In today's interconnected world, investors understand that limiting their portfolios to domestic markets can restrict growth potential. Global investing offers access to a wider range of opportunities, helping diversify risk and potentially enhance returns. However, navigating international markets requires careful planning and informed decision-making.
Like a skilled diver exploring uncharted waters, successful global investors need the right tools and insights to navigate complexities and capitalize on opportunities. Understanding key market dynamics, regulations, and potential risks is essential for charting a successful course.
Key points:
- Market Size and Diversification: Larger, more established markets like the US offer access to a vast array of investment opportunities across various sectors. Expanding beyond your home market provides greater diversification, reducing your portfolio's dependence on any single economy.
- Investment Coverage and Access: Consider the breadth and depth of investment options available in different markets. Some markets specialize in specific industries, while others provide broader coverage. Ensure the markets you choose align with your investment goals and risk tolerance.
- Costs and Regulations: International investing involves costs such as transaction fees, currency exchange rates, and potentially higher tax implications. Understanding the regulatory landscape of each market is crucial for making informed investment decisions.
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Where to dive in: Major markets offering depth and opportunity
Not all waters offer the same rewards. Some, like the Singapore Exchange (SGX), are closer to shore, familiar and accessible. Others run deeper, teeming with diverse opportunities and long-term potential for those who know where to look. Understanding the unique characteristics of each market is your first step to a successful dive.
- United States: Consider the US market your coral reef – vibrant and teeming with life. It represents about 60% of global market capitalization, with over 3,700 listed companies across 11 sectors, offering unparalleled diversification.
- United Kingdom: London, a historic trading port, connects you to over 1,900 of Europe’s leading corporations. Navigate these waters for exposure to established industries and a diverse range of investment options.
- Hong Kong: Hong Kong is your gateway to the pearl-rich depths of Greater China. Access some of the world's biggest banks, IT companies, and consumer brands through this dynamic market.
- India: Dive into the fast-flowing currents of India, one of the world’s fastest-growing economies. With over 6,900 listed companies, India offers access to dynamic sectors like healthcare, IT, and renewable energy.
Each market is a unique ecosystem. Knowing which depths to explore and how much exposure to allocate is crucial for achieving your long-term wealth ambitions.
How deep to go: Calibrating your global investment exposure
Once you've identified promising regions, the next step is determining your dive depth. In the ocean of opportunities, depth matters – not every investor needs to descend to the same level.
Surface Exploration (Globally Diversified Funds/ETFs):
Prefer a broader view? Invest in globally diversified funds or ETFs that track a global benchmark (e.g., MSCI All Country World Index) for wide-ranging exposure without diving too deep. For example, a 60/40 equity-bond benchmarked to the MSCI All Country World Index and the FTSE World Government Bond Index.
Mid-Depth Exploration (Focused Approach):
Ready for a more focused descent? Overweight specific markets you believe offer stronger long-term growth potential. For example, the 60/40 equity-bond approach above has an 18% allocation to Asia-Pacific markets. But an investor with a strong conviction in Asia may go deeper by layering in additional Asia index funds, believing on their relative long-term outperformance.
Deep Dive (Targeted Investments):
Seeking investments in specific areas? Invest in individual multinational companies (e.g., Apple, Microsoft) for targeted exposure and the potential for higher rewards.
There's no one-size-fits-all dive plan. The appropriate depth depends on your risk appetite, investment objectives, and personal outlook.
Navigating the Costs: Understanding the Fees of Global Investing
Every dive has its costs. In global investing, understanding the fees is crucial for maximizing your returns.
- Investing fees: Just as divers rent equipment, investors incur fees. These vary depending on the market and the investment vehicle. Compare fees on online brokerage platforms and consider robo-advisors for cost-effective solutions.
- Currency exchange fees: Like oxygen tanks for a deep dive, currency exchange is essential for international transactions. Factor these costs into your investment strategy.
Investing fees with DBS Treasures
For investors in Asia choosing global, regional, or country funds, the typical annual management fee is 2.5%, plus sales charges based on the investment amount.
Actively managed global unit trusts often have higher management fees than index funds. At DBS, these are available at an attractive sales charge of 0.82%.
For a blend of human expertise and robo-technology, consider digiPortfolio on digibank with a competitive 0.75% annual flat management fee for regional or global portfolios.
When trading equities directly through DBS Online Equity Trading, you enjoy competitive rates across different markets, empowering you to diversify efficiently.
Watch the undercurrents: Managing currency risks
Even in the clearest waters, currents can shift unexpectedly. In global investing, currency fluctuations the undercurrents that may impact your returns.
A strong performing stock may deliver diluted returns if FX rates move unfavourably. Conversely, favourable currency shifts can boost your gains.
Understanding and managing currency risk is crucial for navigating international markets.
Read more: Foreign currency impact investments, even if you’re not directly invested in FX.
Before you descend: Check the investment conditions
Seasoned divers always check the conditions before descending. Similarly, savvy investors assess the economic and geopolitical climate. Factors like US policy, technological advancements, and European economic conditions influence market dynamics. Staying informed is your compass for navigating these waters.
As mentioned in CIO Insights 1Q25: Game Changers1, much attention in 2025 will be on Donald Trump and the Republicans, who have a clear mandate to push through their policy agenda - whether on trade, tax cuts, or border security.
If election rhetoric does translate to reality, it is likely that the Trump’s presidency would boost corporate profitability and drive consumer spending up. While this may lead to further deterioration of US’s fiscal position, it might bode well for US equities.
Within the US market, technology continues to be a favourable current. Based on our analysis of the last 2 presidential cycles, this sector has outperformed the broader market, underscoring its growth potential.
On the other hand, Europe equities face choppier waters, with recession risks and geopolitical uncertainties tempering outlook.
Within fixed income, developed market bonds are attractive from a risk-reward perspective, offering downside protection against potential trade escalations.
Your trusted dive partner: DBS Treasures
Navigating the vast ocean of global investing can feel daunting, but with the right partner, it becomes an exciting journey of discovery. DBS Treasures is your experienced dive master, providing expertise and resources to help you explore international markets with confidence.
Let us be your trusted partner when navigating deep waters.
