International Investing

Investing is one way of making more money. If avenues for investments open, every opportunity must be grabbed to flourish the capital. And one great avenue for investment is investing on international or foreign markets. But this is considered as a serious business undertaking. Hence, before indulging into whatever kind of investment, careful decision-making and research must be conducted first, since investing internationally is indeed a big deal.

Before making an investment decision, it will be better and safe to do a brief research on the political, economical and social conditions of the country where the foreign company is situated. These determining factors can be helpful in assessing future performance and financial outcomes of the company.

International investments can be done through no load mutual funds, exchange-traded funds, American depositary receipts and direct investments in foreign markets. Let us briefly define first the mentioned ways of investing internationally.

Mutual funds invested internationally can give higher costs than those invested in the US market. There are actually four kinds of fund that target foreign stocks: international funds, global funds, regional or country funds and international index funds. Exchange-traded fund or ETF is an investment vehicle traded in exchange of assets like stocks and bonds which are traded through out the day.

American depositary receipts are issued by the U.S. depository banks to foreign countries that trade stocks in the U.S. markets. Direct investments in foreign markets entails buying and selling of stocks to a company that is usually done by a broker who is duly registered in Securities and Exchange Commissions.

There are pros and cons to international investing. When investing internationally, one must consider the risks that may affect the growth of an investment. These are changes in foreign exchange rates, political, economic and social events, and lack of liquidity, less information, reliance on foreign legal remedies, different market operations, and changes in market value. Summing these risks up, there are three critical main risks or probabilities that must be taken into account: the political, currency and market risks. A political risk implies how stable a government is. Government varies. Some has the power to control a company and to take over it. On the other hand, currency risk talks about the day to day variations of exchange rates of foreign currencies compared to U.S. dollar. And lastly, the market risk. This indicates the reliability of corporate information regarding international markets.

Example of unreliable reporting is the differences on accounting practices of countries.

Obviously, these risks may cause harm or help to the investor. But a good, keen and observant investor will definitely take into account the aforementioned risks before entrusting any investment. Information on foreign markets should be put into detail to ensure good decision making. These data-finders can provide vital pieces of information for a sure-shot investment: SEC reports that are usually filed by companies online. You can check this site for better reference: www.sec.gov/edgar.shtml; newspapers’ business section publish news about foreign companies; the internet can also be an efficient source of information, since most foreign companies and organizations have their company websites. Extreme reliance on the internet alone will not mark a good research on foreign markets. Be sure to double-check every fact to avoid fraud and overblown statements. Other sources include international regulators and mutual fund firm.