Global Stock Market

As we continue our finance definitions series, we come across the term “Global Stock Market.” Although the basic definition may be a little obvious (it means the stock market on a worldwide scale), the actual ins and outs of trading on the global market are a little different. Let’s look at everything that makes up the global market.

The Global Market in a Nutshell

The Global Stock Market has gained attention recently. Overseas stocks have both plummeted (following the US stock market crash) and jumped by leaps and bounds (as seen in past emerging markets). This can be crushing or excellent news to potential investors, so let's look at both a little more closely:

First, for the caution (also known as "the crushing news"): the global market, just like the United States market, is subject to bubbles; the countries or overseas companies that you invest in should be chosen wisely, based on your own research.

Now for the excellent news: the worldwide market can offer you some very lucrative deals, in the form of investments in countries (aka emerging markets) and in the form of international company investments. Let's take a look:

Emerging Markets

Investing in countries with little or no national debt (in comparison to the United States’ staggering debt of over $14 trillion) may help line your pockets. These countries, often called emerging markets, can afford to shell out more of the country's proceeds to you, the investor. How? Well, they don't have to pay as much to debt collectors as established countries do: the emerging countries have worked on a cash basis in the past. As they become more developed and make some money, they can share the wealth with their investors.

International Companies

The other place to invest globally is in international companies. These overseas companies companies could grow faster than American-based companies, especially in areas of their own expertise. For example, Japan has led the way for years in the electronics industry and has been a favorite for electronics investors.

Now, let's move on to the nitty-gritty details about global investments.

How to Invest in Global Stocks

With exchange rates and regulations to worry about, simply purchasing a global stock can be a bit of a headache. For that reason, global companies and countries can trade in a few easier ways: American Depositary Receipts (ADR), International Mutual Funds, and International ETFs.

American Depositary Receipts (ADR)

Overseas companies, like British Petroleum (BP), trade on the ADR. This depositary allows United States citizens to purchase shares with US dollars. To purchase, an investor can speak to their broker or banker about the foreign stock of interest.

International Mutual Funds

This simple investment option allows investors to purchase overseas without a lot of research. Basically, just like with mutual funds, you purchase a basket of different securities chosen by a financial professional. Only this basket is full of top global performers (or expected top performers).

These top performers may be chosen base on region or country, but no matter the choice, investing in emerging markets could be wise. These global market stocks can be purchased for a song and sold later at high profit, so check with your financial adviser about which of their mutual funds support emerging markets.

International ETF’s

Just like ETFs in our own market, international ETFs basically allow you to purchase mutual funds on a stock exchange…but on a global market. This makes the ETF an excellent choice for purchasing mutual funds in emerging markets.

In the past, ETFs have supported the emerging markets of Brazil, Russia, India, and China (which are also known as BRIC nations). These countries have all experienced excellent growth because of investments from the US and other established countries, and the same growth is expected as we invest in other (current) emerging markets.

The Global Stock Market may be the move of the future. Many investment companies have cited emerging markets as possible leaders in stocks in the years to come because of their potentially high returns. So do your research and choose a global market to round out your portfolio!

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Anonymous's picture

retirebyforty wrote:

Mon, 07/25/2011 - 20:14 Comment #: 1

I think it's essential to have some international holdings. It's a great way to diversify your investment. If you limit yourself to only the US stock market, you'll only be exposed to less than 40% of the global investment.

Anonymous's picture

MoneyCone wrote:

Mon, 07/25/2011 - 21:06 Comment #: 2

Nice coverage Christa!

Anonymous's picture

David Hector wrote:

Tue, 07/26/2011 - 20:59 Comment #: 3

This is a cool site. These are things that I am also interested in and enjoy researching about. I am always happy to find someone who has similar interest and who also writes about it. I look forward to following future posts.

Christa Palm's picture

Christa Palm wrote:

Wed, 07/27/2011 - 17:15 Comment #: 4

Great point, Retirebyforty! Holding out for that 40% of the global market could leave a person in the finance dust. Global investments can help round out a portfolio.

Thanks, MoneyCone!

Welcome, David! I checked out your site, and it looks great. I'll definitely have to read more :-)

Anonymous's picture

Commodity Market wrote:

Tue, 09/27/2011 - 10:50 Comment #: 5

It was a awe-inspiring post and it has a significant meaning and thanks for sharing the information.Would love to read your next post too......

Thanks

Regards:

Commodity Market

Christa Palm's picture

Christa Palm wrote:

Wed, 09/28/2011 - 17:56 Comment #: 6

Thanks Commodity Market!

Anonymous's picture

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Thu, 01/19/2012 - 21:47 Comment #: 7

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Anonymous's picture

Everything You Need to Know about Stocks | MomVesting wrote:

Thu, 01/19/2012 - 21:48 Comment #: 8

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