If you are ready to explore new investments and watch your net worth grow, you might have considered international investments. Although international investments are rapidly increasing in popularity, many everyday investors still aren’t sure how it differs from domestic investing.
In a number of different ways, international investing can give you more security, peace of mind, diversity and potential for income. Find out some of the most convincing reasons to expand your portfolio to include international investments.
Variety of Risk Levels
Many investors are concerned that offshore and international investments are too risky, particularly when it comes to emerging stock markets. In reality, however, the risk level is similar whether you invest abroad or domestically.
You can find bonds from around the world that have very low risk levels, or you could lend capital to a fledgling startup, which generally carries a greater level of risk. Just like on the domestic market, international investments come in at different risk levels, and the level of risk you feel most comfortable with is always one of the options.
Array of Investment Types
International investments are not isolated to global stock markets. The category could include commercial real estate in London, a vacation rental on the beach in Belize, managed international mutual funds or even an offshore trust. There is no one type of international investment, which means that you can find one suited to your financial needs and desired outcomes.
Potential for Greater Profits
Since some investors are wary of international markets, international investments may bring with them the potential for greater profits. The world bond market, for example, typically outperforms the United States bond market by a considerable margin. Ultimately, there is no guarantee of profit when it comes to any investment, domestic or otherwise, but many international investment opportunities certainly can provide the potential for serious profits.
Plus, the income you make on many international investments won’t necessarily be subject to capital gains tax, depending on your jurisdiction, which in turn boosts profits and helps you to see your holdings grow over time.
Diversity in Holdings
There are no guaranteed in life, and certainly not when it comes to financial matters. If you have worked hard to amass wealth over your lifetime, it is natural to want to take steps to protect it. One of the ways to do just that is by adding some international investments to your portfolio. If any one market crashes, you won’t have all your assets tied up within it.
Ties to More Than One Currency
Finally, it is worth remembering that currencies vary from country to country, and their value fluctuates substantially all the time. If your entire investment portfolio is made up of US Dollars, that might be problematic if that currency declines in value against the Yen, the Yuan or the Euro.
Having international investments in multiple currencies means that you are hedging your bets and staying financially secure whatever inflation or currency devaluation might bring in the future.