Opposing View on Investment Opportunities - Coursework Example

Opposing View on Investment Opportunities Introduction Investment opportunities in a country can not rely on security only. The goodwill of a favorable environment can not be wished away. Although, the impact of investment in any country’s economy is significant, it is not the only factory determining the economy of a country. Investors should not look at security only. The decision should be based on the stability of the stock, bond, and mutual funds. Favorable conditions should be considered. This can be the risk of investment climate. The economical, political and social risks of a country should determine investment. Investment risks Business is a matter of risk taking. Although, risks in a foreign country need to be considered when investing, the political risks determine the investors in that country. The hospitable climates can be favorable for foreign investors. Investments have been done in countries facing civil wars. The evidence can be seen in countries that have oil products. The economy of such country is strong and political climate is unfriendly, yet investors still look for investment opportunities in such countries. The investor can still strike a deal and exploit the available opportunity despite the political risks involved. Countries can have stable governments yet the economy is not stable. Investment opportunities in such countries can be limited. Although, the economic risks involve the ability of a country to pay back its debts, with no investment opportunities no investment can take place. It is said stronger economies and stable finances provide a god platform for investments. But they must at the same time have those opportunities. Countries with such economies are good to invest in compared with ones with weaker economies. Reliable investments can be determined further by factors such as good infrastructure and stable energy. The ability to repay debts by a country using the credit ratings can not be the basis of measuring investment opportunities. Even though, the ratings are done all over the world by well known rating agencies, it should not be the base. The ratings show countries with higher credit rating as favorable and safe to invest in, compared to the ones with lower credit ratings. Investments opportunities are not only government projects but can be done with private entities too. Before one invests in a country, it is advisable to examine and analyze the potential of such country for investment (Carbaugh 243). The country’s economy and financial fundamentals are another area to be looked at. This is necessary in deciding to invest in a country. This can be looked at in terms of gross domestic product (GDP), consumer price index (CPI) readings, and inflation in general. Investment in a country further requires keen evaluation of the structure of the country’s performance on local stocks and bond markets. The financial markets of the country and availability of attractive investment ways are also another consideration for investment. Information on investment opportunities of foreign countries political and economic climate can be publicly known or not. The information can be got from the newspapers of different countries that show the overseas events. Other countries still lag behind in terms of technology. Not all information is available on investment opportunities. The information weekly magazines that cover international politics and economics can be used. This kind of media, give a wide and good coverage of the information required. They give in depth coverage of a country in terms of its objectives, political, social climate, economical, and demographic climate for investment. Moreover, they can give the ratings of countries in terms of investment options. This information can be handy when used together with others from rating agencies. The internet is also a valuable source of information when used. It covers and has a wide range of country newspapers and magazines. Markets International economics considers markets that are needed for investment. The international markets can be of different types depending on the economies of country. This gives the investor an option of choosing the market to invest. They include, developed, emerging, and frontier markets. Developing markets are the markets with industrialized economies. They are the largest markets for investment. The markets in such countries are politically stable, the rule of law is well established, and the economic systems, well developed. These are markets that are safe for investment (Wilson 178). The economies also depend on current market cycles and economic status. The examples of such developed markets include; economies of the U.S, France, Canada, Australia, and Japan. The emerging markets are ones that are at rapid industrialization and have high levels of economic growth. The strong economic growths make the countries potential for investments. This is indicated by the need and available opportunities for investment. The problem with the market is, its risk compared to the developed markets. This is occasioned by the political uncertainty in the markets. Moreover, the financial fundamentals and market economy should be keenly watched in evaluation of investment. Examples of such markets include India, China, and Brazil. Frontier markets are considered to be the emerging economies. These are the potential investment destinations. The markets are smaller compared to the other emerging markets. These markets tend to restrict foreign investment. The markets can be risky but do offer potential investors returns over time. This is so because they do suffer low levels of liquidity often. The frontier markets are further not well correlated with other markets. This makes them have diversification benefits when utilized. Investors to these markets need careful consideration of the economic and financial developments plus the political environment. The examples of such markets include; Botswana, Kuwait, and Nigeria. Steps for investment Investment opportunities are many and unlimited all over the world. The significant thing is to make an informed investment decisions. The decision should include where to invest, and this requires investment approaches. They include; investing in an international portfolio, investing in given region, or country, and in a limited portfolio like the emerging or developed markets. Investment in a foreign country requires diversification. This can be done in the different portfolios of emerging, developed, and frontier markets. It can further be done in several countries so as to maximize on the diversification (Winters 276). The criterion helps in reducing risks that can follow after investment. The next step is to decide the investment type. This can involve investment in the bonds, stocks, sovereign debts, or mutual fund of a company and county. The investment depends on the knowledge, risk profile, return objectives, and experience of the investor. An investor also needs to a thorough search for prospective investments and portfolios. Conclusion The political, economic, and social risks need to be analyzed carefully when overseas investment is being considered. Investment is a matter of risk and it is significant to avoid unexpected losses. Information available can be used in evaluating risks of investment in a country. The international portfolio investment needs monitoring and evaluation. Works Cited: Carbaugh, Robert. International Economics. MI: Cengage Learning, 2010. Wilson B. Brown, Jan S. Hogendorn. International economics: in the age of globalization. Toronto: University of Toronto Press, 2000. Winters, L. Alan. International economics. NY: Routledge, 1991. Read More