Member Article

Basics to investing in international stock markets

Many UK investors have low diversity within their portfolios, a bold statement to make but nevertheless true. There has been increased fear over poor investments abroad since the financial meltdown and this has led to a lack of key diversification within the international markets. This low exposure to foreign equities can be explained by financial advisories recommending that only 10 - 20% of one’s assets should be overseas, or it could simply be down to inherently biased opinions that have only grown in recent years. UK companies are well known and the brands and details can be easily acquired, whereas foreign companies and markets can be harder to grasp from afar. However, this doesn’t mean that broadening a portfolio shouldn’t include the foreign markets.

Why You Should Invest In International Stock Markets

The most obvious reason to invest abroad is for sheer variety within your portfolio. Overseas companies will operate differently; they will have their own set of pros and cons, which makes your investments far more exciting and potentially rewarding. However, beyond sheer diversification, it is also a well-known fact that some foreign investments bring about greater returns for the investor. A clear example of this is the S&P500 that rose by 23.5% last year. There are also some great growing markets, such as Brazil and Russia and Australia, which have all been up in the previous year. Diversification opportunities in these countries can be easily found online, such as on ANZ online trading, which operates on behalf of Australian clients and is a great place to start your research.

The UK population is smaller - a simple statement, but it does have an impact over some of the growing markets across the globe. The UK is a small island, and although we have a strengthening economy, China and Canada are set to grow exponentially this year. Income levels are still stagnant in the UK even though the economy has seen a slight growth in the first quarter of 2013. This cannot compare to some of the emerging countries, giving us another perfect reason to look abroad.

How to Make Sure You Get The Best Out Of Your Foreign Investment

Firstly, if you have made the decision that it is time to look for investments abroad, then you will be glad to know that the internet has made the whole process far simpler. As with the majority of things in our life, the internet gives us clear information regarding the firms themselves, their websites and history, and the majority will be already translated into English. Once you have decided upon companies that you wish to invest in, the procedure is very similar to investing within the UK.

10 years ago it was very difficult and complicated for private investors to venture abroad, this was down to lack of access to the companies’ histories and the longer process of communication. Now, you have access to unlimited online brokers who will offer trading stocks listed in the US, Japan, Australia and Asia, with some starting at £7 per trade. This is a very low rate, but do expect to pay a little more in general for foreign domestic deals.

Equally, you may find that some brokers prefer to do their dealings over the phone rather than online and you may also have to be aware of time constraints. Coca Cola only operates on GMT for example, but equally there are many that stick to their own time zones.

In closing, to invest in foreign markets is to keep your portfolio fresh and inclusive, making for a far more attractive deal that is likely to provide a good return. There are many fund supermarkets that offer excellent prices as well as choosing personal investments. Either way – it’s imperative that you do your research. You will want to ensure that you are investing in a company that is growing and will continue to do so.

This was posted in Bdaily's Members' News section by Charlotte Walker .