The Benefits of Investing in International Stocks
Author: James Clark
5 Reasons to Invest in International Stocks
Every stock investor has their entrenched way of picking financial instruments. Some like to invest in stocks and bonds, while others choose to dive into the world of cryptocurrencies. However, there is a third “outside-the-box” approach modern stock investors are employing to include potentially every instrument but in different markets. Instead of sticking to NASDAQ or NYSE stocks, they’re now investing in international stocks to create an international portfolio.
In this post, we’ll share the main benefits of blending local and international stocks into your stock portfolio.
Five Benefits of Investing in International Stocks
Following the events of 2020, many stock investors are opting for a portfolio with local and international stocks to reduce overall risk and maximize exposure with global economies reviving themselves. Here are the benefits of deploying your capital in Shanghai, London, Hong Kong, Frankfurt, and other popular exchanges worldwide:
1. Outperforming Foreign Markets
You’d be amazed to learn that the U.S. stock market has not been the world’s top-performing market over the last few decades, even with some of the leading companies worldwide in NASDAQ and NYSE. In 2020, South Korea was the best-performing stock market as it staged a stock recovery following the COVID-19 outbreak. Denmark, Taiwan, and China followed in 2nd, 3rd, and 4th place while the U.S. managed to break into the top 5, thanks to some of its large-cap tech companies.
2. Portfolio Diversification
Even though many foreign and domestic stocks/companies are correlated, investing in foreign markets is a great way to reduce trailing earnings on average and improve their overall growth potential. Adding international stocks to your portfolio can also help protect your assets when the local market crashes.
3. Global Growth
NYSE and the NASDAQ composite are mature stock markets with steady, cyclical growth. Global markets undergo shifting economic cycles that can help savvy stock investors gain more profit, especially in third-world nations with foreign investments and rapid expansion.
4. More Stock Choices
Why stick to thousands of stock options when you can choose from millions around the world. By going international, you have a much greater choice of companies and assets. Plus, you can also invest in international blue-chip stocks, such as Allianz, Siemens, and Volkswagen at relatively lower prices to gain higher returns.
5. Currency Volatility
While currency fluctuations can potentially eat away returns in a poor-performing economy, they’re not always a bad thing since they work both ways. In a thriving economy, the exchange rate can move in your favor, thus increasing your return on investment.
Foreign stock markets can potentially offer a lucrative source of income as long as you invest in high-performing international stocks. International diversification is rapidly becoming a popular approach amongst traders. Now is the time to take advantage of the high growth potential before the practice becomes commonplace.
1. CNH Industrial N.V. (CNHI)
2. Heritage Crystal Clean, Inc (HCCI)
3. Conns, Inc (CONN)
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