What is Global Investing? What are The Benefits of Global Investing?

With the dawn of digital economies and the globe becoming a small village investing should not be narrowed down to a single country. Global Investing enables you to leverage lucrative investment opportunities that are not domestically present in the Global Stock Markets. Global investment is a way through which you can acquire financial assets and securities in various countries of the world for various purposes such as portfolio diversification, maximizing returns, and reducing risk exposure.

While there are many Benefits of Global Investing, we will talk about only a few significant ones below for you to understand.

Investment Portfolio Diversification

One of the most prominent and vital Advantages of Global Investing is investment portfolio diversification. As an investor, when you spread out your investments across various investment vehicles across multiple geographies, there is a lower correlation between them. This means that the volatility of one country's market is less likely to affect your other assets. Hence Investment Portfolio Diversification in the form of Global Investing guards your investments against market volatility and reduces your risk exposure.

Multiple Investment Options

With Global Investing, your investment options are not limited to investment options to your country to enjoy high returns. You also have the liberty to invest in the International Stocks of different sectors worldwide. For example, you can invest in commodities in Australia, engineering space in Europe, or technology in the US market. You can also invest in various countries through ETFs. The global investment brings you the opportunity to invest in industry giants globally.

Currency Appreciation

When you invest in International Stocks, you earn both a profit on your investment capital but also from currency appreciation. This means when the overseas currency value appreciates against the domestic currency value, you earn extra returns by default.

For example, you have invested in a particular US stock for about INR 7 Lakhs when 1 US Dollar is valued at Rs 70. Now say when you want to sell your stocks, the current value of your investment is INR 8 Lakhs. However, at this point, 1 US dollar is valued at INR 80. Hence you gain extra returns worth INR 1 Lakh over and above the investment value appreciation because of the US Dollar value appreciation.

Investment Protection

Another significant benefit of Global Investing is investment protection against any frauds and liquidations. Usually, companies belonging to developed nations operate under stringent regulations and adhere to sound corporate governance. Non-adherence to such corporate governance leading to any kind of market abuse leads to the implementation of severe penalties. This protects all International Investments from insider trading losses and potential scams. Many foreign financial institutions offer protection against potential threats such as seizures and liquidation of broker-dealers.

For example, if your broker-dealer faces liquidation, the US SIPC protects your investment up to a value of $500,000.

Building a Foreign Currency Corpus

As an investor, if you are looking out to save up global currency, for example, US Dollars, for specific purposes such as your child's education, foreign travel plans, and offshore real estate investment. Global Investing helps you create that corpus in a foreign currency and grow it efficiently.

While there are many Benefits of Global Investing, it is not devoid of certain inherent risks. Some of the Disadvantages of Global Investing have been listed below for your convenience.

Impact of Political Risk

Before investing in any economy's stocks, you must first consider the bilateral relations of your country with that country. If the relations are not favorable, then know that any adverse political decision can negatively impact investment done in that particular country. Secondly, you must understand that different political events in different countries affect their domestic markets and may lead to unfavorable volatility.

It has been noticed that events like policy decisions and election results can vastly impact the market conditions of even the most prominent countries such as Argentina and Brazil.

Higher Transaction Cost

A significant barrier to Global Investing is the high transaction cost involved, which varies from one foreign market to another. As an International Investor, you may incur additional costs over and above brokerage commissions, such as annual maintenance fees, transfer fees, and FX conversion charges.

The Benefits of Global Investing certainly outweigh the Limitations of Global Investing. Hence you cannot ignore the global market anymore. However, before investing in International Stocks, study those countries' economic and political conditions. International Investments not only bring diversification and high returns it also brings solid stability to your Investment Portfolio. If you are just starting to invest in the World Stock Market, US and Europe markets definitely top the charts.

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