Investing Globally: The World in Your Pockets
Global Capital Markets
Investors have been purchasing securities of publicly traded companies around the world for many decades. These companies issue the securities that we highlighted in our “Types of Securities” article to provide capital for their businesses. The securities often trade on well regulated exchanges that seek to protect investors.
In The Bahamas, this exchange is known as the Bahamas International Securities Exchange (BISX). Some prominent international exchanges that neighbour our country include the New York Stock Exchange, the NASDAQ, and the Toronto Stock Exchange. A securities exchange is the marketplace where investors can buy and sell securities. For a long time, there have been complaints that Bahamians cannot invest in the global markets. Luckily, there is a way for Bahamians to purchase these securities through what is known as the Investment Currency Market (ICM).
What is ICM?
The Central Bank does not allow for the purchase of foreign currency securities or real estate abroad through the official market. Instead, Bahamians are required to purchase foreign currency through a medium known as the Investment Currency Market. To maintain the market, a premium is charged to investors during the both sides of the conversion process. Prior to 2018, the premium was 12.5% to purchase foreign currency, with 10% returned to investors upon the sale. Fortunately, these rates have decreased to 5% and 2.5% respectively in a bid to expand foreign investments by Bahamians.
The government has taken a bold step in improving the ease and affordability of accessing the global markets for Bahamians through the reduction of the ICM premium. This means that you can become not only consumers of your favourite companies, but also partial owners or creditors.
Benefits of Investing Globally
The Bahamas is a small country with a small population and economy. Given this fact, we do not produce many goods and rely heavily on imports. Many of the companies that we purchase goods from are traded on international stock exchanges. It would be advantageous to Bahamians to own shares and benefit from the companies that sell us the products that we consume. Additionally, the wide number of available options provides for adequate diversification of portfolios versus a relatively limited pool of companies locally.
How Do I Invest Globally?
There are two primary ways for investors to gain access to capital markets:
Investors looking to purchase international securities can contact one of the local brokerage houses to discuss available options. Many brokers have introduced products that make the process of purchasing through the ICM easier for investors. These companies will process the necessary conversions and regulatory approvals for investors. Once completed, they will be able to easily buy and sell securities that clients would desire.
Some of the brokerage houses offer mutual funds that purchase international securities. These funds possess different strategies and securities that can cater to the differing needs of individuals. See our article on ‘types of securities’ for more information on mutual funds.
The world is becoming more connected every day in a push to one giant global village. Recent changes have made it easier for Bahamians to participate in this global village through more affordable access to global securities. Contact your broker of choice to see how you can GET MONEY SMART through investing globally. The next time you buy an international good, perhaps you can buy shares in the company to go with it.