This week featuring in Business week: "Warren Buffett visited Frankfurt, Lausanne, Madrid and Milan to assess the investment possibilities of Europe's big family-owned businesses. He said he was not perturbed by the strong euro. Mr Buffett's Berkshire Hathaway has so far made very limited investments outside the United States."
There are a lot of reasons to invest in foreign companies. Let's for a start imagine that you live in a small country like the Netherlands.
One, your local Stock Exchange (SE) doesn't offer the best choices in the sector. Although the stock exchanges will merge in the near future, at present time, one index may not offer the best investment choices. Some sectors may not even be represented. In the Netherlands you will not find the automotive sector for example. But even a country like the US doesn't offer the complete diversity of investments. It is easy to find companies in sectors that have no home representation. The Netherlands have nearly no family businesses, whereas in Spain family business is dominating the scene (one of the reasons why Buffet is visiting Spain).
Two. Especially for the European landscape, there is no currency risk when investing abroad. Only the London stock exchange, The Swiss and Scandinavian exchanges have other currencies than the euro. For American investors this would bring another (currency) risk. This favors the Europeans. Although currencies attribute a new risk they also add an opportunity to lower the overall risk of the portfolio against a world purchasing power one that is beyond the own currency. Makes the investment game much more complex though.
Three. Spread your risk. A diversified portfolio of stocks in various sectors spread over different countries will balance the overall risk while the return is still the expected return of the individual companies performances. Banking in the Netherlands, Automotive in Germany and Energy in France gives a balanced portfolio with a lower risk than if the companies would be from the same SE. Some companies and SE are more dollar-sensitive than other countries that have a larger internal market (like France and Germany).
Four. Better understanding of the market. Investing in companies means acquiring more information about these companies and markets. This increases the overall understanding of financial and economic markets.
Five. There are simply more opportunities. The European or world investment landscape offers much more opportunities than the local investment market. The downside is that it requires more analysis. The risk of making mistakes also increases.
Six. My personal favorite: Culture. Having studied Porter and continuing investigations in this area, I'm confident that certain cultures are better in organizing certain businesses. Go there where the chances on success are the highest.
Seven. Learning. Broaden your view. A local market is just a local market. There is much more in the world.
Hans Bool
Hans Bool
Reuters - Chrysler LLC took recent cost-cutting moves to survive a steep sales downturn and the turmoil in financial markets, Chief Executive Bob Nardelli said on Monday.
Microsoft 20 Billion Buyback Signaled After Slump Update3 Bloomberg
Seo Keyword Research All About Keywords
