How to Become a Global Investor

Capitalize on Everything from Interest Rates to Elections

Global investors, also known as global macro investors, specialize in interpreting and profiting from the movements of economies around the world. From interest rates and monetary policy to politics and subsidies, global investors focus on identifying and capitalizing on opportunities hidden in macroeconomic events that take place around the world.

Build an Understanding of Economics

The most important asset for global investors is a solid understanding of economics, which governs the production, consumption and transfer of wealth.

In particular, it's important to understand the economic consequences of actions taken by central bankers and politicians. For instance, higher interest rates have a bullish effect on currencies and therefore hurt exporters, while a shift from socialist politicians to capitalist politicians could lead to subsidy cuts.

Global investors can build and maintain this understanding by:

  • Elections & Politics - Following political elections where a shift in power is expected can lead to a number of investment opportunities.
  • Central Bank Decisions - Central bank interest rate decisions and meeting notes can be extremely helpful in trying to predict interest rate movements.
  • Leading Economic Indicators - Leading indicators, such as PMI indices and payroll data, can help forecast where an economy may be headed over the medium term.

But beyond conscious decisions made by leaders, global investors also place bets on the way certain events happen in tandem with each other.

For example, the European sovereign debt crisis of 2009 caused a flight-to-safety that led to a sharply higher Swiss franc valuation and hurt its exports. Since this was unsustainable, it ultimately led to a currency peg to the euro, which would have been very profitable to preempt with a foreign exchange bet.

Become Familiar with ETFs

Exchange-traded funds (ETFs) are the most popular securities used by global investors. Since they are easier to trade than foreign securities, ETFs offer a quick way to move in and out of various countries and asset classes. For instance, a global investor that is bearish on Brazil's prospects can simply short-sell or buy put options against the iShares MSCI Brazil Index Fund (EWZ), which tracks all publicly traded securities in Brazil's equity markets.

In addition to simply buying and selling ETFs, global investors can purchase stock options on the ETFs to either increase leverage or hedge their bets. For example, global investors could buy out-of-the-money call options on an ETF as a very bullish bet, buy in-the-money put options as a moderately bearish bet, or write covered call options to reduce their risk.

Getting creative with these investments is also very important to isolate the trade. Global investors should hedge out as much risk as possible, while retaining the upside in their investment thesis. For instance, those bearish on India, but bullish on Asia, may want to create a pair trade by short-selling Indian ETFs while buying Asian ETFs. That way, even if Asia's strong performance helps Indian ETFs move higher, investors can profit from the relative underperformance of India rather than relying on an actual decrease in the ETF.

Finding the Data

Global investors can find it difficult to find reliable information. From foreign language government websites to non-objective reporting on country politics, there are many difficulties that can arise when trying to make an informed investment decision.

Here are a few high-quality resources to keep in mind:

  • The Economist - A great online and print publication that covers events around the world with a focus on economics - a daily staple in a global investor's arsenal.
  • The World Bank - A great source of data on a large number of countries around the world that's free for the public to use.
  • TradingEconomics - A paid source for hard-to-find economic statistics going back years and available in Excel format for analysis.