What is Global Portfolio Management
Table of Contents
Global portfolio management, also known as International portfolio management, is the process of creating a series of strategies for the diversification and increase in the assets of individuals and companies. Because this branch of portfolio management is done on a global landscape, this deals with a mix of policies and investments carried out in international markets, rather than domestic ones.
It is basically wealth management that is set on an international background, expanding growth and maximizing the possibilities of returns at the varying appetite for risks.
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The Basics of Global Asset Management
A specific branch of the financial services industry, global portfolio management pools is simply the art of taking charge of investment accounts so that investors can increase their assets and achieve their investment objective over time.
Here are some basic facts about this specific field of wealth management:
Global portfolio management is perfect for those who have a lower appetite for risk
Each investor has their own objective and appetite for risk. Global portfolio management offers the perfect middle ground for those who want to expand their portfolio without too much risk.
Let us illustrate the benefit of global portfolio management by giving an example. Say you have stocks in the US market and stocks in an international portfolio. If the economy in the US declines, your net investment might be compromised. However, there’s a possibility that your international portfolio might work out better, thus pulling up your net investment.
This is what global portfolio management does–it spreads out your investment stocks so that there are lesser risks for you.
You’ll get more exposure to other currencies
One’s currency may hold more value than others, and you and your portfolio manager can explore this best with an international portfolio. This specific type of wealth management purchases stocks in different currencies.
Now we’re guessing that you might be a little confused as to how this will benefit you. Allow us to provide you with another example to illustrate multi-currency buying through an international portfolio.
You’ll be able to make the most out of market cycles
Trends and patterns emerge over time in different nations. Say your portfolio manager might suggest that the currency in the US and the stocks are undervalued. This means that they will then look for other avenues to invest your money in, likely in other developing countries where you can get the most out of your assets.
There are bigger transaction costs involved in a global portfolio management
Buying and selling international stocks is not going to come at a price. Alongside a wider security net, you still need to take into account the various international stocks that will still be deducted from your net earnings.
With so many stamp duties, taxes, and exchange fees that you and your investment portfolio manager have to consider, it’s wise to take this into account when you decide to dip your toes into the international stock market.
Methods of Global Portfolio Management
Now let’s move on to the different modes that make up global portfolio management. We’ve differentiated these two management methods for you below–keep on reading.
Portfolio equity includes group investments of assets that are transacted in equity. This does not take into account other direct investments and stocks performed in international markets.
On the other hand, portfolio bonds include group investments that are transacted in bonds. These are often long-term and are perfect for those who have a higher appetite for risks.
Global Mutual Funds
This refers to the management of mutual funds at an international level. This is not particular to any foreign country, rather your grouped assets will be diversified among different countries. This transacts predominantly with securities that are issued in an international field.
Closed-end Country Funds
If you prefer a more conservative way of investing in another economy, then a closed-end country fund might suit your appetite. It is not as diversified as your other options and it invests in international securities, giving you space to indirectly invest money.
Disadvantages of Global Portfolio Management
While generally considered safe and conservative, there are certain drawbacks attached to global portfolio management that you need to be aware of.
Currency might not work in your favor
The exchange rate is something that is beyond your control and that of your portfolio manager. For something so volatile, this largely dictates the value of your foreign portfolio. However, the good thing is that these fluctuate rather often, and might just work in your favor.
The government can get involved
The government in some countries has a say in the security prices. They could possibly take a chunk of the share of securities that are in stock exchanges.
The political risk is higher
The political and economic stability of various nations needs to be taken into consideration as well. Although a political coup is unlikely, it is still possible and this will affect the stock market for sure.