The Globalization of Markets

There are four important trends of the recent years that have changed the investment environment that our parents and grandparents have been used to. These four trends are

  • Securitization
  • Financial Engineering
  • Information and Computer Networms
  • …and Globalization

The topic of our discussion is on the globalization trend. If a wider range of investment choices can help the diverse world make better investments and benefit from them, then why should we limit ourselves to investing within our respective nations?

With the help of technology, communication is able to be transferred from one part of the world to another in a matter of seconds. And this rapid increase of technology, and the dismantling of regulatory constraints within nations has encouraged globalization in recent years. Do you think they predicted it would be like this back in the 80’s?

American investors can participate in globalization investment opportunities in several ways. One way is to purchase foreign securities using American Depository Receipts (commonly known as ADR’s).

Another way to invest internationally is to purchase foreign securities that are offered in dollars. Maybe you can buy stocks of a Japanese company that allows international investors to buy with their domestic currencies. You just have to check online or with your broker to see what companies allow these options.

You can also buy mutual funds that invest internationally, and its a great way of not having to do tedious research finding companies that you have never heard of, thousands of miles away.

Finally, you can buy derivative securities with payoffs that depend on prices in foreign security markets.

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