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Where should I invest?

Are you are asking yourself – where should I invest? At home or abroad?

If in doubt, stick to what you know is a good maxim but, if you do not invest abroad, you might be missing out on opportunities that are not available in your home country and you could be making a big bet on the strength of your own economy .

We should start by saying this is a personal choice – again we are not here to advise you. We want to stress however that, before you make any investment, you should think about the risks of investing in different countries.

Currency risk is an important consideration. Moves in exchange rates can make a big difference to your returns.

Political risk can also have a big impact – this can take many forms: a couple of recent examples are the Russian / Ukrainian conflict (war, revolution are usually bad news) and the abolition of compulsory annuity purchases in the UK budget (at a stroke the politicians have wiped out most of a big industry).

Less sophisticated markets can be more prone to corruption and some have low levels of protection for shareholders.

Also, some economies are more susceptible to external shocks, such as rising oil prices, than others.

The more uncertain you are about a market, the higher the return you should be aiming for to compensate you for the increased risk you might be exposing yourself to.

Increasing the diversification of your portfolio (how many truly different things and places you are invested in) helps reduce your risk. Investments that have global exposure should, all things being equal, be less risky than investments that are dependent on the success of just one country.

More in this series: A few tips before you get started; What type of asset do you want to invest in?; A bit about wrappers

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