As globalisation continues to reach every corner of the world, investing in overseas markets or holding a foreign investment portfolio has never been so easy. With the ability to invest from the comfort of your own home with a simple phone call, investors today can reap the rewards international markets provide, which they may not have previously known about or had access to.
Simply put, a foreign portfolio investment is a type of investment that an investor registered overseas. In similar nature to domestic investment portfolios, international investment portfolios will include a range of assets, including stocks, bonds, fixed-rate investments — these, however, will just be held overseas. Before we explore the benefits of overseas investments, we need to understand how they work.
How can you invest overseas?
Many investors naturally want to have some of their owned assets listed outside of the UK. That’s why investors choose to invest in Germany for example, but many are unsure about how to go about it. Although the process of investing overseas may seem like an intimidating prospect, it is far easier than people think.
One of the most common and reliable options available to investors is to invest through a UK-based fund. Offering investors a diversified investment option through one purchase, the individual investor does not need to worry about choosing specific stocks to include in their investment portfolio.
It is relatively easy to access the investment trust or fund that operates in the region of the world you want to invest in. If the investment trust is closed-ended, this will mean shares in the trust are listed on the stock exchange and are available to purchase, with the price dependent on the performance of the stock. In comparison, if you are looking to pursue your international investment option through an open-ended fund or unit trusts, you can purchase this through a fund manager or financial advisor.
What are the benefits of investing overseas?
Investing overseas provides investors with a range of benefits in their investing journey. But what are they?
Access to more significant market options
Domestic markets in the UK have become extremely competitive and saturated with investors over the last twenty years, and the accessibility to the financial markets has increased. Foreign or international markets on the other hand, can offer significantly less competition and sometimes a marketplace with greater investment opportunities. Though this is ultimately dependent on what country or market you invest in, investing overseas provides investors with a dramatic increase for investment and potential for significant returns.
Investment diversification
Arguably the most notable benefit is the opportunity for investors to diversify their investment portfolio, which in turn helps the level of risk associated with an investment portfolio. Due to the nature of international investments and the global stock market, investors can have confidence that factors that are effective in the German Stock Exchange at any time will be different from those in Asia. For those who are unsure of what this means, it allows investors to experience lower levels of volatility over their portfolio.
Attractive yields for income-seeking investors
As international markets continue to develop significantly, especially those in East-Asia, global investments in these regions provide shareholders with attractive yields for income-seeking investors as well as capital growth. While diversification is often cited as the most common benefit, investment trusts that openly pursue high-yield returns in international markets provide investors with the chance to take advantage of well-performing stocks across a number of countries with a relatively small amount of work on the investor’s behalf.
Increased liquidity
Foreign portfolio investments are often more liquid than their domestic counterparts. But what does this mean?
In short, this means that they can be bought and sold quickly with relative ease. Higher or increased liquidity provides investors with a rather useful set of benefits for investors going forward. Having access to shares with increased levels of liquidity, means greater buying for investors looking to take advantage of investment opportunities as soon as they arise through having a ready money pot.
International investments provide investors with a fantastic opportunity to expand their investment portfolio into a collection of assets that provide individuals with fantastic return on investments. As domestic markets continue to attract more people year on year as the access to markets grow, international markets allow investors to pursue investment opportunities that are relatively unknown.
