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Why limit your focus to Australia when there’s so much wealth created in world markets?
Gone are the days when you were restricted to Australia’s dominant industries of finance and natural resources. Investors now have access to an incredible number of overseas markets and exchanges with plenty of financial products.
The globalisation of world markets
The global market can be imagined as a series of interconnected financial transactions. This globalised economy brings significant opportunities (and risks) for Australian investors.
As a capital-hungry nation with a small population, Australia relies on other world markets to fill the gap in terms of savings. Foreign investment can help the Australian economy in the long-term by investing in new and established industries — boosting infrastructure and providing new employment opportunities.
This increase in investments has a flow-on effect for domestic services at a community level, by increasing the amount of money going to essential services like health and education.
In turn, access to foreign markets can diversify Australian investors’ portfolios, and give you access to industries that don’t exist here. Foreign investments can also add value to your portfolio in times of strife. A falling local market could be negated by rising value in your shares overseas, and vice versa.
Access to emerging markets and developing countries is also helping stimulate global growth and wealth. It won’t be long until up-and-comers like China and India will have control of the majority of manufacturing services. Early investors could see significant gains from these rising economic powers.
Although these benefits do not necessarily outweigh the risks in foreign investment. Developing economies are particularly vulnerable to financial and political instability. And as we have previously seen, the globalisation of markets can lead to risk ‘contagion’.
Any shock to the US market can send larger shockwaves through world markets. This is particularly noticeable in Australia, which so heavily relies on the US and China as trade partners.
The GFC demonstrated how quickly an interconnected global economy can lead to calamity, and many Australian investors are hesitant to risk international investments, especially after being hit by fluctuations in the exchange rate.
Nevertheless, for those interested in investing elsewhere, the options overseas are potentially limitless.
To find out more about opportunities within world markets, see our latest market news and analysis below.
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