What Are the Different Types of International Investments?

With the global economy more connected than ever, international investing has become integral in the worldwide marketplace, be it institutional investors or retail traders. An international investment strategy involves choosing global investment instruments like equities or bonds.

4 Most Common International Investments

1. Government Funds

These are bonds offered by a foreign government that can be purchased directly from your bank, or you can acquire a mutual fund or exchange-traded fund (ETF) that pools together multiple bonds.

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2. Cross-Border Loans

Domestic lenders will lend money in local or foreign currencies to a foreign borrower.

3. Foreign Portfolio Investment (FPI)

An FPI consists of acquiring financial instruments in another country, such as bonds, stocks, and cash equivalents. You can purchase these securities directly or through a money manager.

4. Foreign Direct Investment (FDI)

This cross-border investment strategy allows investors in one economy to buy instruments in another marketplace, giving direct control to the purchaser.

4 Types of International Instruments

There are many ways to execute international investments through four primary financial instruments.

1. Foreign Stocks and Bonds

They allow you to purchase shares in foreign companies or foreign government debt.

2. Mutual Funds and Exchange-Traded Funds (ETFs)

Mutual funds and ETFs are the easiest way to gain exposure to foreign markets because these investments pool together foreign companies and/or bonds in a single investment.

3. American Depository Receipts (ADRs)

An American depositary receipt (ADR) is a certificate issued by a U.S. bank or broker that represents one or more shares of foreign company stock,

4. Global Depositary Receipts (GDRs)

Global depositary receipt (GDR) is a negotiable investment provided by a bank and accounts for shares in a foreign company.

The World of International Investments

International investing is a potential tactic to garner exposure to worldwide companies and government bonds, especially when domestic challenges seep into national financial markets. Emerging markets and other advanced economies offer possibilities.

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