No need to leave your couch. Whether you work in the oilfields of West Texas or cater to tourists in The Bahamas, whether you are a millionaire in San Francisco or on your first job in Austin, TX, it is possible to own a slice of Vietnam, Germany, or any other country you like. And you can do it with a few mouse clicks on your smart phone*.
Integrated Financial Markets Thanks to Globalization
Our globalized world offers some amazing opportunities to everybody. When people think about globalization, they often think about trade and services, travel and immigration. That is what’s usually in the daily news. But globalization also means the integration of capital markets.
For companies, it means that they can find financing for their expansion plans both at home and abroad. It is normal for, let’s say, GE, to offer debt securities in Japan or in Europe. Why? Conditions might be more favorable. Demand for the offered securities could be higher, regulatory burden less, or financing costs fewer.
For investors, institutions or individuals, the world has become a proverbial oyster. There is nothing you cannot buy. There are foreign individual stocks, mutual funds, bonds, or Exchange Traded Funds (ETFs). Once you have a regular or online brokerage account, you can get into the action.
No Travel Needed
Think about it for a moment. You may be thousands of miles away from a foreign country. Despite the distance, the information about this country and its investment opportunities are at your fingertips. Your transaction costs are not flights, hotels, costs for looking out for investments on the ground, and translation of documents. This would be prohibitively expensive. No, you can do your research online for free to find out what companies or countries you would like to invest in.
The Exchange Traded Funds Universe
The US is a great place for investors. Rules and regulations ensure a high level of transparency and protection, in particular for the regular Joe. Your money is safe at the major (online) brokerages, be it Fidelity, TD Ameritrade, Charles Schwab, E*Trade, or others. It’s not going to vanish overnight. You can invest globally. While you could buy at stock exchanges overseas, there is no need to. US financial markets are so vast and liquid that many foreign securities are listed here. For example, you could buy the German chemical giant BASF in Frankfurt, Germany, or here in the US. Same price, same dividend, but lower transaction costs.
The same goes for mutual funds and ETFs – Vanguard, BlackRock, VanEck and other providers offer ETFs for almost every country and region in the world. You can invest in all the thousands of major stocks of the world in one fund, pick smaller companies outside the US. If you feel bullish on Asia, you could pick a diversified basket of Vietnamese stocks to participate in the amazing growth of this country. There is almost nothing you cannot invest in. The costs are minor. Trading costs are less than $10 per order. Annual fees usually range between zero and 1% per year, deducted automatically from your mutual fund or ETF. You may not notice, as almost all funds pay dividends after these fees have been deducted.
Why Invest Abroad?
Whether or not investing abroad is advisable for everybody is open to debate. Financial theory is a never-ending discourse. Even well-educated and reputable financial advisors differ on the yes/no and percentage of your ideal investments abroad. As everything in life, it depends on your personal circumstances. We will cover this debate a different time. For now, the main point is: you have the option to participate in the global economy even if your job and life is centered just in one spot. There is no need to work and live in Germany to profit from its economy. No need to fly to China to participate in the technological transformation of that country. You can sit back at home and relax while your money works for you abroad.
Investing is inherently risky, but usually regarded as the only way to save for retirement and put your hard-earned money to work. This is article is not about whether, and if so how much, you should invest outside your home country. It is meant to open your eyes to the simplicity of being able to invest anywhere globally from your couch. If this is not an amazing opportunity, I don’t know what is.
This is article is not intended to recommend or sell any type of security. It is purely educational. Each investor, unless sufficiently qualified, should always seek professional guidance before putting her money to work. Links to reputable companies that offer international investment options are provided for convenience only. No compensation is received whatsoever.
© Michael Froehls – 2019 – All Rights Reserved
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