Benefits of Investment in Global or International Stock Market

In Last post We have discussed the various modes through which we can Invest in International Stock markets. Investing in the global Stock market has indeed become considerably more accessible in recent times compared to earlier decades. In this post we are going to discuss the various advantages and disadvantages of doing Investment Globally.

Advantages of Investment in International Stock Market

Investment in global market is very crucial to success of an Investor. Following are the needs or advantages of Investing in International Share Market.

1. Portfolio Diversification

Investments in Global Stock Market, mitigates the risk associated with an individual Country. Recent conflicts involving countries like Israel, Palestine and Iran are the perfect examples of the geopolitical risks associated with investing in a single country.

2. Currency Risk

Our investments might look like they’re growing. But sometimes, even if our investments grow, our money’s buying power can decrease because devaluation of National currency. Staying vigilant about our investments is key to avoiding this trap. That’s where investing in the global market comes in handy. By spreading our investments across different countries, we can better protect ourselves against the risk of currency devaluation and keep our financial health in check.

3. Getting a wide range of Investment Opportunity

Investment in Global Market opens up a wide range of opportunities, where Investor can compare and select the best available opportunity. Like an Indian Bond is more lucrative for an US Investor in term of Rate of Interest.

4. Higher Economy Growth

The growth potential in a rapidly developing economy like India often exceeds that of a mature economy like the US. Therefore, investing in the global market offers an opportunity to explore and capitalize on the rapid growth of emerging countries. By diversifying our investments internationally, we open doors to high-growth markets, allowing us to potentially grow our investments at a faster pace than would be possible by solely investing in mature economies.

Disadvantages of Investment International Stock Markets

Every coin has two sides, and investing in the global market is no exception. While it offers numerous advantages, it also comes with its fair share of disadvantages. Below are some of the drawbacks associated with global market investment:

1. Higher transection costs

Since investments in any country typically necessitate transactions in its native currency, investing in another country involves an additional expense: currency conversion costs.

2. Taxation

Taxation plays a pivotal role in investments, varying from one country to another. In some cases, returns on investments from foreign countries may face double taxation in the absence of a Double Taxation Avoidance Agreement (DTAA), or may be subject to higher tax rates compared to returns on domestic investments. Therefore, it’s crucial to carefully analyze the taxation implications before investing in global market.

3. Lack of Information

Each country has its own regulatory body responsible for overseeing its securities market, and companies are obligated to adhere to their respective regulatory requirements. While some countries mandate comprehensive disclosure of company information readily accessible to investors, others may not impose such obligations. Consequently, investors in certain jurisdictions may encounter challenges in accessing the necessary information to make informed investment decisions.

Conclusion : Investment in Global Share Market

Investors must carefully weigh factors like currency risk, taxation, regulatory differences, and information accessibility before committing to global investments. A thorough analysis ensures informed decision-making, safeguarding against potential pitfalls and optimizing opportunities in the dynamic global market landscape.