Making an investment decision is not very easy. You have to consider a lot of things before you plan to invest a part or whole of your savings. You should always seek an expert’s advice when you are considering different investment options. He or she will be the best person to guide you according to your future needs and the amount of money you are willing to invest. This article gives you a run down of the benefits of investing in global markets.
Usually experts will advise you to invest globally which means that you should not only invest in your country but in other countries as well. Investing globally has a lot of advantages and the probability of incurring a loss and losing your investment is minimized. The principal benefits that you can reap by investing in global markets are as follows:
You can find better investment opportunities in other countries. There maybe some opportunities that do not exist in your country so by investing in other countries you can take advantage of those opportunities and make your investment portfolio grow.
Another advantage is that you can maximize your return. By finding new investment opportunities in other countries you can certainly get huge returns. In addition there maybe a company that is performing well and providing large returns to its investors. By investing in that company you too can benefit from the large returns the company is offering. Or there might be a case where the country’s stock market is outperforming all other markets. Investing in such a market will give you a chance to magnify your return.
Diversification is another reason why people invest globally. Almost everyone is risk averse which is why some portion of their investment is always in risk free assets. Investing globally will help diversify your portfolio. Suppose you have invested in four countries. Even if you are not getting your expected return from two countries, the other countries should help you earn returns more than you expected. You can even suffer losses which is the main reason you should diversify your portfolio. If one of your investments has incurred a loss, there should be another investment to cover that loss.
Talking about diversification leads us to the discussion of correlation. Correlation tells us whether the assets are negatively or positively related. Negative correlation means that one asset in a portfolio is suffering a loss while the other is earning profits. Positive correlation means that both the assets are moving in the same direction, if one is earning a profit the other will also earn a profit, or if one is suffering a loss the other will also suffer a loss. This means that negative correlation is good. Investing globally will help you to create negative correlation between assets, if not then it will definitely help you to create a low positive correlation.
For more information on diversification, go to:
en.wikipedia.org
