Why Invest In International Markets
International investing has become vital for our portfolios as we take part in the global growth. Adding international investment to a portfolio offers diversification and may provide higher returns. However, there are both benefits and risks associated with global investing. At Invest Globally we will cover a few significant reasons and benefits to invest internationally. We will also point out the volatility and risks that one is exposed to.
Diversification is the most obvious yet the most crucial benefit of global investing, as one say’s ” Do not put all your eggs in one basket”. A diversified portfolio acts as a source of stability during market volatility. When you spread out your investments across geographies, there is a low correlation between them. This means that the volatility in one market is likely not to affect your other assets. You may choose a theme or a combination of multiple sectors. For example, you can prefer the US market for technology, Europe for engineering, and Australia for commodities. If you are interested in healthcare or pharmaceuticals, there are several great options in the US and Europe. Keeping your investments globally diversified means you could always have something in your portfolio doing well. It offers the best chance of achieving a steadier return over the long term. It can lower the impact if one of your investments goes through a rough patch, lowering the expected volatility (the price swings up and down) that your portfolio could experience.
Diversification is the most obvious yet the most crucial benefit of global investing, as one say’s ” Do not put all your eggs in one basket”. A diversified portfolio acts as a source of stability during market volatility. When you spread out your investments across geographies, there is a low correlation between them. This means that the volatility in one market is likely not to affect your other assets. You may choose a theme or a combination of multiple sectors. For example, you can prefer the US market for technology, Europe for engineering, and Australia for commodities. If you are interested in healthcare or pharmaceuticals, there are several great options in the US and Europe. Keeping your investments globally diversified means you could always have something in your portfolio doing well. It offers the best chance of achieving a steadier return over the long term. It can lower the impact if one of your investments goes through a rough patch, lowering the expected volatility (the price swings up and down) that your portfolio could experience.
There are four main pillars of diversification-
- assetry-based,
- time-based,
- geography-based. t-based,
- indus
While most investors are decent at asset, industry and time diversification, geography-based diversification is missing from portfolios. A geography-based diversification strategy means that all your investments are not concentrated in a single geography. Investing globally helps diversify your portfolio. This means that you move away from single country or currency risk.
Investment opportunities that are not present domestically. Developed markets like the US are home to some of the world’s largest tech and Health companies – something you probably cannot access by investing in non-developed countries. Developed markets are located in countries that have established industries, widespread infrastructure, secure economies, and a relatively high standard of living. Examples of developed markets include the United States, United Kingdom, Japan, Australia, Canada, and France.
Another significant benefit of global investing is the protection of investments against fraud and liquidations. Developed market companies generally have strong regulations that ensure sound corporate governance and severe penalties for market abuse. This protects retail investors from potential scams and insider trading losses. Remember, capital is always at risk, but many foreign financial institutions, offer protection from seizures and other threats such as liquidation of the broker-dealer.
Investing overseas exposes you to currency appreciation (or depreciation). For example, the USD has been appreciating against many other countries. Emerging markets currencies depreciate over the longer-term. By investing globally, portfolios have generally had the dual benefit of better markets and appreciating currencies. In countries with high inflation and currency depreciation, globally investing can protect your investment against such risk.
At Globally Invest, we bring international investing for investors and guide you on the process of how to invest globally from your country. What’s more, the high price of shares should not be a deterrent, you can invest in fractional shares please contact us for further information.