Diversifying your investments is crucial if you want to manage risk and most financial experts advise having at least a few investments overseas. But investing in a foreign country brings a lot of challenges with it, like language barriers and currency exchanges. Many investors, especially new ones, steer clear of foreign markets because of these challenges and that ultimately means that their investment portfolio is less secure.
The good news is, investing in foreign markets doesn’t have to be as difficult as people think. Here are some top tips to help you make your first investments overseas.
Find A Financial Advisor With International Experience
Having a good financial advisor behind you helps you make better investment decisions, leading to higher profits and reduced losses. But when you are choosing a financial advisor to work with, consider their international experience. Wealth management advisors like Monty Cerf, for example, have experience working with financial institutions around the world. An advisor with experience in investing in different markets will understand the unique challenges you are likely to face, so they can help you tackle them.
Start With Forex Trading
The easiest way to start investing across international borders is to try your hand at Forex trading. Trading currencies is relatively simple and it’s a good introduction into the financial market. It’s also a good opportunity to learn about the global economy and which countries are best to invest in.
Use Mutual Funds
Investing in mutual funds is a great option too because you don’t have to pick the stocks yourself but you can still diversify your portfolio. You can choose regional funds that will have a variety of stocks from a specific region, like Europe or Asia, for example. There are also country specific funds if there is a certain country that you are interested in. Alternatively, you could look into sector funds, which allow you to invest in a specific sector, like energy, across multiple countries. Consider your investment goals and what areas you are interested in when making your decision.
Buy Individual Stocks Using ADRs
An ADR is an American Depository Receipt, and they are the best option if you want to pick foreign stocks yourself instead of putting your money into a mutual fund. They are US-traded securities that represent an interest in foreign stock. They are in dollars and they are traded on NYSE, NASDAQ, and AMEX, so you don’t need to worry about trading on foreign exchanges. It also means that you don’t need to deal with any currency exchange rates. Essentially, they remove a lot of the challenges associated with buying foreign stocks. However, when investing in foreign companies, it is even more important than usual to do your research. Unless you have a clear understanding of the economy in your chosen company and what the market trends are, you will struggle to make sensible investment decisions.
Investing in foreign markets can be very daunting at first, but if you follow these steps, you can begin diversifying your portfolio overseas.