Stock ownership in the US strongly correlates with age, race, household income, and formal education. More than 56% of Americans reported having stock investments based on polls done between April and July 2021. This is a slight increase from 55% in 2019 and 2020.
Most investors include their stocks in mutual funds and retirement savings accounts such as IRA and (401K) plans. However, you can also invest in international stocks. Investing in global stocks implies owning shares of a company located in a foreign country.
It’s a great investment plan to diversify your portfolio and tap into different economies. This gives you a perfect hedge against risks associated with the local economy.
Here is a quick guide on how to invest in international stocks.
1. Foreign Direct Investing
Foreign direct investing is the most conventional way to invest in international stocks. You have two options. You can either open a global trading account with a domestic broker or a local broker in a foreign country.
Whichever option, go for it if you’re a long-term investor. Causal brokers may incur costly fees and tax implications.
2. Invest in International Stocks Through Global Mutual Funds
Why invest in international stocks? Global mutual funds allow you to do that without much hassle. Moreover, you can choose to focus on international equities either aggressively or conservatively. This allows you to mitigate all potential investment risks.
However, it’s imperative to note that global mutual funds attract higher costs than domestic options.
3. Go for International Exchange-Traded Funds (EFTs)
You can also access the best international stocks to invest in right now through EFTs. EFTs are simpler and more convenient than other options. You don’t need expert technical analysis to diversify your portfolio.
EFTs can give you access to multiple markets and sectors. However, some types of EFTs focus on one geographical location only. Visit monexsecurities.com.au to expand your portfolio in EFTs. Other options include Listed and Real Estate Investment Trusts.
4. Global Depository Receipts
Global Depository Receipts (GDRs) are the best way to invest in international stocks in Europe. This option allows you to buy shares of a foreign company issued by a depository bank. Buying stocks through GDRs is open to investors from within and out of the US.
You can access GDRs at the Luxembourg and London Exchange markets.
5. Multinational Corporations (MNCs)
Investors can trade in international stocks through Multinational Corporations if they are uncomfortable with mutual funds. It’s also a convenient alternative for American Depository Receipts (ADRs).
Moreover, investing through MNCs means you don’t have to buy foreign stocks directly. Instead, you’ll buy stocks in domestic companies with a significant overseas market share.
Examples of domestic companies with overseas sales include McDonald’s and Coca-Cola. However, MNCs offer a backdoor approach. You may not experience all the benefits of international diversification.
Go for International Stocks But Do Your Research
Just like domestic stock trading, knowledge is power if you want to invest in international stocks. Do in-depth research on the political and economic landscape of the foreign country you plan to invest in. These factors significantly influence your potential returns.
Most importantly, stick by your investment plan and costs. Readjust your objectives depending on the prevailing risks. If the risks are overwhelming, don’t invest in international stocks.
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