Habit Trade: A New Way to Build Your Habits and Stick to Them!
Global markets offer substantial opportunities, but they also come with their own set of challenges. International investing is not as simple as buying domestic stocks and bonds. It's more expensive, which makes it a non-starter for many people. And the potential for even greater volatility in international markets is another concern.
There's also the challenge of managing risk beyond one's home market. While domestic markets tend to be less volatile than international ones, that could change anytime if trade wars escalate or other geopolitical tensions flare up again. There are also considerations about foreign taxes and regulations that can make it difficult to invest globally (and vice versa). Read on to learn why you need to break the barriers with global investing!
What's to Come in Global Markets?
The future holds much promise for global markets despite their volatility in the first half of this year:
Commodities are expected to remain strong. As demand for everyday items such as food, energy, and metals remains strong, commodities will likely see continued price increases. This is even more likely if the U.S. dollar remains strong, making commodities a more attractive investment.
Emerging markets are seeing increased interest as investors look for places to put their money when domestic markets slow down.
After seeing tremendous growth in recent years, many investors are looking for a way to temper their expectations.
As a result, emerging markets are still expected to see growth, but not at the breakneck pace they've seen in the past.
Why You Shouldn't Be Afraid of International Investing
Several myths about international investing have prevented many people from taking advantage of the significant opportunities it offers. For example, many people mistakenly believe there is no way to know when to get out of a rising non-U.S. market. While it would be great if you could just quit while you're ahead, the reality is that you probably can't. The point is that beyond the myths, there are very real challenges to investing internationally. The first is that international stocks are far more expensive compared to U.S. stocks. This is because of an additional layer of risk associated with investing outside one's home market. Investors are compensated for that risk by accepting lower potential returns. While international stocks have a higher risk than U.S. stocks, U.S. bonds have a lower risk than U.S. stocks.
This means that when you diversify across asset classes like stocks, bonds, and cash, you're automatically diversifying across markets. So you're not only diversifying across asset classes but also across markets. Diversification is the single biggest way to manage risk in your investment portfolio by lowering the chance of incurring a loss in any one investment.
The Challenges of International Investing
One of the biggest challenges of international investing is requiring more research and time. If you like to quickly and easily select stocks, international investing might not be for you. One of the challenges of international investing is that it requires more research. In addition to researching companies in the U.S., you must research companies in other countries. You need to understand the macroeconomic factors that affect each country and how those factors affect the companies in the country. Learning how to read financial statements in different currencies may also be necessary because those financial statements will appear in their local currency. And if you want to consider investing in foreign exchange-traded funds (FX ETFs), you may need to learn more about the differences between various currencies.
Improving the Process with Habit Trades
Above all, the best way to succeed with international investing is to make it a habit. There is no surefire approach to international investing, but there are ways to improve your process. First, diversify your portfolio across asset classes and geographies using low-cost, broadly-diversified ETFs. That is the most important and effective way to manage risk and achieve financial goals. Beyond that, use a subscription-based investment service that offers a variety of low-cost ETFs and options to diversify across geographies. In addition to helping you build a portfolio that meets your investment goals, a subscription-based investment service can help you stay on track.
Investment services that provide low-cost ETFs can help you avoid the pitfalls of international investing, such as potential language barriers and unfamiliar accounting standards. The best investment services offer low-cost ETFs focused on geographies and asset classes.
Conclusion
Investing in global markets is not only a great way to diversify your portfolio to reduce risk but also a great way to potentially earn more money. There are indeed a few extra challenges associated with investing in foreign stocks, but there are also many great reasons to do so.
If you are interested in global investing, you should be sure to do your research and find the best ways to make it happen. The earlier you start, the better prepared you will be for the future!