Stock exchanges in Europe: learn how they work and how to operate
Everything you need to know about European stock exchanges!
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European stock exchanges: how to start investing?
This is one of the main questions for those looking for financial investments outside of Brazil.
The possibility of obtaining good returns and international diversification are some of the main advantages.
And contrary to what many believe, making international investments is not that complicated. Furthermore, it is an excellent way to protect your capital.
If you want to know more about the subject, keep reading!
Why is international diversification important?
Every successful investor knows how important it is to diversify assets.
Obviously, a diversification strategy requires certain precautions. After all, diversification is not simply buying a large amount of assets at random, as this can even eliminate the chance of gains.
However, without diversification, the investment process becomes much riskier.
Basically, diversifying means exposing your portfolio to different types of investment, some riskier, others safer.
In other words, the main objective is to protect your portfolio from market fluctuations.
To understand better, let's give you an example.
Imagine an investor who has invested heavily in the shares of just one company. If that company goes down, he could suffer huge losses.
However, if he made different contributions and even invested part of his capital in fixed income, he can deal with the situation in a much calmer way.
And international diversification works in the same way, but offers an additional advantage: protecting your capital from crises and fluctuations in the Brazilian market.
European stock exchanges: how to invest without leaving Brazil?
It is possible to expose yourself to the European market without leaving Brazil!
In fact, this is one of the main questions asked by Brazilian investors who do not want to open an account with an international securities brokerage firm.
Fortunately, it is possible to invest in the international market without having to leave the country. Take a look:
BDRs (Brazilian depositary receipt)
Known by the acronym BDR, Brazilian Depositary Receipts are certificates that represent shares issued by companies in other countries, but which are traded on the B3 trading floor.
By being listed in the country, companies are able to increase their visibility, which helps pave the way for future public offerings.
But whoever acquires a BDR is not actually directly purchasing shares in companies abroad. Instead, they are investing in securities representing these securities.
Therefore, it is an indirect investment.
The institution responsible for ensuring the functioning of this entire system is a financial institution, called a depository, which is responsible for issuing BDRs abroad.
There are several share receipts listed on the Brazilian stock exchange that are European:
• Nokia;
• Shell;
• Astrazeneca;
• Sanofi;
• Deutsche Bank;
• Rio Tinto;
• Unilever.
International funds
International funds, as the name suggests, are investment funds that focus on foreign assets.
They basically function as a condominium in which investors come together to make contributions, which is common in any investment fund.
The difference lies in the composition of the fund, which in this case is focused on foreign assets.
By pooling capital from several investors, the fund manager has more freedom to choose investments and, therefore, obtain greater profitability for participants.
The fund's portfolio may be made up of shares, bonds, currencies and shares of other funds linked to other countries.
ETFs (exchange-traded funds)
ETFs are exchange-traded investment funds that replicate the performance of a benchmark index.
Despite being known as index funds, ETFs can have different investment modalities, such as:
• Actions;
• Market indices;
• Coin;
• Fixed income securities.
As ETFs can replicate international indices, they are a great alternative for those who want exposure to the foreign market.
In other words, those looking for international exposure have the option of looking for index funds linked to European indicators.
What are the main stock exchanges in Europe?
Europe has one of the largest economies in the world.
In this way, it influences the movement of other exchanges, such as B3, the Brazilian stock exchange.
And the main stock exchanges in Europe are:
London Stock Exchange (LSE)
The London Stock Exchange is the fourth largest in the world.
It was established in the year 1801. In the year 1973, it merged with the British and Irish Stock Exchange, keeping its original name.
It has a market value of approximately US$4.6 billion.
There are currently over 2,000 companies listed on the LSE.
Euronext
Euronext, in addition to being one of the main stock exchanges in Europe, is considered one of the largest in the world!
It was formed in 2000 with the merger of three European exchanges (the Amsterdam, Brussels and Paris Stock Exchanges).
Euronext provides listing market data, market solutions, custody and settlement services.
Euronext is headquartered in Amsterdam, the Netherlands. However, it also has offices in other cities, such as Paris and Dublin.
Frankfurt Stock Exchange
The Frankfurt stock exchange is the largest in Germany and one of the largest in the world.
Its operation is based on the Xetra system (exchange electronic trading).
The Xetra is a platform where trading takes place. In fact, around a third of all fund transactions traded in Europe are made through this platform.
In 2021, the Frankfurt stock exchange accounted for 85% of transactions in Germany.
What are the best countries to invest in Europe?
According to Forbes, the best countries to invest in Europe they are:
• Portugal;
• Sweden;
• Ireland;
• Denmark;
• Netherlands;
• Finland;
• Norway.
Conclusion
As you can see, European stock exchanges are excellent options for protecting your wealth and diversifying your assets.
But before choosing where to invest your capital, you need to understand the political and economic situation of the country and the market.
For this reason, it is important to do a lot of research and create an investment strategy!
