How to Invest in Foreign Market
If you are an investor, the hallmark of your investment is when you have diversified investment portfolio in international market. Big time investors know that in order to continue to be relevant and to increase their earnings, they would have to continue to explore international markets where they can invest their monies and get good returns for their investments.
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Before now, it used to be a Herculean task for small investors to invest in foreign markets, but that is no longer the case because there are investment vehicles that encourage small investors who are interested in investing in foreign market to conveniently invest in foreign markets. As a matter of fact, small investors now have options to invest in foreign markets. They can choose to invest in stocks in any country of their choice via a stock broker or they can choose to invest their money with a firm that professionally manage fund for their clients with bias for international markets.
Although, it is a risky venture to invest in foreign markets, it is also a very profitable and rewarding venture if you get it right. The truth is that if you are equipped with the right business information you can maximize your investment in the foreign market. Now let us quickly consider how you can invest in foreign market;
1. Invest in Mutual Funds
Investing in mutual funds is obviously one of the easiest ways to invest in foreign market without stress. All you need to do is to look for a reliable and well trusted mutual funds manager and invest with them. But it is important to critically examine the investment philosophy of the mutual funds manager to be sure it aligns with yours before committing your hard earned money.
Mutual fund is deed a good way to start because affords you the opportunity to be a part owner of an international company with just little investment and coupled with the fact that it is less volatile. Another advantage you stand to gain with mutual fund is that you have the options to chose the stock, and bond you want to invest in. With mutual funds you have the options to also invest in global funds, sector fund, country funds or regional funds et al.
2. Buy Stocks of Multinational Companies
You can choose to invest in foreign markets by buying stocks of multinational companies that are listed in the stock market of your country. For example if you buy the stocks of Chevron or Microsoft, it means that you are a part owner of the company’s investments in other countries. Although this form of investment might not give you the kind of returns that you are likely to generate from mutual funds and ETF, et al but it is sure a good way to start investing in the foreign market. It is less risky and perhaps a gateway into venturing into international market.
3. Invest in Exchange Traded Fund (ETF)
Another means of investing in the foreign market is to invest in Exchange Traded Fund (ETF). Exchange Traded Fund is similar to mutual fund but one of the differences is that with ETF you can buy over the share of an existing share holder and you can as well sell your own share anytime you so desire. ETF is highly volatile when compared to mutual funds. With ETF, you can decide to buy the stocks from a particular country or from all the countries in the world if you have the financial capacity to do so.
4. Invest in American Depositary Receipts (ADRs)
If you live in America, perhaps one of the best ways to launch into foreign markets is via American Depositary Receipts (ADRs). American Depositary Receipts are securities that represent shares of foreign companies and they are traded in the United States of America and in Dollars for that matter. You can easily buy ADRs and sell them when you so desire. Just ensure that you have an experienced stock broker and you won’t have any challenge trading in ADRs. ADRs are traded in NYSE, NASDAQ and AMEX.
5. Invest in Hedge Funds
Another means to invest in foreign market is via hedge funds. Hedge fund is simply described as an offshore investment fund that is formed as private limited partnership that engages in speculations making use of credit or borrowed capital. Hedge funds explore every available market and they make use of various investment strategies and financial instruments. One thing about hedge funds is that it can be very volatile; the risk involved is much so also the profit margin is much as well. As a matter of fact, hedge fund is one of the world’s top investment vehicles and you stand to get good returns on your investment annually if you invest in hedge funds.
As an investor, spreading your investment across different sectors and different countries is one of the surest ways of spreading your risks. So, ensure that you look for reliable investment vehicles to launch into the foreign market.
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