For investors, sometimes they have to seek the global market to receive additional dividends. The markets in the United States or the Eurozone may not cut it for an investor that wants to make some more money playing the markets. This is why international markets, though risky, are very rewarding.
Although it does take due diligence and some time to find out what investment vehicles to embrace, international markets play a significant role in our portfolios. Even if you think you’re not exposed to the likes of the Asia Pacific or Western Europe, it’s quite possible that you are. (You must take into account certain regulations before you move forward).
With that being said, if you do want to be directly involved in markets overseas, then there are various ways you can do so. Of course, like any other investment tool around, it does come with some risk and you should always proceed with caution. In other words, you must understand the level of risk involved, the fees that accompany these financial instruments, and the geopolitical realm of the market you’re investing in.
Here are five ways to tap into international markets and grow your investment portfolio:
1. Exchange-Traded Funds (ETFs)
An exchange-traded fund (ETF) is a marketable security that monitors things like commodities, indexes, bonds and baskets of assets. They trade similar to the average stock on a stock exchange. The price of an ETF fluctuates all day as they are bought and sold. ETFs are very popular for novice investors because they come with lower fees, have a great deal of liquidity, and they’re easy to buy. All you have to find is an ETF that is exposed to the international markets.
2. Mutual Funds
A mutual fund is simply a compilation of stocks and/or bonds. Investors own shares that account for a portion of the holdings in the mutual fund. Akin to ETFs, they are very popular because it allows the investor to gain access to complex markets without having to monitor CNBC all day long. Similar to ETFs, you have to find a mutual fund that dedicates itself to global markets that have foreign government bonds, foreign equities and foreign stocks.
3. Foreign Currency
If you think a certain currency that is depressed could gain in considerable value when compared to your respective currency, then you may want to touch foreign currencies – those who invested in Singapore dollars and New Zealand dollars a decade ago made quite a killing. Although this comes with high conversion fees, purchasing foreign currency can help a novice investor have limited access to global markets.
4. American Depository Receipts (ADRs)
Since 1927, American investors have taken advantage of American depositary receipts (ADRs). This is a stock that trades in the U.S. but accounts for a certain number of shares in a foreign corporation. They are purchased and sold on American markets similar to common stocks and are handled by a bank or brokerage firm in the U.S.
5. Multinational Corporations (MNCs)
Want to avoid the intricacies of ADRs and ETFs? Perhaps you should just acquire stocks from U.S. companies that operate in the global economy. Multinational corporations earn about half their revenues in international markets, and you can therefore gain access to the same venue. For instance, Coca-Cola is an American company but it’s a brand that is seen in every pocket of the planet. McDonald’s is another MNC that has garnered international ubiquity.
Due to the advancement in technology in recent years, there are numerous investment opportunities on the global stage. Anyone with a small amount of cash can place their funds in Japan, Germany, Ecuador, Canada, and Australia without having to spend a lot of time and energy (or a headache) doing it. Moreover, if you’re a financial neophyte, you can take part in a free practice demo before taking that leap into serious investing.