Investing in stocks abroad can be a great way to diversify your investment portfolio and take advantage of opportunities in international markets. However, it can be a bit intimidating if you don’t have international investment experience.
This guide will help you understand how to invest in stocks abroad and what you need to consider before you get started.
Why invest in stocks abroad?
There are several reasons why investors choose to invest in stocks abroad. Below we show some of them:
1. Portfolio diversification
By investing in stocks abroad, you diversify your investment portfolio, thus reducing the risk of loss in the event of a drop in the stock market of just one country.
2. Access to international markets
Some sectors, such as the technology industry, have a strong presence in international markets. Investing in shares of foreign companies can be a way to gain exposure to these markets and the trades that take place in them.
3. Opportunities for growth
Foreign companies may have greater growth opportunities than domestic companies, especially in emerging sectors. Investing in stocks of companies in solid growth markets can be profitable in the long run.
4. Currency diversification
Investments in foreign companies also provide currency diversification to the portfolio, reducing the risk of negative changes in a single currency.
5. Different regulations and labor laws
Country regulations and laws vary across companies, sectors and industries. Investing in foreign companies can bring differentiated opportunities with regard to legislation.
How to buy shares abroad?
There are quite a few options when it comes to buying stocks in foreign markets. Below we show the available options:
1. International brokers
International brokers are very similar to national brokers, but focusing on brokering investments abroad. They facilitate the process for investors who want to open accounts in foreign markets.
Some international brokers operate in Brazil, offering the opportunity to buy and sell shares on the stock exchange in other countries.
2. Home Broker of national brokers
Some domestic brokerages also offer home brokers that allow you to buy and sell foreign stocks. However, it is important to check which markets are available for trading and the fees charged.
3. BDRs (Brazilian Depositary Receipts)
BDRs are securities generated in Brazil that represent shares of foreign companies. They work as if it were a translation of a share in dollars (or another currency) into reais.
BDRs are a way to invest in foreign companies without buying shares directly on the international exchange.
What to consider before investing in stocks abroad?
In addition to the choice of different purchase models, there are some considerations to be made before investing in shares abroad. Below we show some of them:
1. Currency and economic risk
Investments in shares abroad are subject to currency and economic risks. This is because a number of factors, such as currency devaluation, political instability and regulatory changes, can affect investment performance.
Therefore, it is necessary to assess the long-term prospects and consider the risks involved.
2. Transaction cost
Brokerage fees charged by international brokers may be higher than those charged by Brazilian brokers.
In addition, it is important to be aware of exchange rates, taxes and other expenses that may be involved in international transactions.
3. Portfolio diversification
Before investing in stocks abroad, it is important to assess how it fits into your portfolio diversification strategy.
It is recommended that at least 10% of the portfolio be allocated to assets to diversify risks. It is also necessary to consider the security of investments and the expected return.
Investing in stocks abroad can be a way to diversify your investment portfolio and take advantage of opportunities in international markets.
It is important to know the different purchase options, calculate the risks involved, assess prospects and consider the cost involved. Maintain a proper diversification strategy across multiple markets to keep your portfolio balanced and get good long-term results.
