The Pros And Cons Of Local Investments Versus International Investments
The Pros And Cons Of Local Investments Versus International Investments – by Chrissy Davids
US equities account for 52% of the entire stock market. While this is an impressive amount, it means that if you’re only investing locally within the US, you’re missing out on almost half of the entire stock market. While the American stocks are currently outperforming global investments, there have been times where the American market had a negative annual return while the international market had up to 10% returns. There are advantages and disadvantages to both local and international investments, with international investing becoming easier and less risky, while you’re more likely to have knowledge about local investment opportunities.
Locally – The Pros
A mere 1% of the $30 trillion that Americans invest goes towards local small businesses, but it can be a very safe and rewarding option. Investing locally keeps money in your local economy, helping to build and support your community. You’re also more likely to know and easily understand your local markets, making them safer and less risky options. It’s very likely that investors and businesses can achieve their goals by investing locally. Building your company up with good advertising and becoming a trusted local business will give you more money to invest, which can go back into your business, kept as profits or used for stepping into international investments to further expand your business.
Locally – The Cons
Your local market, politically and financially, may seem strong, consistent and somewhat predictable, but there’s plenty of examples of steady economies and markets crashing unexpectedly, such as Japan’s market, which has been up and down over the last few decades and the current Turkish currency and debt crisis. From a business point of view, never branching out to invest internationally could mean that your business stays small and doesn’t reach its full potential due to lack of exposure or not enough funding. You’re also missing out on nearly half of the market.
Internationally – The Pros
Investing internationally has become easier than ever and, from a business perspective, it’s a great way to gain exposure and recognition from other big companies that are also investing internationally, which could lead to better business all round. You’re also spreading your money further, so if one market was to crash, you have money invested elsewhere to keep you afloat. The US has been named 2018’s most competitive economy, based on 98 indicators by the WEF, but Singapore and aren’t far behind.China is an emerging market that peaked 28th on the list, making it an ideal place to invest in now to see the benefits in the long-term as the economy thrives.
Internationally – The Cons
While investing internationally does add some diversity and open new opportunities, it does come with increased risks. It’s more difficult to analyze foreign stock because information may not be so readily available and you’re sitting in a different country, making it harder to keep an eye on the market and your investments. You’re also likely to experience fees, such as in Hong Kong there’s stamp duty, trading fees, brokerage commission and a transaction levy to pay. You can open an offshore account that makes investing internationally easy, but you may find that you encounter huge transaction and brokerage charges, such as $100 per month maintenance fees and $75 wire transfer feeds, which could counteract any money made.
There are good and bad points to both local and international investments, so it comes down to how much money you have to invest, what your goals are and how much of a risk you’re willing to take. A mix of both international and local investments could be ideal if you best so that you’re supporting your local community, but also reaping the benefits or international investments.