Published on September 9th, 2014 | by Pete0
The Art of Global Investment: How to Create and Manage an International Portfolio
As a general rule, global businesses tend to operate in ever depreciating circles. Technological advancement and remote communication techniques have continued to eliminate the barriers that once hindered international trade and investment, with the result that it has never been easier to operate within a global market. Developing a global investment portfolio is now a particularly viable option for individuals, although this also brings considerable risk in terms of social, economic and geopolitical threats.
How to Create and Manage an International Investment Portfolio
These risks must be considered and managed carefully, especially if you are to create a viable international investment portfolio that can stand the test of time. Consider the following practical steps towards achieving these goals: –
1. Pay Attention to the Detail of Each Investment
Attention to detail is the key to any successful international portfolio, primarily because the level and nature of risk will vary depending on various factors including location, demand and economic trends. If we consider an example taken from a recent news story on the Killik & Co LLP blog, for example, we can see that growth in the American hotel sector has been driven by a prevailing trend for international travel. This has created considerable opportunity with a clearly defined and specified market, as investors can generate large returns while also minimising risk. This is not necessarily true across all markets, however, as geopolitical and other social threats have restricted international travel in some areas.
2. Diversify into Multiple Markets
On a similar note, it is important to diversify your investment interests and portfolio by embracing multiple markets simultaneously. This is because each financial market or derivative can fluctuate at any time, according to a host of variable, socio-economic factors. Investors who restrict themselves to a single market therefore place themselves at risk in instances of depreciation or decline, as they have no additional avenues through which to generate income. By diversifying and moving into a range of international markets, however, you can offset your risk and secure more regular returns.
3. Beware of Real Estate
Given the recent levels of growth in the global real estate sector, it stands to reason that this would provide a viable opportunity for diversifying in 2014. The market is poised to experience a significant decline, however, with house prices in the UK and similar developed economies already stalling amid falling demand. This is a cycle that continues to define the property sector and one that poses a huge threat for inexperienced investors. There is therefore a strong argument to avoid real estate investment where possible, especially in areas where growth is likely to be unstable or fleeting.