As an individual investor, you can invest in various securities. One such option is investing in Global Market. Global investments in international assets place your money in securities originating across the world. According to experts, global markets investing diversifies your portfolio and helps build wealth with long-term growth. Geographical diversification also offers risk mitigation, as economic situations within India may differ from international markets during downturns. However, before investing in the global market, knowing the pros and cons of doing so can be of great help.
Pros of Global Markets Investing
While investing in the global markets can be confusing, here are a few reasons why you may consider choosing international assets for investment:
- Diversification: Most importantly, investing in global assets diversifies your portfolio rather than concentrating all your money on a few familiar companies or sectors. Spreading investments across domestic and international equities will reduce your vulnerability. That is because, under any economic conditions, not all areas and commodities are likely to react in the same manner.
- Global Growth: Global market investing has another advantage of growth potential. Investing in a mature market has a high potential for growth over time, allowing you to capitalise on profits from emerging markets and developing economies.
- Wider Selection: By not investing in assets outside India, you will narrow your investment opportunities. These days, modern trading accounts and platforms give easy access to analysis and information, making them ideal options for growth.
- Access to Giants: Investing in giant global companies like Amazon, Apple, Tesla, and Microsoft has maximum chances of doing great business. While these companies are not listed on the Indian Stock Exchange, investing in them through global investments helps earn huge profits with minimal risk involvement. Moreover, you can invest in multiple geographies through mutual funds, ETFs, FOF schemes, etc.
- Currency Appreciation: Global markets investing exposes you to currency appreciation under favourable conditions. For instance, the US Dollar’s value has continuously increased over the last few years compared to the Indian Rupee. Therefore, by investing globally, your portfolio can enjoy the dual benefit of currency appreciation.
- Low Transaction Costs: The increasing number of AMCs introducing several international mutual fund schemes has made global markets investing unbelievably inexpensive. They have also eliminated additional costs of transfer fees, annual maintenance charges, Foreign Exchange conversion charges, etc., making global investing hassle-free and more affordable than ever. You may also invest in mutual funds through SIPs to avoid spending money in a lump sum.
Cons of Global Markets Investing
Like any investment decision, consider global investing carefully before taking the final leap. Besides all the benefits involved, global investing has some risks. You must account for them before investing in the worldwide market. These include the following:
- Currency Risk: Also known as the exchange-rate risk, currency risk is related to the price differences between two currency values. When the exchange rates fluctuate, the value of investment returns also changes. Foreign investment may increase in value in its domestic market but depreciate in India due to exchange rates.
- Limited Liquidity: Some countries limit the movement of money for foreign investments. On the other hand, some countries limit the type or amount of international investments, preventing investors from selling or buying securities as desired.
- Instability: Under conditions of war, transition, and economic instability, you may experience the economic effects on your investments. Since the situation may change at any minute, keeping up with what happens in the economy is challenging.
- Cost: Sometimes, investing in foreign securities is more expensive than the Indian stock market. That might be due to foreign taxes on earnings from outside India, brokers’ commissions, currency conversions, transaction costs, etc.
- Limited Data Access: Different countries may have regulations requiring foreign companies to provide different data than what Indian companies must provide. Also, the standards, nature, and frequency of disclosures may vary from what you see in India. Limited data access may make decision-making complex.
Even though the global economic, social, and political landscape keeps changing, global markets investing is a considerable strategy to minimise risk exposure. To become an international investor, open a Demat and trading account with a reliable broker and start investing in ETFs and mutual funds in US stocks. Are you ready to achieve your investment goals? Invest in global markets now!