Stock market investment opportunities are no longer limited by geographical boundaries. For starters, investing in international stocks gives people the ability to diversify and spread their risk across different foreign companies. In addition, investors also get to take advantage of the growth potential that some emerging economies have to offer.
Identify the Opportunities
Investors who live in North America and plan to invest in companies such as Barclays, Rolls-Royce Group, Toyota, Sony, Samsung, or SoftBank are often found exploring their alternatives beyond borders.
Japan, for example, is at the forefront of robotics, with companies such as Murata and Fanuc already making their presence felt. Other prominent Asia-based companies that might require your attention include Honda Motor, Alibaba, Weibo, ICICI Securities, Taiwan Semiconductor, and SK Hynix.
Some European pharmaceutical companies are finding favor with international investors. These include GlaxoSmithKline, Novo Nordisk, Novartis, and AstraZeneca. Luxury goods companies such as Richemont, LVMH, and Kering are based out of Europe, as is Nestle, one of the world’s leading food companies.
Investors who live outside of the U.S. and hope to invest in American stocks might benefit by looking at alternatives such as Alphabet, Amazon, PayPal, Nvidia, and Splunk.
Consider the Risks
No matter how you plan to invest your money, you have to account for associated risks, and investing in the international stock market is no different. However, exercising due diligence is bound to hold you in good stead. Before you invest in international stocks, determine if any existing political problems might lead to economic problems.
If you’re investing in regions where lack of regulations is a concern, you might expose yourself to fraud or manipulation. In addition, you also need to account for forex risks that might arise because of volatile fluctuations in exchange rates.
How Can Americans Invest Internationally?
Americans get to invest in international stocks in different ways, which include:
- Buying American Depositary Receipts (ADRs) of non-U.S. companies that trade in the U.S.
- Buying U.S.-registered mutual funds
- Buying U.S.-registered Exchange Traded Funds (ETFs)
- Buying U.S.-traded foreign stocks
Trading directly in foreign markets such as the Tokyo Stock Exchange, the London Stock Exchange, Euronext, the Shanghai Stock Exchange, the Hong Kong Stock Exchange, and the Bombay Stock Exchange
Foreign Currency Accounts
If you plan to invest in international stocks through brokers or online platforms, you might benefit by opening a multi-currency account. This way, you get to pay for your trades in matching currencies, and you don’t have to worry about exchange rates and currency conversion fees every time you make a trade. While some banks are known to provide multi-currency accounts, they tend to come with significant fees. As a result, you might be better off taking a look at what overseas money transfer specialists such as TransferWise and WorldFirst have to offer through their multi-currency accounts.
If you wish to add diversity to your portfolio, looking at international stocks as viable investment options might work well for you. There are, after all, numerous instances of companies that have resulted in significant returns even in regions with non-thriving economies. While the location does play a role, what’s more important is the expertise that any business brings to the table.
About the Author: Gavan Smythe is the founder of iCompareFX. This website lets its users compare the world’s best international money transfer companies across offered services and features. When he’s not working, Gav is often found spending time with his family.
If you have any questions, please comment below and we’ll help you out. For help with investing within the United States, check out our guide to investing.