Beyond borders: A Guide to Investing in the International Market

Date : 12/07/2023
Read: 4 mins

Discover the key to financial success: diversify your portfolio and explore international markets for maximum returns. Find out how!

Diversify portfolios across investment types and international markets.
Consider ADRs, GDRs, FDI, global mutual funds, and ETFs.
Top international stocks for 2023: ASML Holding, CD Projekt, MercadoLibre, Shoprite Holdings.
Assess risk tolerance and conduct thorough research before investing.

To achieve financial success, investors should diversify their portfolios across various investment types and markets and even consider investments beyond domestic markets. This will help to minimise risk and avoid dependence on a single market, company, or country. When investing in the international market, investing in developed markets offers stability, liquidity, and investor protection.

How to invest in the international market?

There are several ways to do this:

American Depository Receipts (ADRs) and Global Depository Receipts (GDRs)

ADRs and GDRs are depository receipts that allow investors to buy foreign stocks and grant foreign companies access to the U.S. and international markets, respectively. ADRs have different levels, with Level 1 providing a trading presence. Level 2 allows trading on national exchanges, while Level 3 enables capital raising and listing on national exchanges. ADRs represent underlying shares and are traded like domestic U.S. stocks. GDRs, on the other hand, are issued by depository banks and traded in international markets, denominated in major currencies.

Foreign Direct Investing (FDI)

This involves buying foreign stocks directly, requiring global or local brokerage accounts, and considering costs, taxes, support, research, and currency conversions.

Global Mutual Funds

Global mutual funds offer a simple way to explore international markets, with options including region-specific or country-specific funds, which are actively or passively managed, and track overseas indices. Considerations for global mutual funds include fees and costs.

Exchange-Traded Funds (ETFs)

International ETFs provide a convenient way to access foreign markets without individually selecting stocks. ETFs can cover multiple markets or focus on a single country, offering exposure to various investment categories. Key factors to consider when buying international ETFs include liquidity, trading volumes, taxes, and portfolio holdings.

Multinational Corporations (MNCs)

Investors who prefer indirect exposure to global markets can invest in MNCs that generate a significant portion of their revenue from overseas. While this approach lacks true international diversification, it allows participation in global markets through domestic companies with global operations.

Also Read- In what proportion should international funds be allocated?

What are the top 4 international stocks for 2023?

ASML Holding - The Netherlands-based ASML Holding is a global leader in semiconductor manufacturing equipment, poised for expansion with increasing chip demand and a focus on localised production.
CD Projekt - This Polish company is a significant player in the video games industry, capitalising on the demand for interactive entertainment and emerging trends like augmented reality and the metaverse.
MercadoLibre - Latin America's prominent e-commerce and FinTech provider, MercadoLibre, shows significant sales growth despite macroeconomic challenges, positioning itself for expansion in online retail and FinTech.
Shoprite Holdings - Africa's largest grocery chain, Shoprite Holdings, benefits from economic and demographic tailwinds across 14 countries.

Takeaway

Investing in the international market can be a beneficial strategy for diversifying your portfolio and maximising returns. However, carefully assess your risk tolerance and investment goals with thorough research before investing in the international market.

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Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.