As investors in the US, we are always looking for ways to diversify our investment portfolio, helping to mitigate risk. However, diversification through foreign investment also allows us to get in on markets that may be growing faster than our own.
There are many great places to invest our money, outside of the US. While the US has the largest economy, countries like China and Japan aren’t that far behind. And many companies around the world are continually growing at rapid rates.
Wondering how to invest in foreign markets? It’s not hard, nor is it expensive. In fact, it’s virtually the same thing as you are currently doing in your native market.
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Keep reading to learn why investing in foreign markets is a good idea, how to invest in international stocks, and which markets should be at the top of your list.
Benefits of Investing in the Foreign Exchange Market
There are a few motives for investing in foreign markets. One of the primary drivers of foreign investment is diversification. Diversification is the strategy of spreading your investment portfolio across various companies, industries, and even global economies.
That way, if one of your investments plummets, your overall portfolio remains unaffected, because the other stocks you own aren’t related to the one going down.
For example, your US stocks might go down during a turbulent election cycle, but your Chinese stocks might continue growing, as their stocks might be unaffected by these events.
Another reason is increased exposure to growing markets. There are high-growth companies all over the world. Investing in only one country could mean missing out on a golden opportunity.
How to Invest in Foreign Markets
So what does it take to invest internationally? For starters, you may be able to invest in some international stocks from your existing, local brokerage account. Some of the largest global companies will list their stocks on popular stock markets, such as Chinese companies listing on the New York Stock Exchange.
This is the easiest way to invest. Otherwise, if you truly believe in a particular foreign economy, look into brokerages in that country that are open to international investors. Usually, you can find a handful of brokerages that cater to foreign investors.
In the US, you can also invest in ETFs that focus on foreign companies. These are collections of stocks from a particular area.
Looking to invest in Australia? The Australian Securities Exchange is listed in the top 25 largest stock exchanges in the world and is a worthwhile place to invest some capital. Check out monexsecurities.com.au for the easiest way to start investing in the land of Oz.
Top Markets to Invest in 2021
Where should you invest your money this year? Outside of the US, China and Japan are always at the top of the list when it comes to foreign investment. That’s because their economies are always growing, thanks to technology, innovation, and manufacturing that is distributed globally, not just to the US.
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Expanding Your Portfolio
Now that you know how to invest in foreign markets, it’s time to start adding new companies to your portfolio. Pick one or two foreign markets that you’d like to do further research on. It’s best to stick with the markets in the top 25 global markets.
Then, find a way to invest in the companies that look promising and start diversifying.
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