Investors understandably only want to invest their hard-earned money in assets that they are comfortable with and have personal knowledge of in some substantial way. With this in mind, it makes sense that many investors shy away from investing in foreign markets. After all, you may have minimal or no knowledge of foreign companies and markets. However, by failing to explore opportunities in foreign markets, you may be leaving a wealth of opportunities untapped. With a closer look at what you may gain from this type of investment, you will see why now may be the right time to start expanding your horizons to foreign markets.
The Proportion of the Global Market
It may seem like a huge portion of the world’s assets are centered close to home, but the world is a big place and there are many foreign markets that each have their own benefits and opportunities. In fact, you may be overlooking as much as three-quarters of the world’s investment opportunities when you only consider domestic stocks. As you might imagine, this can drastically limit your potential to grow your portfolio over the years.
The Potential for Better Growth
You may now be thinking about the option to set up self directed IRA and to invest in foreign markets, but you may be wondering what type of growth you can expect if you take this action. Whether you choose to invest in other developed nations or in developing countries, you are opening yourself up to incredible chances for increased growth. Some local markets are saturated, and there may be little room for growth unless you happen to find the next big thing and invest in it at precisely the right time. Through your own efforts thus far, you may be well aware of how challenging this can be. However, with foreign markets, you have many other opportunities available to pursue for an increased chance at developing substantial wealth. In fact, when the domestic market lags, there are many foreign markets that continue to thrive.
There are some risks associated with investing in foreign markets. For example, there may be political instability in some regions of the world that could impact your investments. However, your portfolio may be more diversified as a result overall of expanding your investment horizons. To have a truly diversified portfolio, you must have interests in multiple areas of the economy, but you also must have a stake in different markets. Investing only in a domestic market can be risky in its own right. You may think that you would have some exposure to foreign markets because the largest companies in the U.S. markets do business overseas as well. However, this is simply not the same as investing in a company that is solely focused on foreign markets and based on foreign currency.
Expanding Markets Offer Different Opportunities
The last thing you want is for your investment opportunities to be limited. You want access to a full range of opportunities so that you can make the most thoughtful and intelligent financial decisions. You simply must look at global opportunities to accomplish this. This is largely because expanding markets and developing countries may have opportunities that are not present in the domestic market.
Domestic Investments May Not Be Cutting It
Many investors who only focus on domestic stocks are unhappy with their portfolio’s performance. They may feel concerned about the risk of being heavily focused in the hottest areas of the economy, or they may not have the growth they want from a properly diversified portfolio. By expanding your investments overseas, you may be able to increase your return while further diversifying your portfolio.
There is definitely a place in every investor’s portfolio for domestic stocks, but you should also consider allocating at least a portion of your funds into international stocks. By taking this step, you can more easily enjoy great benefits from a profitable portfolio.