Total Trader allows you to diversify your existing stock portfolio. Investors with only a local bias may be missing out on opportunities overseas.
Overseas markets can provide investors with a higher return potential as many overseas economies are growing at a faster rate than the Australian economy. Naturally, the faster the rate of local economic growth, the greater the growth potential is for the companies that operate in those markets. These economies can experience greater volatility in their share markets as well.
Geographic diversification means including different countries in your portfolio. By having a global diversified portfolio you can gain exposure to overseas companies and economies with faster growth rates. You can also short companies and countries with slower growth rates via CFDs.
These faster growth rates can be attributed to several factors including:
- a faster rate of population growth
- the transformation of these often less-than-technically-advanced economies into more modern and productive markets
- the widespread adoption of democracy, capitalism, and the rule of law among these nations
Sector allocation, as well as global allocation are important in constructing a global portfolio. Sector analysis examines the world in terms of sectors rather than by regions. As the world converges into one global market, we are witnessing the increasing importance of sectors in global investing.
Stocks are classified by the Global Industry Classification Standard (GICS) to enables market participants to identify and analyse a customized group of companies from a common global standard.