Why investors invest in foreign market?

A simple way to invest internationally is through a mutual fund that holds foreign

securities. You get the benefit of professional management and the option to choose from

stock, bond or money market funds in several categories.

1. International or overseas funds invest in stock or bond markets only in countries

outside of the United States. They buy securities in both mature, stable economies

and in the more volatile economies of emerging countries.

2. Global or world funds are different because their portfolios hold U.S. stocks or

bonds as well as securities from foreign countries. Fund managers buy and sell assets

based on which markets are performing well at any given time.

3. Country funds hold investments in a single foreign country.  The fund may be in a

country with a well-established economy or one that focuses on an emerging country

with the potential for rapid economic growth. Emerging-country funds can be

particularly vulnerable to political or economic upheaval.

4. Regional funds invest in a specific geographical area. Because this investment spans

several different countries, the fund may be able to offset one country's lackluster

economy with another country’s thriving economy.

Risks of investing internationally

Investing internationally carries the same risk associated with all investing – market

conditions can change, causing your investments to lose value. There are added risks of

political and economic instability as well as changes in value of the U.S. dollar abroad.

1. Political risk – Changes to government and political systems can wreak havoc on a

nation's investment markets.

2. Currency risk – Exchange-rate fluctuations can boost or limit investment returns. A

rise in security prices can be offset by a decline in the value of the currency.

3. Market risk – Many overseas markets are characterized by wide price swings.

Why the borrows borrow from the foreign market?

Individuals borrow money via bankers' loans for short term needs or longer term mortgages to help finance a house purchase.

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Companies borrow money to aid short term or long term cash flows. They also borrow to fund modernization or future business expansion.

Governments often find their spending requirements exceed their tax revenues. To make up this difference, they need to borrow. Governments also borrow on behalf of nationalized industries, municipalities, local authorities and other public sector bodies. In the UK, the total borrowing requirement is often referred to as the Public sector net cash requirement (PSNCR).

Governments borrow by issuing bonds. In the UK, the government also borrows from individuals by offering bank accounts and Premium Bonds. Government debt seems to be permanent. Indeed the debt seemingly expands rather than being paid off. One strategy used by governments to reduce the value of the debt is to influence inflation.

Municipalities and local authorities may borrow in their own name as well as receiving funding from national governments. In the UK, this would cover an authority like Hampshire County Council.

Public Corporations typically include nationalized industries. These may include the postal services, railway companies and utility companies.

Many borrowers have difficulty raising money locally. They need to borrow internationally with the aid of Foreign exchange markets.

Borrowers having similar needs can form into a group of borrowers. They can also take an organizational form like Mutual Funds. They can provide mortgage on weight basis. The main advantage is that this lowers the cost of their borrowings.

Why creditors provide credit to the creditors?

Character: Lenders are looking for someone who is stable and reliable. They’ll look at your payment history to see how frequently payments were made on time and how often you paid more than the minimum amount. Lenders will also consider other factors, such as how long you’ve lived at your current address or in your current city, or how long you’ve been at the same job.

Capacity: Lenders will gauge your ability to repay the loan you’re applying for based on your current situation, and the amount of debt and expenses you currently have. Lenders will typically calculate your debt-to-income ratio – or how much you owe vs. how much you earn – to gauge your risk. The lower your ratio, the less risky lending to you may seem. 

Collateral: With some loans, you’re required to offer an asset (for example, a home or car) that the lender can take possession of in the event that you are unable to make loan payments. Some lenders may require a guarantee in addition to collateral, which means

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that you or a third party must agree to repay the loan if the collateral cannot cover the amount.

Conditions: These are outside circumstances, such as the economy and job market, that can influence your ability to repay a loan. However, this category also includes how you intend to use the loan. For instance, obtaining a loan to pay for graduate school would seem less risky than a loan being used for a family vacation, since the degree would most likely improve your profitability in the long run.

Credit history: Lenders will check your credit report and score. Together they show lenders your credit accounts, payment history, and level of risk.  

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