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How Buying Foreign Stocks Can Seriously Damage Your Profitability


A diversified portfolio is the key to long lasting success in the stock investing world. Part of true diversification is investing in stocks outside of the country in which you live. After all, it makes no sense to claim diversity within your portfolio, if its success is irrevocably tied to the success of a single nation’s economy. Some investors stay within the financial borders of global powerhouses like the US economy.

But the financial difficulties of the past decade have proven that staying within a single national finance system may not be such a good idea after all. Many investors lost everything in the financial bubble of 2008, and while internationally diverse investments would not necessarily have prevented this outcome, it would have kept a lot those same investors high and dry.

But there’s a problem with international stock investment, or any kind of investment one takes part in within a country that it not one’s own. In order to make international investments, and investor has to use the local currency to buy the stock, or whatever else it is he or she is buying. While this might seem like no great difficulty to the casual observer, it’s actually quite expensive to do this, and it’s all because of the currency transfer industry.

It has been possible to transfer, say, American Dollars for Francs for generations. A few companies specialize in these transfers, and conduct each transfer with a certain degree of professionalism, accuracy, and speed. But there’s a cost involved with each transfer; it’s how they companies make money. Even today, the total transfer cost can exceed 1% or 2% of the total funds being transferred. With investors sometimes straining to make 6% or 7% on an investment, this cost can make international investment far too expensive to be a worthwhile consideration.

But for these people, with portfolios made up on investments tied up in a single country, there is vulnerability baked into every level of the portfolio. It’s true to say that these investors are stuck between a rock and a hard place. But a new generation of currency transfer companies are making international exchange of currency much more affordable than ever before, and bringing out a new generation of international investors in their wake. Currency Direct is one such company.

Currency Direct’s service makes it possible to perform routine currency exchanges online, with minimal transfer rates and fees. They also make it easier for the investor to hedge their exchange rates, locking in the best possible rates and even providing discounts when making large transfers. In some cases, rates will be very low, even compared to the interbank rate that is happening at the time of the transfer. International investment no longer has to be expensive, taking away much of the burden that was set upon the shoulders of those who would insulate their portfolios from a single nation’s stocks. As they say, you shouldn’t put all of your eggs into one basket. For investors, Currency Direct makes this possible for the first time.

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