That’s right - given the various opportunities that exist for investors in the global capital markets, you may want to take part in the action. After all, the global markets offer a great deal more options for any investor – but don’t forget they also have attendant risks.
Investing directly in global markets is a more difficult process for a retail investor than investing in domestic markets. This is because there are different government restrictions (such as those governing the outflow of money from the Philippines), as well as the difficulty in getting foreign currencies for purposes other than business and travel.
Moreover, not all investment funds are open to all nationalities; there may be administrative requirements that a Filipino national may not be able to meet. Also, the required investment amount may be large. Add to this the challenges that may come with transacting with someone in a different continent and a different time zone.
These, however, should not keep you from looking at investing in global markets. In fact, there are ways that you can do so using local channels and brokerages, by tapping into those funds that are invested in global markets. Of late, larger banks and financial institutions have been offering unit investment trust funds (UITFs) and other funds invested in these vehicles, providing the Philippine-based investor with a convenient way to tap into the much larger global capital markets.
Here’s a guide to help you get started on investing in global markets:
Assess your diversification needs.
Before you choose to invest in the global markets, it is important to have a thorough understanding of your financial goals, investment needs, and financial status. Also know how much risk you want to take on. Investing using a different currency, which is usually required when investing in global funds, may or may not be appropriate for your needs. Therefore, you would have to assess if investing in global funds is the right step to take at this stage in your life, in view of your financial objectives and related considerations. If you don’t know how to proceed, this may be a good time to consult a professional financial advisor.
Do your research.
Know what is being offered out there for retail investors. If you are thinking of global funds, there are plenty of options to choose from to suit various preferences—bonds, equities, and many others. These may be denominated in dollars or in euros. You will also have to think of what your investment strategy is, and what type of investments is best for your needs. In the Philippines, financial institutions can give you access to exchange traded funds (ETF) and UITF, invested in different vehicles to meet various investor profiles. You can also open an individual brokerage account. Check out what the brokers have to offer and if these products dovetail with your financial goals.
Obtain the needed currency for your fund.
Most global investment funds require that the invested funds be in a foreign currency, most often the US dollar. If you have a dollar account, then withdraw this now. If you do not have the needed currency and plan to purchase these, be mindful of rules pertaining to this. Note that banks have restrictions on dollar purchases, especially for those related to investments.
Open your investment account with the financial institution of your choice.
You will be asked to sign documents to signify your understanding of and compliance with government rules (especially pertaining to anti-money laundering) and fill up an investor profile assessment. The latter will help the brokers know your needs and will enable them to recommend appropriate funds. Make sure you check out the required holding period and transaction fees.
Monitor the performance of your fund.
Most funds report their performance daily on their company websites. Also monitor the currency exchange rate from time to time. When you invest in global funds, you should be looking at both the performance of the fund and the currency it is invested in. By monitoring your funds, you will know if you should top up or diversify into another investment vehicle. If you have questions or concerns regarding how to move forward, seek professional advice.
Investing in global funds requires doing your homework and research, to ensure that you meet your financial objectives and that your investment decisions support these. By investing in global funds, you can diversify your investments and spread your risks beyond one country, hopefully to get the best returns for your money and help you meet your financial objectives.
Diversification is one of the most important pillars of effective investing and should be well thought of. Next week, we will discuss why it is never a good thing to put all your eggs in one basket.
source: www.abs-cbnnews.com
