If you were asked to list out some of the most common brands you use in daily life, the odds are that most of the names you list out would be foreign brands. It is not uncommon for us to use goods made by international companies in our day to day lives. But what about investments? Have you invested in any of these foreign companies?
Investing in foreign funds is not only a great idea, it can be very profitable. Here’s why investing in foreign funds can help you in wealth creation.
- Access to more financial options
When you invest abroad, you have the opportunity to expand your investment choices. These days, there are lots of many wonderful opportunities and foreign funds are a prime example. Mutual funds, exchange traded funds (ETFs) and American Depository Receipts (ADRs) are some of the most popular investment options out there.
Investing only in funds from a domestic financial market may not be the best decision. This is because you can face negative exposure in case of a market crash in that particular economy. For example, if the India stock markets crash, you can risk losing a big chunk of your investments if you have invested only in domestic funds.
Expanding your investment choices beyond the borders can help you gain geographical diversification. So in case of a market crash, you can ensure that your portfolio is able to withstand the economic problems in the domestic market.
- Growth potential
One of the biggest advantages of investing in foreign funds is that your portfolio has great potential for high growth. There are many global markets that are developing at a fast rate. By tapping the potential in these markets, you can hope to earn a sizeable return on your investments. You can start by identifying good foreign funds through careful analysis and research. Once you successfully identify these funds, you can invest a portion of your money in these funds and wait for the returns to start coming in.
- Tax benefits
Many countries offer exciting tax benefits to global investors. This is to help strengthen the country’s financial environment and attract international wealth into the country. This can be seen as a win-win situation for both the parties. As an investor, you can benefit from the numerous tax benefits available from foreign investment destinations.
- Supplement your core portfolio
Investing in international funds is a great way to supplement your core portfolio. As mentioned above, it is a great means of diversification. That means it is a good idea to have a healthy amount of foreign funds without going overboard. It is best to consider invest around 10-15% of your funds in international funds, especially from other emerging markets.
Considering all options in front of you is a crucial element of financial planning. As an investor, you have the great opportunity to tap into international funds and benefit from wealth creation. With the world becoming more and more smaller due to globalisation, it is perhaps the best time to start investing in foreign funds.