Whether you’re a well-versed investor or you’re completely new to the game, it’s always important to consider how diversity could benefit your investment strategy.
As the saying goes: ”’variety is the spice of life”, and when it comes to investing, international stock is something you want to keep on your radar. If you’re looking to take a well-measured leap of faith, here’s how you can benefit from international investing.
What Does It Mean To Build an International Portfolio?
An international portfolio is one that consists of a variety of different stocks and assets that belong to foreign markets.
A strategic international portfolio is a great way to expose yourself to developing markets. You can also include diversity in your investing, and ultimately, make more money.
International investing would appeal to you if you already have a fair bit of experience in trading stock domestically. But perhaps want to diversify the assets you have? Yes, there are risks associated with buying international stocks, such as political instability. But there are far more rewards to focus on.
Building an International Stock Portfolio: 4 Key Benefits
When it comes to international investing, you need a good financial strategy. Ideally, you want to offset any risk by investing in mature foreign markets while taking a gamble on riskier, emerging markets.
A good balance of the two types of investments is crucial. If you’re looking for guidance on diversifying your portfolio, a good place to start is with monexsecurities.com.au. For now, let’s look at the top benefits:
1. Reduce Your Investing Risk
As mentioned, you need to think about how to offset the risk of investing in emerging international markets. After all, they’re new and relatively unstable — albeit exciting.
A good way to start building an international portfolio is to start small and continue to maintain your domestic holdings. Essentially, you want to split your investments between domestic and international holdings.
This is beneficial and reduces your risk of losing money. I.e. when one portfolio underperforms, the other could overperform, and you’re still left with a profitable return.
2. Broaden Your Currency Exposure
By investing in foreign markets you’re basically buying stocks of international currency. For example, if you purchase stocks from the London Stock Exchange, the value of the stock rises and falls with the British pound.
If your own domestic currency falls or fluctuates, stronger performing foreign currencies can help to neutralize these fluctuations. This ensures you’re never losing too much money.
3. You Can Benefit From Market Cycle Timing
It goes without saying that each country has its own top-performing markets that fluctuate in cycles. As a foreign investor, you can take advantage of certain market cycles, invest at the right time, in the right stocks, and make a serious profit.
For example, this might include investing in developing regions where there is usually a demand for capital inflow and commodities. The stock is not overvalued and will offer you a decent return on your investment by investing at the right time.
4. You Have a Huge Range of Options To Choose From
The investments available to you internationally might not be available to you domestically. Investing in the global market exposes you to new investment opportunities in different nations. For example, big tech opportunities in developing nations such as Asia.
To add to this, you can also combine your investment opportunities to include a variety of sectors. You might prefer the U.S. for tech development, Australia for commodities, or Europe for pharmaceuticals.
The point is, international investing broadens your horizons. And it allows for greater money-making opportunities.
Making International Investing Your Business
When it comes to purchasing international stock, remember to start off low and slow. Don’t neglect your domestic investments in order to offset any risk, and do your homework on market trends before you invest!
Looking to break into the business of stock trading or investment? Take some time to explore the rest of this blog for top business and tech tips…