International money management can provide higher returns, but carries risks due to economic and political conditions in other countries. Investors can gain exposure to foreign markets through ADRs, GDRs, mutual funds, and ETFs. Professional money managers aim to achieve diversification to minimize risk.
It is quite possible that the best returns or profits are not limited to the internal economics of an investor. Subsequently, international money management could create opportunities for higher income and returns. However, there are risks involved, as the performance of foreign investments, in addition to foreign currencies, is vulnerable to economic and political conditions that exist in other nations at any time. However, there are definite ways to manage money internationally, and in some cases, an investor does not even need to create an offshore account.
A convenient way to achieve international money management is to gain exposure to foreign companies in the domestic stock market. One way to achieve this is by investing in financial securities known as American Depository Receipts (ADRs) in the US, or Global Depository Receipts (GDRs), which are mainly available throughout Europe. Although ADR or GDR shares represent the business of certain entities abroad, these securities are traded on local exchanges. By investing in ADRs and GDRs, investors can gain access to international stocks without having to open an offshore brokerage account. Additionally, Depository Receipt stocks trade and profits are distributed in the local currency where these financial securities are listed.
International money management is not limited to investing in individual stocks. Both individual and institutional investors can gain exposure to international markets through money management firms that oversee mutual funds with foreign securities. Investors can select portfolios that include stocks or bonds, depending on the types of returns desired and the amount of risk that can be sustained. An exchange-traded fund (ETF) is a type of mutual fund that can provide exposure to foreign markets, but is generally cheaper to invest in compared to more traditional mutual funds. International money management that includes exposure to ETFs is intended to provide the types of returns that are average and similar to another market barometer.
There is additional risk when investing in foreign markets. This is especially the case in emerging market economies, where there is enormous potential for growth but also for instability, as the political and economic structures in these nations continue to take shape. By selecting mutual funds, that risk can be minimized, which can help with international money management. Professional money managers often aim to achieve diversification within a fund, either across countries or the types of assets being purchased. Even if the performance of some securities is disappointing, there are other investments in the portfolio that may offer returns that offset the losses.
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