What Are the Best Tips for International Money Management?

Geri Terzo

It's very possible that the best returns, or profits, are not limited to an investor's domestic economy. Subsequently, international money management could create opportunities for greater income and returns. There are risks involved, however, as the performance of overseas investments in addition to foreign currencies are vulnerable to the economic and political conditions that exist in other nations at any time. Nonetheless, there are definite ways to manage money internationally and in some cases an investor does not even need to create an overseas account.

American money.
American money.

One convenient way to achieve international money management is to gain exposure to overseas businesses in the domestic stock market. One way to achieve this is by investing in financial securities known as American Depository Receipts (ADRs) in the U.S., or in Global Depository Receipts (GDRs), which are primarily available throughout Europe. Although ADR or GDR stocks represent the businesses of certain overseas entities, these securities trade on local stock exchanges. By investing in ADRs and GDRs, investors can gain access to international stocks without having to open an overseas brokerage account. Also, 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 the international markets through money management firms that oversee mutual funds filled 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 are typically cheaper to invest in versus more traditional investment funds. International money management that includes exposure to ETFs is meant to deliver the types of returns that are average and similar to another market barometer.

There is additional risk with investing in overseas markets. This is especially the case in the emerging market economies, where there is an enormous potential for growth but also instability, as the political and economic structures in these nations continues taking shape. By selecting mutual funds, that risk can be minimized, which may help with international money management. Professional money managers often set out to achieve diversification in a fund, either across countries or the types of assets that are purchased. Even if performance in some securities is disappointing, there are other investments in the portfolio that may deliver returns that compensate for any losses.

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