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Trading or Investing in multiple markets

While diversification across market sectors is common; diversifying across multiple asset classes is less so. Yet, modern technology has opened up the world to retail traders & investors and has provided significant opportunities for them to take advantage of global financial markets and the various opportunities that they offer.

Most of today’s brokers provide access to several thousand tradable products from all major stock, futures and currency exchanges.

While there are certain things to take into account, such as exchange rates and the way that different products are traded, diversification across multiple markets and multiple product types should not be shied away from simply because they seem unfamiliar. Investigating the benefits of new markets may just open up what is literally a world of opportunity.

Key considerations:

  • The Australian share market is comparatively small to those of other nations
  • Many familiar products and companies can be traded (Gold, Crude Oil, BHP, Google, Microsoft, Nokia)
  • 24 hour trading opportunities- easy access to global markets from a single, Australian-dollar based account
  • Some products have significantly lower trading costs than others
  • While some carry higher risk, others are lower and can even be used to protect other investments
  • Many can be traded using high leverage- increases risk and reward potential
  • The trading hours of some markets can either be a benefit or an inconvenience
  • You should always have what you consider to be sufficient understanding of what you are trading

 

Liquidity (the level of buying and selling activity, and their quantities) is a key point of consideration for any investor, and especially so for a trader using leverage (gearing). Trading in a highly liquid market means having a greater ability to get in and out of trades quicker and with less slippage (a term for the difference between your ordered price and your actual traded price), this can greatly improve your bottom-line profit over time.

Many overseas markets – especially currencies, index contracts (through CFDs or Futures) and the US stock market (including CFDs) – have vastly superior liquidity when compared to with the Australian share market.

In addition to their high liquidity, many traders prefer the hours of operation of some markets. For example; the UK share market opens at 5pm (Sydney time) and has many familiar stocks such as BHP and RIO, to name but a few. Furthermore, several products such as Currencies, Gold, Crude Oil and most stock market index contracts (like the Australian SPI200) can be traded through an Australian brokerage firm practically 24 hours a day. You don’t even need to worry about converting and reconverting currencies, you can have a single Australian dollar account and your broker will take care of all necessary conversions etc.

“But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.” – Benjamin Graham

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