The combination of the assets that are being invested in either international or foreign markets is known as Global Portfolio Management. The grouping or combination of assets depends on the securities. Some of the illustrations of Global Portfolio Management are as follows -
In order to invest in the international market, it is essential to understand and have the knowledge about the market in which the business is investing. The Global Portfolio Management is affected by the financial factors of the foreign country. The decisions regarding the Global Portfolio Management are influenced by some of the major factors such as -
Global Portfolio Management is mainly influenced by the tax rates assigned to the dividends. The countries which levy lower rates of taxes on the dividends and the interest earned are chosen for investing by the investors. The after-tax earning that are being made from foreign securities are calculated by the investors.
The countries that give high interest rates receive more inflow of money. But this tendency leads to weaken the local currency and this is not good for the economy for a long period of time.
Sometimes securities of foreign country are chosen for investing, in such situations, the return on investment is affected by many factors such as -
When the foreign currency in which the investor has invested, comes don drastically then the investors shift their investments.
The stock exchange of a foreign country directly offers the investors with their respective depository receipts of foreign securities. Two important modes of Global Portfolio Management are Portfolio Equity and Portfolio Bonds.
The income that is earned from the equity securities excluding the direct investment such as shares, stocks, depository receipts and share purchases by the foreign investors constitute Portfolio Equity.
The investments that are either long-term or medium-term are termed as bonds. The following are the situations that are considered appropriate for investing in portfolio bonds are as follows -
When the investor desire to invest in the shares of mutual funds which are internationally diversified global Mutual funds is the right choice for such investors. The mutual-funds which are open-ended serves to be even more better option for the investors.
The investments that are being made in international securities and not in portfolio are considered as closed-end funds. The close-end funds fetch more interest and thus turn out to be more profitable. But the benefits associated with diversification cannot be availed as the systematic risks associated cannot be reduced.
The concept of Global Portfolio Management is not left without drawbacks. Some of such drawbacks are as follows -
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