Financial investment analysis and strategy

Financial Investment Analysis: Securities

The foreign investment strategies of national pension systems vary widely. In the United States, the Social Security fund keeps its reserves in government bonds, while other countries such as Singapore have tens of billions of dollars of their worker's invested abroad. ("China's Pension Fund to Invest Abroad, 2006, International Business Times) A manager of a private pension has the discretion to choose to invest either entirely domestically, or to combine a mixed investment approach between home and abroad, and thus the next, obvious question is -- what approach is the wisest?

The reasons for investing in international securities include the added value that diversity can bring to any portfolio, particularly when the country of origin's economy is not doing particularly well, or, as in the case of the United States, when national pension funds are already heavily concentrated in one nation. Also, as the world economy continues to grow more global in nature, international investment allows investors to take greater advantage of the more rapid expansion opportunities in nations of the near and far East. After all, pension funds are designed to accrue revenue for long periods of time, rather than be rapidly divested at the first time of instability, and such nations seem to be showing long-term growth possibilities. "Pension reform in several emerging market countries has been associated with rapid growth in assets under management and a positive impact on the development of local securities markets." (Roldos, 2004) Finally, the stability of many international securities, located in Britain, Switzerland, or Germany, to take only a few examples, means that using the diverse potential of international investment opportunities does not necessarily entail a high risk.