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Managing your money 23 March 2019

Why you should invest in global markets

Investing internationally could increase the diversity of your portfolio, decrease risk and yield a better total return.

Global market investment options

Investing internationally could increase the diversity of your portfolio, decrease risk, and yield a better total return as a result. Investing internationally may also help you capture investment opportunities that arise from fast-growing economies and markets around the world.

Why invest internationally?

Investing in global markets has some unique benefits to offer and it could help you build long-term wealth. In a globalised world, there are virtually limitless opportunities for investing. Investing internationally also enables you to diversify your portfolio. Diversification can help to minimise risk and optimise potential return, because your portfolio is spread across different securities, industries and countries. Poor performance in one market, therefore, will have less of an impact on your overall portfolio.

Know the risks

Before making any decisions, it’s worth taking the time to do some in-depth research, taking into account your current financial position, your risk profile and your long-term goals. Investment specialists can help to establish your appetite for risk to help you determine whether you are a ‘defensive’ or a ‘dynamic’ investor.

There are three key risks to bear in mind
  • With an international portfolio, the value of your investments will be affected by currency fluctuations. 
  • Taxation on investment income is a complex issue. To ensure that you abide by the tax rules and regulations pertaining to income from foreign investments it’s advisable to seek professional advice from a tax consultant.
  • Be aware of any political, social and economic risks to ensure that your investments are safe. This will require country-specific knowledge and understanding of the various markets.

The benefits of investing in global markets

Most investment professionals advise that diversification is the most important factor when it comes to achieving long-term financial goals while minimising risk. It’s an investment strategy that may help to protect your money. 

By investing globally, the risk of being impacted by a downturn in the market is decreased. Building an international investment portfolio gives you the opportunity to diversify your assets across a range of asset classes and geographic locations. If one investment performs poorly over a certain period, the others may perform better, reducing the potential losses that might arise if all your capital was concentrated in a single investment.

Investing abroad can also give you the chance to put your money into emerging markets in countries where stocks are less expensive. The value of currency is an important consideration when making a global investment. If your money has a higher value, you can buy more shares in an international company with the same amount of capital, allowing you to receive a greater return on investment.

How to invest in global markets

Investing in global markets can be tricky. Different countries have different rules and regulations. Before you make any decisions, it’s important to do your research so that you know as much as possible about the markets and countries that you’ll be tapping into. Regardless of your specific situation, managing your finances is complex, and you need to seek the right advice. 

Being selective in your portfolio construction is important; this requires vigilance and the ability to look for pockets of value in the different markets.

It’s advisable to find an experienced investment advisor who can help you to review your needs and goals, determine how long you can invest, and create an investment plan tailored for you.

Next step

If you’re considering investing in global markets, take a look at our Investment Solutions that we offer.