An external market is a market for investment opportunities which are offered outside the jurisdiction of a specific country. These investments are typically put up for sale in multiple countries at once, allowing international investors to pick and choose from a range of investment options. Things traded on the external market can include stocks, mutual funds, futures, and bonds. There are both risks and benefits with such investments which are carefully evaluated before people and institutions make investment decisions. Companies known for the reliability of their issues in this market will tend to attract more investors.
There are a number of alternate names for this market. People may refer to it as the offshore or international market, for example, referencing the fact that the trading takes place beyond national borders. The term “Euromarket” is also used. In contrast with the external market is the internal market, which covers investments available within the boundaries of a given country. Something like a municipal bond, for example, would be traded on the internal market.
The biggest flaw with investing in the offshore market is that it is less closely regulated than the internal market. Because these investments are offered outside national boundaries, there are fewer regulations and the regulations can be inconsistent and confusing. For example, if a German bank offers bonds in American dollars to investors in Britain, Spain, and Japan, it can be difficult to determine which regulations should apply to protect investors.
Because of the risks, the people who invest in the external market are usually experienced individuals and institutions with diverse portfolios. As an incentive to invest, the people offering these investments also usually offer higher rates of return than they do on the internal market. Trading securities on the external market can be a way to generate steady returns, as long as people invest wisely.
New issues are made on the offshore market on a regular basis. When a financial institution plans to issue a new security on the offshore market, a formal announcement is made providing information about the investment and the estimated rate of return. People can access this information through financial publications or financial professionals who keep up with new investment opportunities as part of their work. Individuals who would rather not deal with the external market directly can opt to invest instead in funds which may hold some investments in the offshore market.
