2023-06-14 18:00:43
- 4.15% in the month;
- 7.87% in the year.
How to seize the international market now?
International investment is one that exposes your capital to a foreign economy. But why do investors seek this exposure? There are some interesting advantages of these contributions.
The first benefit is the diversification of the investment portfolio. You may have already heard about this strategy, but it is essential to reinforce it. By spreading your contributions across different modalities and areas, you also expose yourself to different risks.
In this way, the portfolio is not vulnerable to just one factor — it could commit all of its capital. By distributing the risks, they can offset each other. That is, while there is devaluation in one area, another sector may have an upward movement.
Suppose you have BRL 50,000 to invest and you decided to use all that capital to buy shares in company A, which had a good appreciation potential. But, after a few days, an unexpected crisis occurs in the sector, which ends up devaluing the company’s shares.
In this case, all your capital was exposed to this risk and you suffered a considerable loss in equity. Now, imagine that, with those R$50,000, you used 10% to buy shares in that company.
The other 90% you distributed in different alternatives, such as fixed income securities, international investments, securities of other companies and funds. That sectorial crisis will only affect 10% of its invested equity, while the other investments may behave differently.
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Decorrelation between investments
An important part of the diversification strategy is the decorrelation between the investments in your portfolio. That is, real exposure to areas, sectors and economies that do not interact with each other or do not behave in the same way in different scenarios.
In this sense, it is necessary to be careful not to fall into false diversification. It happens when making investments in different alternatives, but which, in fact, are affected by the same risks. A common example is buying shares of several companies that are part of the same sector.
Another example is having investments only in the same country. After all, all will be related to the risk of the place. International investment, on the other hand, allows diversification, mainly because it tends to focus on large markets and strong economies, such as the US.
Thus, Brazilian financial and institutional crises may not affect these alternatives. Therefore, when making the international contribution, there is a decorrelation of investments. So their downward or upward movement will be independent of each other.
On the other hand, it is worth knowing that crises in the US market are felt all over the world, such is the importance of its currency and economy. However, it is common for strong economies to recover from the crisis more quickly.
- portfolio dollarization
You have seen that the United States market is one of the most chosen among those who wish to make international investments. In this scenario, an advantage to consider is the dollarization of the portfolio. It means linking portfolio assets to foreign currency.
When making investments involving the US market, your contributions will also be linked to exchange rate variations, even if the investment was made indirectly. And, as we know, the dollar is historically a stronger currency than the real.
Because it is a strong currency and used worldwide by several Central Banks, it is not so related to economic and political instabilities – which is very common in Brazil. Thus, having investments linked to it can act as protection.
It is also important to consider the relationship between the dollar and the Brazilian stock exchange. It is common for them to have a negative correlation — generally, if the stock market is devalued, the dollar appreciates against the real. The opposite movement also occurs.
This happens due to a movement of investors: when the stock market is on the rise, it attracts more foreign investment. Thus, the dollar supply increases and it has a devaluation. On the other hand, with the stock market falling, the dollar is withdrawn from the country, which values it due to the low supply.
What is the best way to invest?
Are you interested or want to invest abroad? Here are five tips to help you allocate smartly and effectively across borders.
1 – Understand your investment strategy
Before you start investing in international assets, it’s important to understand your overall investment strategy. This includes your risk tolerance, investment goals, time horizon and asset allocation. A well-defined strategy will help you choose the right investments and avoid costly mistakes.
2nd – Choose the right markets
Not all international markets are created equal. Some are more stable while others are more volatile. Some have strong sectors that you might want to invest in, while others may have economies that are in a growth phase. When choosing international markets, it is important to consider their risk profile as well as the country’s economic and political conditions.
3rd – Consider the local currency in the international market
Fluctuating exchange rates can significantly affect the returns on your international investments. Therefore, it is important to consider the local currency when choosing your investments. If you are investing in a foreign market, you might consider using financial products that are linked to that currency, such as exchange funds or ETFs.
4 – Diversify your investments
Diversification is one of the most important rules of asset allocation. When investing in international assets, it is important to diversify your portfolio by choosing investments in different markets and sectors. This will help reduce your investment risk and increase your return potential.
5th – Be aware of costs and taxation in the international market
When investing in international assets, it is important to be aware of associated costs such as brokerage fees, currency conversion fees and taxes. Make sure you fully understand all the costs involved and choose a brokerage that offers competitive rates. In addition, it is important to consider the taxation of your international investments, which may have different rules than those applicable to domestic investments.
Not to forget about the international market
Investing in international assets can be an effective strategy to diversify your portfolio and increase your return potential. You can count on Renova Invest advisors to have an international allocation that makes sense for your financial goals.
However, it is important to understand your investment strategy, choose the right markets, consider the local currency, diversify your investments and be aware of costs and taxation. Mainly because they are issues that affect the return of applications.
By following these tips, you can enjoy the benefits of international assignment smartly and effectively. Did you like it?
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