Five Quick and Compelling Reasons to Invest in the Global Market Most investors tend to concentrate their investment funds on local trade platforms while rarely taking the time to familiarize themselves with the less visible, but just as viable and potentially more profitable global markets that are outside of their scope. In fact, while foreign equity accounts for about half of the global market, research has found that less than one percent of a majority of American investor’s portfolios get allocated to markets abroad. While local stock markets hold many excellent investment opportunities, widening your perspective and expanding your portfolio beyond your local borders might be your ticket to investment gold. Below I will give you five simple, succinct and smart reasons to consider broadening your investing horizons by allocating parts of your portfolio for more exotic and perhaps profitable locales. A Well-Balanced Portfolio When you were a kid, you would get so annoyed that your mom or dad, your grandparents, your teachers, and every other adult who cared about you would continuously remind you to everything on your plate. They would always throw out the 1980’s buzzwords ‘well-balanced meal,’ and you would roll your eyes and continue to secretly feed your vegetables to the dog underneath the dinner table. Well, when it comes to your assets, well-balanced is still an important idea and one that will help to keep your financial growth smart and steady. Global investing is a great way to balance out all of your local equity because the moment that our local markets begin to lag, chances are that the portion of your portfolio invested internationally will be on the rise and can make-up for any slow down or loss seen in the local markets. A well-balanced portfolio that includes both domestic and international equities is still the healthiest option on the menu. Potential for Growth Access to growth opportunities is another primary reason many investors go global. In the beginning, it is smart and only natural to invest in your local markets and then begin to grow your portfolio from the foundation you laid. In the first few years, you will see your assets grow and mature, but there are occasions when you start to see stagnation and growth interruption in your portfolio if you never look beyond your local markets. By opening your options to global investment opportunities, the probability and potential for growth exponentially heighten.
First-Mover Advantage In marketing strategy, first-mover advantage refers to all the benefits given to the first significant occupant of a specific market segment. I like to adopt the idea when it comes to the business of investing. If you are a pioneer and take the risk to invest in global ventures that you believe in, but are infantile and brand new to the market space, your risk heightens, but the potential to profit is exponential. Think of the initial investors of Facebook or Apple, at that time, technology and social media were new frontiers, but those investors took the risk, were the ‘first’ in that market space, and the ‘advantages’ they see now due to the success of those companies is great. Investing globally gives you more opportunity to tap into these blossoming businesses abroad before everyone has heard about them. You will be happy to have ‘first-mover advantage’ when that company explodes, and your investment soars.
Geopolitical Diversity Perhaps the most important benefits of investing overseas are the ability to spread geopolitical risks. While the American stock market is the most sophisticated, variegated and sufficient in the world, you could still be taking a massive gamble on the future of your portfolio if you have domiciled all your assets in a single country. Wherever you live in the world, it is smart to stay positive and assume that local markets will remain economically prudent, well-governed, and stable, and its inflation returns will be sufficient to meet your financial goals. While such bets have paid off in specific instances of the past, most times when countries get hit with economic strife, they may seem to stay untouched and calm, while genuinely suffering political and economic upheaval. So to minimize your risk, globally diversify your assets, and if one or more markets suffered a setback or collapse, that diversification might be the thing that saves you from financial doomsday.
Access Unlimited Access to limitless industries is one of the most exciting aspects of gaining foreign stock exposure. For a simple example here at home, many firms with flagship offices in the United States are likely to have a lot of major tech stocks due to their visibility and easy access. An investor in Sweden might not get the opportunity to invest in those tech companies because their local firm in Stockholm is likely not to have as much understanding or familiarity to state-side tech stock options as American investors might have with their local firms in the United States. In short, global diversification allows investors to access industries and sectors that they would not be exposed to if they only focused their investments in the local markets. Overseas investment creates an opportunity for an enterprise to build its portfolio and improve its returns. Moreover, the Security and Exchange Commission and other financial authorities of the sort generally consider investments in foreign markets to be beneficial regarding portfolio diversification, volatility reduction, and potential growth. Another compelling reason to expand your investing platforms to those place unknown and reap the benefits waiting for you in the financial markets across the globe.
-ADAM JIWAN, Global Investor and Entrepreneur