Investing overseas can be a great way to diversify your portfolio and open up new opportunities. However, it is important to consider the various risks associated with global markets before taking the plunge. Political risks, different regulations, costs and exchange rate risks are some of the factors to be aware of. Analysts often use readings of a country's gross domestic product (GDP), inflation, and consumer price index (CPI) when evaluating an investment abroad.
Before investing, it is essential to do thorough research and understand the investment objectives, risk factors, and fees and expenses of the Funds. Frontier markets are not well correlated with other, more traditional investment destinations, meaning they offer additional diversification benefits when held in an entire investment portfolio. iShares minimum volatility ETFs are fundamental investments that can help reduce the volatility of equity portfolios and maintain your investments. According to a Vanguard study, “at least 20% of your total portfolio should be invested in international stocks and bonds”. The legal structure of the country in which you are investing is also crucial, as it can determine if certain investments are allowed by law or if certain taxes apply.
If you're investing directly in a country's bonds, assessing the country's economic situation and strength can be a good way to evaluate a potential bond investment. For advisors who work with clients who are more reluctant to invest abroad because of their recent profitability, using an international equity ETF aimed at higher-quality companies can make investing abroad more desirable and, at the same time, increase exposure to a historically rewarding factor of return. The decision to invest abroad must begin by determining the risk level of the investment climate in the country under consideration. Investing overseas involves a careful analysis of economic, political and business risks that could result in unexpected investment losses. It is important to balance your investment objectives, costs and potential returns with your risk tolerance.
