert O. Smith, a certified financial planner in Exton, Pa. In fact, it's normal to hear this reminder in voice mail messages at many firms.

When trading stocks, dramatic changes in prices can occur in short periods of time and it can be very important to be able to sell the stock quickly to avoid further loss or to lock in a gain. So you need access to someone, or some process, to be able to execute your trade when you want.

As Mr. Smith sees it, the bigger issue here is access to your broker. You may want to consider using other trading alternatives or ask your broker to provide a backup for you to place trades in case he or she isn't around when needed.

If you still feel cheated, read your brokerage account agreement carefully since it should outline the complaint options that you have. Usually, it's arbitration. You can also file a complaint with the National Association of Securities Dealers (www.nasd.com).

Q: We're frequently advised to include international investments in our portfolios. Some have reservations about investing overseas. Since many US firms have international operations, wouldn't investing in those provide some diversification? If so, what major US corporations would fill the bill?
W.N.B., via e-mail

A: Foreign developed markets have outperformed US broad markets (such as the S&P 500 Index) three years in a row, points out Bill Wixon, a certified financial planner in Minneapolis and member of the Financial Planning Association of Minnesota.

International markets follow different economic cycles than domestic markets do, Mr. Wixon says. Adding foreign stocks to a portfolio reduces volatility and increases risk-adjusted returns, he says.

The US economy, however, is dealing with some serious issues, such as a weak currency and large budget and trade deficits. These problems weigh on US stocks and they are not as serious in many foreign countries, which he notes are home to some very large corporations (think Nestlé, GlaxoSmithKline, or Royal Dutch Petroleum). "Roughly half the world's market capitalization is outside the US. Why should a smart investor ignore all of these companies?" Wixon wonders. So it appears to him that diversifying internationally over and above just owning multinational corporations has advantages.

No doubt Microsoft, Intel, Coca-Cola, and others have strong overseas sales, but they also will sway with the US markets, says Wixon. For the sake of diversification, then, he recommends a "three-legged stool" approach to investing: domestic stocks, international stocks, and bonds.

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