Sign Up Now
Get instant access to over 1 million+ study documents
OR
Already registered? click here to login
By creating your account, you agree to our terms of service, privacy policy and student honor code.
International investing offers a unique opportunity to investors to diversify their portfolio, manage risk more effectively and take advantage of significant political, social and economic events in other parts of the world. However, international investing has some downside to it as well. This paper will discuss the pros and cons of international investing and recommend a best market to pursue for investors seeking to offshore at least some of their wealth.
The pros of international investment are that it can help increase an investor's total return in their portfolio. By adding assets international markets that are minimally correlated to investments already in a portfolio, one's risk is reduced. Mitigating risk is one of the most important concepts in investing, and the more that one can advantageously diversify a portfolio, the more likely one's return is to be positive.
International investments can be particularly appealing when an event occurs within a foreign nation's social, economic or political spectrum that will impact companies or other assets based in that region. For instance, the Russian stock market has nearly doubled since 2014 and for international investors the steady climb over the past 2 years has been a unique opportunity...
Meanwhile the S&P 500, while achieving significant growth in the same time span did not quite measure up to the same returns. Moreover, the two markets do not share the same risks: the U.S. is much more deeply in debt than Russia, while the latter country's interest rate is more than 10x higher, indicating that Russian Government Bond 10Y yields would pay a much better return than a 10-year U.S. bond (Trading Economics, 2017).
The cons of international investment are that one can run into illiquidity in the marketplace and be unable to exit a trade at a desirable price. The same economic, social and political factors that can lead to potentially big returns can also flip and lead to potential losses. Investing overseas also brings with it higher fees from brokers than the fees normally associated with domestic investment. Currency risk is another issue: when investing overseas, changing the U.S. dollar for the foreign currency has risks associated with currencies rising and falling in value. Should more countries determine to the leave the EU, for instance, investment in the Euro could backfire if the…
References
Nguyen, J. (2015). The 3 biggest risks faced by international investors. Investopedia.
Retrieved from http://www.investopedia.com/articles/basics/11/biggest-risks-international-investing.asp
Trading Economics. (2017). Russian government bond 10Y. Retrieved from http://www.tradingeconomics.com/russia/government-bond-yield
VanEck. (2017). VanEck international investors gold fund. Retrieved from https://www.vaneck.com/library/vaneck-funds/inivx-fact-sheet-pdf/
Despite offering particular benefits to post-conflict nations, increased levels of help following civil war also comes with negative upshots that entails a rise in fraud and jeopardizing one of the basic objectives of peacekeeping. Corruption affects the peacebuilding process, institutions and people in a given nation. For instance in Herzegovina and Bosnia, corruption affected the operation of Bosnian judicial institutions (Kahler, 2013). Moreover, the strategy adapted to address fraud in
International Lending and Financial Crises There has been remarkable growth in the gross and net external positions and international capital flows in the last two decades. This represents growth of nearly three times among industrialized or developed countries and has led to large effects on the valuation of asset price and exchange rates have also changed considerably with these countries having larger external assets and liabilities. This increase in international capital
International Accounting The Dupont analysis identifies three key equity value drivers. These are operating efficiency, asset use efficiency, and financial leverage. Operating efficiency is measured by the (net) profit margin, asset use efficiency by total asset turnover and financial leverage by the equity multiplier (Investopedia, 2013). Operating efficiency is clearly one path to healthy returns, because firms with higher margins are more likely to earn profit. They can withstand price shocks
International Financial Markets and Institutions: Throughout the globe, today's landscape of international financial market and institutions has continued to experience several changes that require practitioners to examine new models. The need for practitioners to examine new models that are relevant to the state of these markets and institutions has also been necessitated by the recent events that contribute to financial crises, which have been very dramatic. Actually, the recent financial crisis
Differences in international orientation include ethnocentric, polycentric, geocentric, and regiocentric. Each of these has varying levels of recognition of how diverse one culture is relative to another with the ethnocentric mindset being the most biased towards ones' own culture being the best. The one that sees a more accurate view of globalization is polycentric which sees the unique values of each culture on its own merits. Globalization has also seen
International Financial Crises and the IMF Demand failures are a major economic problem, and one that cannot necessarily be addressed by cutting interest rates as once believed. Small economies, such as those known as the Asian "tigers" are not invulnerable to international speculation. They may, in fact, resist cutting their interest rates -- raising them instead in an effort to keep their currencies from collapse. Failed economies financed poor investments with