Clever investors have been diversifying their portfolios by taking advantage of global investment options for generations. For wealthy U.S.-based investors, Swiss asset management has been a tried and true investment strategy they have utilized to protect their earnings from both rising inflation and market volatility. High-net-worth families have sought out global investment management and global investment strategies for generations to add necessary diversification to their portfolios.
A wealth management firm specializing in international and global investment advice, like LFA, provides you with a specialized process on how to diversify and maximize your portfolio.
The topics covered in this blog will explain why diversifying your portfolio using a wealth management firm in Switzerland can be a viable option.
Read our complimentary Private Wealth Management in Switzerland eBook to learn how valuable Swiss-based financial services can be.
What Are Your Global Investment Options?
A global index fund is either a mutual fund or ETF which invests in whatever securities are tracked by a global index. International index funds attempt to track the measured performances of a particular international index.
As index funds have grown in popularity, so has the variety of funds available to investors, and now there are funds that cover most asset classes and sectors. Most mutual fund allocations now have global index funds, which follow indexes based on foreign investments. Global funds that combine U.S.-based investments with international ones are much less common. However, our experienced financial advisors can structure your fund management by mixing the assets and allocating both types of funds to fit your risk profile.
Benefits of Global Diversification
Diversification is crucial in building a strong portfolio. For example, you probably don’t exclusively invest in just stocks, right? So why limit your portfolio to assets based in the United States? Global investing provides you with a wealth of new investment opportunities, which can also help buffer any losses when financial markets around the world falter.
When you focus too much on the best-performing asset classes over a shorter investment term, it will likely lead to you trying to time the market and chase performances which ultimately may result in a disappointing outcome.
Companies based in the United States represent less than half of the total global stock market and roughly one-quarter of total global economic activity (measured by GDP). International investments can improve portfolio diversification by offering exposure to foreign companies with distinct traits and economic drivers.
Global diversification allows investors to use currency diversification, which can help reduce the concentration risk that comes as a result of investing in one particular region.
What to Keep in Mind Before Investing Globally
Opening an account with direct access to foreign investments and markets is not cheap in today’s market. As you begin to diversify your portfolio with global investments, be aware of several factors beforehand to ensure a smooth process.
Taxes
When investing globally, the first thing to consider is how the taxes will play out. You may be required to file a tax return in a country where you make a profit in. You also may be eligible for certain tax credits, however, this can be a complex process to understand before jumping into. Make sure that whoever you entrust to help manage your foreign investments can provide you with the necessary reports and accurate calculations to file your taxes correctly.
Expertise
While you may have an astute understanding of your home country’s taxes and regulations, there are many nuances and ever-shifting regulations, as well as different economic and political climates. These are all major influences and may make understanding things difficult. Because of this, it is important to either thoroughly educate yourself or invest your money through an experienced Swiss-based financial professional.
Asset Exposure
As a general rule of thumb, about 10-20% of all your equity exposure should be in foreign investments when you are just starting. As time goes on and you become more comfortable with this investment strategy, you can consider increasing your international exposure.
Conclusion
Global investing is becoming more popular with U.S.-based investors. If you’re looking for a way to diversify your investment portfolio and reduce risk, Swiss-based investing may be a good option for you.
A Swiss-based financial advisor, like LFA, can provide you with global wealth management services to better diversify your portfolio.
