International Investing – Watch Out For the Risks

International investing can prove to be lucrative in the long run, however, there are various risks that need to be considered before starting to invest abroad. Even though risks are part and parcel of any investment or business venture, it takes a wise person to realize them before hand and try to counter and minimize them. One of the important characteristics of international investing is the decrease in the precariousness with time.

So any investor must look out for long term international investing projects that should span over a period to 5 to 10 years so the risks of any sort of decline in the market can be minimized to the best effect.

There are a few other risks that you need to consider before looking out for international investing opportunities. One of them is the correlation between domestic markets and the international markets and this can prove to be extremely beneficial for investors. The recent market reports show that the correlation between the domestic market and international investing market is increasing and there seems to be a positive relation between the downturn in the market and the amount of correlation. This can be problematic as during a slump, both the international as well as the local markets perform differently and it has been seen that this trend is rife in the up-and-coming markets.

Investing internationally can be costly for any investor due to the cost of transactions and their respective commissions along with the market impact costs, higher portfolio management cost and so on. This can, of course, have an adverse effect on the return that the investor earns through international investing. Another thing to consider is the investment tax and other unforeseen duties that apply in various foreign countries and the fluctuation in the currency rates is obviously a factor that cannot be ignored.

The investor’s psychology plays a huge part in any international investing decision. If the investor has the desire and business acumen to hold on to his investment for a significant period of time rather than trying to cut on losses, then he would surely get a favorable return from the investment. The traditional view has been that international markets are not volatile but still one can incur significant losses. However, international markets can be volatile but this can be countered by diversifying in international mutual funds.

The key for investing internationally is devising a strategy that you are comfortable with and provided that you are willing to wait, the returns can be extremely lucrative.

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