Best trading app | Image Resource: investoracademy.in If you have an investment portfolio, then one of the most important parts is diversification. When you spread out your investments among different companies, it reduces the risk of losing money even if one investment incurs losses.
One of the options for diversification is to invest in international markets. Investing in the shares of the companies located outside your home country can help to diversify your portfolio, and you can tap into growth in other economies. Stocks and bonds have different risks in different countries. Going for international investments can help to boost your returns as you get exposed to fast-growing economies. You may find favorable conditions abroad like good government leadership, tax incentives, access to natural resources and policies that allow rapid industrial development. International companies may represent an attractive market value. By investing in different countries, you are investing in different currencies, and this creates an opportunity for growth if these currencies appreciate against the US dollar. Domestic index funds Some domestic funds offer limited exposure to international stocks and do not offer enough diversification. These are called the ‘Domestic index funds’ because they invest in the US domestic funds and US stocks. To get real exposure to international stocks, you should invest in international funds and indexes. The international stock market represents around 40% of the world’s equity investment opportunities. Saving many investments in different countries will help you when any of the stocks perform lower. Risks involved in international stocks The risks that you need to consider when you invest in international stock are: When the dollar gets weaker, international investments can provide a hedge against this. If the US dollar becomes strong against the other currencies, then the international stocks can have a weaker performance. If there is political unrest, and it leads to economic instability in the region, then your investments might have limited liquidity. Many countries have introduced capital control to limit foreign investors from withdrawing money during crises. Buying international stocks You can easily buy international stocks using an online brokerage account. Most brokers provide online trading apps. The best trading app allow you to invest with just a few clicks.
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