The investment scene, including stocks, is facing a tough time at the moment. That does not mean that everyone should completely ignore it and focus only on hoarding cash under his or her pillows. Even if you decide to actually stay out of the market until you see a bull market again, it doesn’t mean you can’t continue accumulating more information that will make your decisions more informed.
With that being said, the Singapore stock market is really a tiny fraction of the stock market in general. As a market that prides itself on being a global city, we believe investors should also try to see the bigger picture when it comes to investing.
Here are the top five things you should consider about investing in international stock markets.
1. Boosting Your Returns
As we’ve already mentioned, Singapore’s stock market is tiny. In fact, in a recent Business Times’ article, we read that Singapore’s entire stock market capitalisation is smaller than just one stock on Nasdaq. While the stocks on the local index would be more familiar to us, and we should concentrate some proportion of our portfolio in it, the international markets are far wider reaching and offer better returns as Singapore’s STI was one of the worst performing markets in 2015.
2. Achieving Better Diversification
Again, the notion of just investing in the Singapore market, means that you’re being exposed to the Singapore market quite a bit. To really receive market returns, you have to be diversified to the international markets.
Also, considering countries like Singapore are very trade dependent, shocks in the economy could have large reverberations on the country’s stock market. This is in stark contrast to large economies like the USA, whose economy determines the financial health the world, and whose stock market is not likely to fluctuate unless there are drastic global events that call for it.
3. Currency Differences
One of the main things to note when investing in international markets, it’s that you have to take note of currency movements as well. The rule of thumb for investing is to hold solid investments over the long term. This adds to the case of not trying to buy and sell foreign stocks too often as currency fluctuations would mean a different return that what you thought.
In addition, we’re also unsure of the actual rate that you would get with your banks. They are usually lower than what you can get at regular moneychangers. The main benefit for Singaporean investors this year is that the Singapore Dollar has been one of the worst performing currencies as well.
4. The Accessibility To International Markets
The fact that we’re even discussing currencies being a factor in your investment decisions shows how accessible international markets have become for retail investors.
All our local stock brokerages provide services to buy and sell foreign stocks on their online portals, and hold your foreign investments.
5. Thinking Global
As Singaporeans, living in a global city, we have to think global as well. This will make us more aware of global events that affect investments and will ultimately create more astute investors out of us.
Like Minister Chan Chun Sing said – Stay competitive…, get out of Singapore (more or less). In the same token, by harnessing the power and logic of all the points above, we can make our investments more competitive for us.
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