Only 3% of India’s population invests in the stock market, compared to 13% of China’s population and 55% of Americans. As investors become more sophisticated, they learn not to invest in a specific company, but rather to invest in various sectors of the stock market and across international borders to diversify their holdings and increase their chances of long-term success. Allocating one’s assets to cover all the major investment classes—bonds, stocks, and cash or cash equivalents—and to balance risks and returns is more likely to lead to success. Geographic diversification of investments is also helpful—but how does one choose the right international investments? According to LCR Wealth, investors should pay attention to liquidity (how quickly the investment can be turned into cash), efficiency (speed and cost of transactions), investor protection, and currency (whether the investment currency is stable or fluctuates dramatically, posing risk to foreign investors). LCR recommends investing in developed markets, such as US equities or fixed-income markets, to reduce risk and protect returns. Developed markets come with better investor protections and higher liquidity. US markets also give investors dollar-denominated investments that protect against local currency deflation. Other investments in stable markets include immigrant investor programs in Portugal, Spain, Malta, and the US, among others, allowing investors to live, work, and study in a stable foreign country. In all investment strategies, whether in India or abroad, good advisers recommend diversifying one’s portfolio to limit the risks of betting on a single market or company.
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