International investments are a beneficial way of improving your portfolio, and diversification outside your home market can be a profitable move. These markets can offer you an increase in your returns and reduce the impact of domestic economic difficulties or a high market on a portfolio. However, you need to understand the performance of markets overseas to ensure you make a wise decision. This performance can be affected by a number of factors, and one event can dramatically impact your returns. It’s vital that you find the right stock and the right time to invest to make international investing a secure option.
The Right Climate to Invest
You may feel that you can simply transfer your knowledge of the domestic markets to the international investment scene. However, you need to know how to assess the current climate in a specific market to judge if it’s the best time to invest.
The two key areas to analyze when investing in foreign markets are the political and economic risks associated with them. The economic risk is the ability of a nation to make its debt repayments. If a country is economically secure, it will offer a more reliable source of investment. The political landscape of a country can result in financial losses for investors as well. The climate needs to be hospitable to investors from overseas and stable enough for a long-term strategy.
Economic risk can be assessed through the credit rating of a country, in a similar way to how companies are measured on their financial security. If the nation has a high score, then it is classed as a safer market in which to invest. Other indicators for a sound investment are the gross domestic product (GDP) of a country, alongside the inflation rate and the Consumer Price Index (CPI). You should also examine how a financial market is structured, the performance over recent periods, and what the availability of investments is.
There are a number of sources you can use to assess the current climate, both politically and economically, in a particular country. Key media outlets, including The Wall Street Journal and The New York Times, provide excellent coverage. Other comprehensive sources are the Central Intelligence Agency ‘World Factbook’ and the Economist Intelligence Unit.
Before you begin to invest in international markets, it’s good to get advice from a reputable and knowledgeable source. For example, Dr Shahram Shirkhani has worked with businesses across Europe and the Middle East as an international legal consultant. He has an extensive knowledge of financial markets and can support clients in making foreign investment decisions. He has a particular experience of representing financial institutions and corporations in Iran within the financial markets of Europe and the Middle East.
Tips for Successful International Investing
Choosing the right moment to invest in an international market is paramount to your success. When you’re selecting a particular market in which to invest, you need to find one with the potential for high growth. Currently, Asian stocks are doing well, but there is the fear that this could stagnate. European markets have also performed well, but there is less growth potential there due to the developed nature of the market. Emerging economies can be risky areas, but they also offer high returns. When you’re assessing the investment potential of these areas, you should be looking for an industry that is set to increase in price and buy ahead of this.
With a sound understanding of the performance of international markets, you can make an informed judgment on the security of a particular investment. This will enable you to enhance your portfolio and make a success of international investing.
