Expanding Horizons: Understanding the Benefits of Diversifying into the U.S. Market

Published on May 20, 2024

Expanding Horizons: Understanding the Benefits of Diversifying into the U.S. Market

With its robust economy and a plethora of internationally renowned brands, the United States stock markets stand as premier destinations for investors worldwide. The New York Stock Exchange and Nasdaq epitomize global economic dynamism, serving as pivotal hubs that grant investors access to every major business sector and the forefront companies leading in revenue, profitability, and innovation.

Investing in the U.S. in USD affords foreign investors the opportunity to diversify their portfolios, mitigating the risks associated with over-reliance on their home country’s economy. Despite the number of benefits that investing in the U.S. markets offers, such as diversification and risk management, foreign investors need to understand the intricacies and complexities of the U.S. market and confront the inherent challenges in navigating its markets.

Strengths of the US market

The United States has a large, liquid, strong, and essential market that attracts investors from across the world. The U.S. is also home to many innovative companies that dominate their respective markets. An important characteristic of the U.S. markets is robust government regulation and oversight. Robust legal protections are in place to support individual investors, making the U.S. a comparatively safe and regulated financial market. These measures are necessary to ensure that the U.S. continues to play a vital role in the global economy.

There’s also no shortage of data for investors to gather and analyze. Public companies, rating agencies, banks, and investment advisors produce vast amounts of research and marketing materials to help investors make fully informed investment decisions. There’s also a growing number of websites dedicated to helping investors evaluate and track their investments.

Diversification and risk management

Critically for overseas investors, the U.S. stock market provides geographic and sectoral diversification. In addition to shares in public companies, U.S. markets offer investors access to diverse investment vehicles, including mutual funds, exchange-traded funds (ETFs), fixed income, alternative investments, and annuities. This makes it easy for investors to allocate assets to different vehicles or sectors and diversify their portfolios.

Investors have the opportunity to customize their portfolios based on their risk tolerance using various investment vehicles. Investors with conservative, moderate, or aggressive risk tolerances can have a portfolio designed by qualified financial professionals that match their investment mindset and long-term financial objectives.

Challenges to consider

While the U.S. market can help an investor achieve their financial goals, in today’s globalized economic environment, it is not isolated from international markets. While the degree of correlation between the U.S. market and an overseas market varies, geopolitical events, monetary policy, and economic cycles can and do impact U.S. publicly listed companies.

Investing in any market is not without risk. Every investment requires due diligence and an understanding of U.S. market regulations and practices. Financial professionals in the U.S. who speak a variety of foreign languages and who have familiarity and an understanding in an investor’s home country can tailor investment strategies according to an investor’s risk tolerance, investment objectives, and tax situation.

Economic conditions can also change quickly. Ongoing monitoring and education are required to ensure an investor’s portfolio is ideally positioned to respond to market developments. U.S. investment professionals can provide investing education, explain market developments, and continually present ways to optimize each investor’s portfolio to meet their goals.

Why Valley Bank?

The US market allows foreign investors to invest in the world’s leading brands while diversifying their portfolios. A well-informed strategy can help investors navigate the market’s challenges and complexities and fuel the long-term growth of their portfolios. Investing in the U.S. also provides an excellent opportunity to hedge local country risk, which can be critical for investors in politically or economically unstable countries.

Valley is committed to guiding high-net-worth families and businesses through the complexities of investing in the U.S.,offering professionally managed portfolios tailored to every investor’s risk tolerance.

Valley’s investment strategy is grounded in the principles of risk control and diversification across financial sectors and global markets. The firm places a premium on cultivating enduring client relationships and delivers tailor made, responsive investment guidance supported by decades of investing experience.

Banking products and trust services are provided by Valley National Bank (the “Bank”), member FDIC. Brokerage and insurance products are provided by Valley Financial Management, Inc. (“VFM”), a registered broker-dealer and investment adviser, member of FINRA and SIPC, and a licensed insurance agency. VFM’s SIPC coverage and supplemental SIPC coverage apply only to assets held through VFM. Advisory products are offered through VFM and Valley Wealth Managers, Inc. (“VWM”), SEC-registered investment advisers. Registration with the SEC does not imply that VFM or VWM, or any individual providing investment advisory services on their behalf, possess a certain level of skill or training. VFM and VWM are wholly owned subsidiaries of the Bank.

Non-deposit investment products offered by the Bank and its subsidiaries, including VFM and VWM are:

Investing involves market risk, including possible loss of principal, and there is no guarantee that investment objectives will be achieved. Past performance is not a guarantee of future results. Asset allocation/diversification does not guarantee a profit or protect against loss.

Providing this information to you does not constitute investment advice or an offer to sell, or a recommendation to purchase, or a solicitation of an offer to buy, any security, nor shall any such security be offered or sold to any person in any jurisdiction in which such offer, solicitation, purchase, or sale may not lawfully be made.    

VFM and VWM and their employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transaction.