International or foreign stocks allow investors to effectively diversify their portfolio, and gain exposure to emerging economies with growth potential. As per Kavan Choksi / カヴァン・ チョクシ it is prudent to allocate a portion of investments to the international market in order to balance risk and reward. Global ETFs and mutual funds help simplify international investing and provide exposure to varied markets and sectors.
Kavan Choksi / カヴァン・ チョクシ sheds light on tips for investing in international markets
Investing in international markets can be an exciting way to diversify one’s portfolio and grow wealth. Due to U.S. government restrictions and regulations, international investing can provide several benefits that domestic stocks cannot provide. It also assists investors in building diversified portfolios and preventing economic risks from compromising long-term growth and profit.
While international investing does come with certain challenges, the following tips can help deal with them:
- Learn about the growth of outside markets: Risk-averse investors typically stick to investments in the markets they know and understand. However, by doing adequate research, they would be in a better position to identify opportunities in other markets with considerable growth and become comfortable enough to invest in them. While many focus their investments on developed countries as doing so seems like a safer option, it is vital to note that even these markets can be subject to significant peaks and valleys. Moreover, in terms of growth, developed economies often become outpaced by the top emerging markets. Investing in emerging economies provides exposure to fast-growing markets while also mitigating the natural volatility of developed markets.
- Understand the risks involved in international transactions: There is a unique set of risks involved in investing in international markets. Properly understanding these risks can help relieve some of the anxiety associated with entering new markets. Being well-acquainted with these risks allows investors to properly vet opportunities, and make more confident investment decisions.
- Rebalance the portfolio at regular intervals: Several investors simply build a portfolio and forget about it as it grows over time. But investments grow at varied rates. Hence, the makeup of an investment portfolio would also change over time. Assets that performed well may become over-represented, and the ones underperforming can become underrepresented. Therefore, one must periodically check and re-balancetheir portfolio in order to control risk and maintain the desired over-representation. Re-balancing is particularly crucial when investing in foreign markets, as their growth patterns are likely to be different from those in the US. Not re-balancing the portfolio in a timely manner can leave investors at increased risk in case these investments start to represent a large portion of the portfolio.
As Kavan Choksi / カヴァン・ チョクシ recommends investors to focus on consistency more than hype when investing in international markets. When becoming more familiar with foreign markets, investors may hear hype about particular investments and feel compelled to invest in them. But short-term investments driven by hype are often quite risky. Investors are likely to be better served by consistency. It would enable investors to figure out the level of risk they want and maintain it over time while making adjustments based on the changes in their financial situation.
