It seems obvious that an investor would want to invest in the asset class that offers the least amount of risk. But the sharp fall in the Dow Jones last week wasn’t the worst globally.
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 upcomers 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.
October is bad for markets. At least that’s according to the so-called October Effect theory. Apparently, investors get nervous this time of the year, so markets are more prone to declines.
Markets have rebounded from previous sell-offs and the bulls seem to be back in control. But ignore the developments out of Italy at your peril.
Once in office, Mr Trump used the stock market as a measure of his own success. He said he had ‘already made America great,’ and pointed to rising stock prices to prove it. If stocks…
A bounce of 400 points compared to a loss of 1,400…that’s not much of a bounce to write home about, so this is something we’re watching closely.
Many media outlets missed it. Indonesian President Joko Widodo warned on Friday that ‘Winter is coming’ for global markets.
The Trump team is already preparing to step in — with the collusion of Congress and the Fed — to prevent a bond bear market.
It was inevitable. And yet the market is struggling to digest it, and the mainstream financial media is grasping for stories to explain it.
Shares of Amazon.com, Inc. [NASDAQ:AMZN] took a hit in last night’s trading, sliding by over 6% during the day of Wall Street’s worst performance in eight months. This seemed a common theme in growth stocks…
At time of writing, the ASX is currently down 2.2%. This is a major drop and has the ASX trading below 6000 for the first time since early June.
At time of writing, shares of Netflix, Inc. [NASDAQ:NFLX] are down 8.4% as it got caught up in a major sell-off in the US. It will open tomorrow’s trading (US time) at $325.89, with another…
The new trade deal is credited with adding 400 points to the Dow over the last two days. Investors were relieved — once again — to find that Mr. Trump is more bark than bite.
The September Institute for Supply Management (ISM) manufacturing index came in at 59.8, lower than August’s 61.3 and below the 59.9 forecast – suggesting President Trump’s trade war is not yet impacting the US economy.
Italy is no stranger to debt with its debt-to-GDP ratio currently sitting at 130% of GDP. Greece had a debt-to-GDP ratio of 109% in 2008, and we all know how that story went.