By Santosh Joseph
In today’s interconnected and globalized world, international investing has evolved from being perceived as a luxury to becoming an integral part of a well-diversified portfolio. The products and services we use daily often originate from remote corners of the world, highlighting the significance of participating in these markets.
Diversifying your portfolio with international investments can offer numerous benefits, including reduced risk through exposure to different economies and industries. Moreover, it allows you to capitalize on growth opportunities in emerging markets. Embracing international investing enables you to harness the potential of a truly interconnected global economy, providing a pathway to long-term financial success and resilience.
Unlocking Vast Opportunities
One compelling reason why international investing holds great importance lies in the sheer size of the global market, which far surpasses the domestic market. To put things into perspective, India’s share in the global market accounts for just 3%. Consequently, if we confine our investments solely to the Indian market, we inadvertently miss out on a staggering 97% of the investment horizon’s potential. It becomes evident that diversifying our investment approach to encompass markets beyond India is a strategic move that can significantly enhance our portfolio’s outlook.
Access to Unique Sectors
Investing outside India allows us to expand our horizons and tap into a plethora of opportunities worldwide. As economies become increasingly interconnected, various nations play integral roles in manufacturing products and delivering services that we use daily. By actively participating in international markets, we position ourselves to benefit from the growth and development taking place on a global scale.
Manage your risk better
Investing in global markets offers an effective means of diversification, leading to better risk management. Diversifying across different countries and economies allows for spreading risk, thus enhancing the overall risk management strategy and potentially reducing the impact of adverse market fluctuations.
Investing internationally offers valuable opportunities to mitigate risks associated with the domestic economy, domestic geopolitical factors, or concentrated geopolitical risks. One fascinating aspect is that different economies and sectors worldwide tend to perform better at various points in time. Within the broader global landscape, certain themes consistently outshine others, while developed or global markets may excel beyond domestic ones. This highlights the substantial advantage of international investments, whether in global tech companies, global product enterprises, or companies not accessible domestically in a specific country like India.
The international approach provides three significant benefits. Firstly, it grants access to a broader range of investment opportunities, unlocking the potential for higher returns. Secondly, it acts as a safeguard, reducing the impact of localized risks by diversifying across various regions and markets.
Finally, it ensures a more balanced and resilient portfolio, capable of weathering fluctuations in specific economies. Embracing global markets opens doors to greater possibilities, allowing investors to capitalize on global growth drivers and protect their assets more effectively.
(Author is Founder and Managing Partner, Refolio Investments)