Global investing could be the next step in your investment journey. Although investing close to your home market sounds safer, there are several key reasons you should explore beyond your borders and look to invest internationally.
Investors did rediscover the UK market’s appeal last year. In a year when inflationary pressures were high, and commodity prices and interest rates spiked, its combination of energy, mining, and banking companies performed well and did the trick.
However, it would be prudent to pay attention to global markets. The UK market is still dominated by a few industries, many of which are “old economy” businesses, and the most exciting long-term growth opportunities are likely to be found elsewhere.
Investors willing to look beyond the UK will find plenty of opportunities in global stock markets, with an array of funds that invest on an international scale.
In this article, we have explored the different types of global investment markets, which are typically divided into two categories, and how you can get started.
Developed Markets for Global Investing
Countries with established industries, extensive infrastructure, stable economies, and a generally high living level are home to developed markets. Canada, Japan, Australia and France are a few examples of developed markets. These markets are usually more stable and predictable than emerging markets, but offer a limited range of potential returns.
Emerging Markets for Global Investing
Emerging markets are found in nations with less stable economies and emerging capital markets. They may also go through a quick growth phase as they shift into developed markets. Currently, emerging markets account for 15% to 20% of all global markets.
Examples of emerging markets include China, India, Egypt, South Africa and Mexico. Unsurprisingly, developed markets’ volatility levels and range of potential returns are often a concern regarding global investing. Because of this, it is recommended not to overweight your funds into emerging markets.
Now we will look at why investors might want to consider global investing and some of the risks involved in investing in this sector. We at Brite offer expert financial advice, so if you’re unsure where to invest, don’t hesitate to contact Brite today for professional guidance.
Global Investing aids diversification
As an investor, sticking to companies in your home country may seem safer because you are more likely to be familiar with them compared to those based externally. But remember that many FTSE 100 index companies are huge, international corporations that frequently make most of their revenues abroad.
As a result, they are less dependent on the UK economy, but it still makes sense to diversify your investments to help safeguard yourself against any unforeseen setbacks. Global investing in a diverse range of businesses on international markets may lessen the effect of stock market surprises on a portfolio. If one region or sector suffers a knock, hopefully, gains elsewhere will ensure that any losses won’t be overwhelming.
Global Investing leads to exposure to more sectors
In the UK, some industries are disproportionately underrepresented. For instance, the majority of the world’s largest technology firms, like Facebook, Amazon, and Netflix, are headquartered in the US. Additionally, Japan is home to numerous leading manufacturers of high-tech goods, including Hitachi, Toshiba, Sony, Nissan, and Honda.
The largest corporations in the UK are represented by the FTSE 100 index, which is disproportionately skewed towards the oil, gas, and financial sectors. Therefore, investing internationally rather than concentrating only on home markets can assist in giving a better mix of sectors, further aiding to diversification.
Global investing means more opportunities
Many investors look for a steady and stable income stream so they don’t have to sell investments or use their resources to make a living. And many businesses worldwide choose to provide dividends to shareholders rather than reinvest all of their revenues in expanding their businesses.
When investing globally, you typically have two options: income units, which pay out income as cash, or accumulation units, which reinvest any dividend income. If you don’t need income, choosing the latter option can be an excellent method to potentially increase your returns over the long term.
Global Investing risks
If you’re considering investing globally, ensure you’re comfortable with the risks involved. Markets outside the UK could have less robust corporate governance, less investor protection, and higher volatility.
There is also the issue of currency risk. Any gains you make from investing in stocks priced in currencies other than sterling could be negated by a decline in the value of that currency relative to the pound. Conversely, if the foreign currency gains strength, this will benefit returns. To minimise your losses if one currency declines versus the pound, it is a good idea to diversify your investments over several different nations and currencies.
Brite & Global Investing
At Brite, our investment philosophy is based on taking the long view and thinking
protection first – as nobody knows what’s around the corner. Learn more about our investment strategy here.
However, you can choose the level of risk you’re comfortable with, and we will provide you with a portfolio that meets your requirements. You get access to highly qualified asset managers that determine the best way to invest your portfolio and maximise value over time.
Contact Brite here to learn more about global investing and get started today.