The American stock market is a popular hub for investors. Almost 4,000 companies list their shares in the U.S. Stock Market.
However, the U.S. stock market doesn’t list every publicly traded company. Some investors mix international stocks into their portfolios instead of exclusively U.S. stocks.
Investing in international stocks has its perks. U.S. investors should take note of the opportunities available elsewhere. We’ll share some reasons to consider investing in international stock markets.
1. Portfolio Diversification
Investors diversify their portfolios to mitigate risk. Other assets can pick up a laggard and help you produce a respectable return.
International stocks increase portfolio diversification. You can invest in multiple sectors and countries to spread your risk.
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You can buy stocks from around the world, mitigating risk in the process.
2. New Possibilities
Investing in international stocks opens up new opportunities. You no longer become reliant on the companies listed in the US stock market.
International investors have a wider pool of companies to select. They can look for undervalued companies receiving less attention.
Some international companies eventually file for a US IPO. You can buy shares in these companies long before they get traded on US exchanges.
3. Global Growth
The US stock market is relatively mature. It still achieves moderate growth, but other countries have a higher upside.
International markets expose you to countries with more growth potential. These countries can grow GDP more rapidly than the US.
Experts expect Guyana’s GDP to increase 47.5% year-over-year in 2022. The United States is well beyond the days where it could churn out those gains.
Some investors prefer mature markets with less risk. However, they can miss out on compelling growth opportunities hidden in plain sight.
Liquidity is a significant strength for most stocks. You can quickly enter and exit positions if necessary. They don’t carry the same commitment as real estate.
You can quickly exit an international stock position if you become wary. You can dabble with international stock markets to understand how they work.
You can always back out if you change your mind.
5. Currency Fluctuations
International stock markets expose you to more companies and currencies. Fluctuations in currency exchange rates will impact your return on investment.
This perk works like a double-edged sword. You can achieve higher returns if the currency moves in your favor. However, you can lose money if the currency devalues compared to the US Dollar.
You should review a country’s currency before investing in its stock market. International stock markets give you exposure to multiple assets simultaneously.
Investing in International Stocks Can Yield Higher Returns
International stocks can produce higher returns than their U.S. counterparts. Some international stocks eventually list on the U.S. stock market.
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