The myth
Investors are often advised to consider entering global markets as a way to diversify against country risks and take advantage of opportunities that aren’t available locally.
However, some may feel hesitant about international investing due to worries that it’s too complicated and would require a lot of money.
The reality
When people talk about the cost of investing, they may refer to transaction fees, taxes, and the amount needed to invest. Here are some that you may encounter when investing globally:
- Transaction costs and taxes
Investing comes with costs whether you’re going local or global. The apps or platforms you’ll use may charge fees each time you make a transaction.
Some also charge for deposits, withdrawals, and inactivity. Additionally, your potential profits may be taxable.
You may also face higher transaction costs when investing in foreign markets depending on where and how you’ll invest.
There are platforms that waive fees to encourage more people to invest, but you should remember to check the fine print to know if you’ll really save money.
- Minimum investment amount
You might also need a sizeable capital to buy certain foreign assets. For example, if you’d like to own shares of big US technology companies like Google or Microsoft, they are currently trading around $200 and $400 per share, respectively.
However, fractional shares are also an option. These can make stocks more affordable since you’ll only buy smaller portions of shares.
- Currency exchange
You’ll also deal with currency exchange costs as a global investor. Many foreign brokerage platforms require users to trade in US dollars.
Exchange rates can fluctuate and affect the value of your investments. This can influence how much you’ll earn and the costs you must cover once it’s time to withdraw your money.
If you’d like to invest globally using Philippine pesos, there are locally managed pooled funds that contain foreign investments.
These are available through domestic banks and investment firms, which may be more accessible if you’re not yet ready to navigate foreign platforms.
Take note that fees may be higher for investment funds with global assets. Always check the fees and find out if they’re worth paying for given the potential returns.
You should also consider other possible benefits, like diversification, expert help, and exposure to growing markets.
Verdict: Partly true.
Investing in foreign markets comes with costs, and they may be higher than domestic charges depending on the country, platform, and method you’ll choose.
However, there are alternatives that can make international investing more affordable, like fractional shares and local investment funds.
If they have the potential to fulfill your diversification needs and get you closer to your goals, the costs might just be worth it.
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