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Investing in Property in Foreign Markets

Buying property in foreign markets is one of those concepts that doesn’t come up much in the world of investment. It is a high risk/high reward method of investing, and is definitely not for the faint of heart. The weak dollar makes the idea seem shaky. But for those who go forward and invest, the financial return can be big. The Euro and the Pound trade at a higher rate than the dollar, which is what makes the payoff worth aiming for.

It can never be said enough. Do the homework. Research the markets. Don’t wade in and buy a property and assume that it will sell with no effort at all. The same factors that influence real estate sales in the US are the same anywhere. Some areas are only worth buying in if the neighborhood’s desirable. In fact, the same can be said about the countries themselves. Don’t purchase where the local government has instability. That can sink an investment faster than the Titanic went down. Understanding the lay of the land is key to making a pick.

Scammers abound on the Internet, just like any other investment opportunity. Plenty of people are willing to take money and walk with it, knowing that the foreigner will have a tough time getting it back. Thoroughly investigate the broker that offers to work with a foreigner. Get credentials, get referrals, and listen to instinct. If it smells like a fish, it is one. Play it safe and work with brokers who have been around for a while. It’ll be easy to tell someone who’s legit and who’s not. A legitimate broker will have references, will be able to show portfolio that’s past, present, and future, and will have a clean record. A simple Internet search can turn up a lot of information on someone, regardless of the country they live in.

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How Government Can Help Make Overseas Investments

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There’s an unheralded branch of the US government called the OPIC, short for Overseas Private Investment Corporation. It’s a blend of the private sector and the government providing investment opportunities in foreign nations. The goal of the OPIC is to loan money to developing industries that may not be able to obtain money through other methods. It does have a bit of a “feel good” sense about it, but it still operates like any other investment fund. To provide a return on investment to the investor.

OPIC works to ensure that the money that is loaned out is used wisely. It’s done by sending experienced fund managers to serve on corporate boards. In turn, these managers seek out local talent and hire them to do a correct job of managing the business at hand. The ultimate result of the investment in expertise is that the receiving business can grow, expand, hire more people, and provide a safe but profitable work environment for all. On the reverse side, OPIC will not support funds that in any way harm American jobs or economy.

This is a branch of government that operates without spending a dime of the taxpayer’s money. It was started in 1971 by President Nixon for the purpose of allowing US investors to fund businesses in developing nations. Investing with OPIC is a sound strategy for those who are interested in staying in a fund for the long term. There is no risk taking by the managers by mandate. Money must be used in businesses that will not harm the environment and violate worker’s rights. The is offered insurance from risks such as a currency that cannot be converted. A currency will always be convertible. Any loss from businesses taken over by the local government or violence is also insured. In all, it’s a very sound method of overseas investment.

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International Investments: The Same Principles Apply Around the World

A major advantage to investing in international markets is that it opens up a whole new vista of stocks to chose from. This is a wonderful thing for the investor who wants to broaden their investing horizon. Now instead of only having a handful of companies to put money into, the opportunities are increased ten fold.

One of the keys to successful investing is to be familiar with the business that’s being invested in. Investors become comfortable with their range of stocks after some time has passed and some experienced has been gained. So why stop with what’s available in the home country? Go overseas to investigate similar businesses to see what kind of opportunities they can provide.

Moving into offshore investing is not without its risk and to be sure, the risks are similar all over the world. But at times there are external forces such as an unstable government that can mess things up. It can make finding a sound stock a bit of a minefield. Be risk-averse and shy away from putting funds into a business situated somewhere that has unstable factors surrounding it.

Consider using an established financial institution in the country that’s being looked at. The fund managers will have intimate knowledge of any potential situations and be able to steer the investor into businesses that are stable and produce results. Choose a financial institution that’s been around for a few years and has a good mix of management. There are plenty of fly-by-night outfits that look good but are just scammers in disguise. A little research goes a long way.

Ultimately an investor needs to play it safe with their money. To be sure there is no reward without risk. But there’s risk, and then there’s risk. Don’t go putting all of the eggs in one basket and hope that they’ll come back in one piece.

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Benefits Of Investing In International Markets

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A common way to diversify an investment portfolio is to expand into international markets. International investing can benefit a portfolio through favorable exchange rates, and the potential for excellent return rates. Just as diversifying investments throughout various industries and stock classes provides protection against the normal market fluctuations, geographic diversity can also help stabilize a portfolio.

Venturing into foreign markets can also enable the investor to tap a substantial economic and commercial base. While the typical United States-based investor may be comfortable in only dealing with familiar brands, it’s important to note that the population of the US is a relatively small portion of the world’s population. This means that international markets offer a vast number of investment opportunities. Less than half of the world’s Gross Domestic Product is created in the United States; therefore, the majority of production occurs in the international marketplace. A well-diversified portfolio of foreign investments can provide enough stability to overcome the volatility of assets based in a single country.

Many of these countries have rapidly developing economies, and are home to innovative and growing industries. International markets offer vast opportunities for growth. The fact that many of these opportunities are virtually untapped niches means that investors can capitalize on these positions. While investing is always a risk, many international companies offer significant stability and returns as well as the beneficial geographic diversity.

Analyzing international investments requires the same research and analysis as the domestic market and should be approached with the same amount of care. However, international stocks are an effective way to balance a portfolio. The global market provides many opportunities to invest in markets that are poised for rapid significant growth and that do not have a domestic counterpart. For those who look beyond traditional borders and pursue the opportunity, the right international stock has the potential for great financial rewards.

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Understanding International Investments

Before investing in international markets, it is important to understand how these markets are classified and the risks and benefits involved with each classification. The most common is the developed market, which refers to countries that have a long history of industrial development and a stable economy. The benefit to investing in developed markets is that the available history allows investors to research long-term trends. In some markets, such as the United States, some companies are over 100 years old. There is no shortage of information to guide investors while researching stocks. An additional benefit to developed markets is that they are more stable overall, creating less risk for an investment. Because of the reduced risk, returns are relatively smaller and more predictable.

Developed international markets provide much of the same stability and history, but also offer a wide range of geographic diversity. These markets can provide breadth to a portfolio by including companies in sectors that may not be popular or even available in one’s home country. Companies focusing on innovative research, alternative energy sources and local specialties can provide unique investment opportunities. The drawback is that unfamiliar sectors may be more difficult to research if they are culturally specific. A lack of exposure in US media can limit the amount of available information. Internationally developed markets tend to provide the same stability and lower risk.

Emerging markets refer to countries that have not yet experienced long-term or large-scale industrialization. These economies are still growing, and they do not yet have substantial strength or size among world markets. Their growth may even be limited to a single sector. However, the advantage to emerging markets is that most of their growth is in the future. This can result in larger returns for new investors in these markets, although the risks will be greater.

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Risks Of International Trade

International investment can provide portfolio diversity as well as a steady source of profit. However, many of the benefits of international investing are a result of the inherent risks. Stocks in foreign companies, particularly those in emerging markets, carry more risk than domestic investments, which is why aggressive, high-growth stocks should represent a smaller percentage of the entire portfolio.

One factor that can directly affect an international company’s profitability is the change in import and export laws. A country can ban imports on a particular commodity without warning which directly impacts the profitability of the exporting country. This is common in industries such as agriculture, which needs to protect the supply chain from real or even perceived threats.

Tariffs (taxes on imported goods) can also limit profitability. Tariffs can increase according to domestic market factors. Some tariffs can make exporting a product cost-prohibitive, and in some cases can even shut down an industry that relies on the export market. Import tariffs can increase the cost of obtaining raw materials for production, driving up the cost of the final product. A government can issue or increase a tariff resulting in higher costs, or it can reduce one when competition is low, which creates more low-cost goods for consumers and increases competition.

Other risk factors in foreign markets include unstable governments, wars, and a volatile currency. In some parts of the world, natural disasters can decimate an industry. Smaller countries that dedicate a large percentage of their resources to maintaining a stable government, or that rely on a single industry can be riskier investments. Before investing in foreign companies, it’s important to research factors beyond the company’s past performance. Despite the risks involved with international trade, it is still possible to minimize these risks and find a foreign company that is an asset to the portfolio.

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Why Invest In The International Market?

In periods of slow economic growth, such as the current recession in the US, investors may want to focus on American companies as a way of helping the economy. While investment in American companies will have the long-term effect of helping the economy, investors may also want to look elsewhere for ways to stabilize their portfolios and to minimize some of their losses.

The recession has resulted in restrictions on lending and reduced credit. Without access to credit, businesses can’t expand and consumers reduce their spending. This domino effect means that economic recovery is even slower, as consumers do not create the demand necessary for businesses to produce more.

Banking and housing are the two industries that have been hit the hardest, resulting in higher unemployment and investment losses. As unemployment continues to rise, banking and housing continue to remain flat and consumers lose confidence. Those who have invested in these sectors have taken hits to their portfolios as well as retirement funds and 401(k) accounts.

In order to be able to ride out these investment lows, it can be helpful to invest in areas that have not been affected by the US recession. International markets that do not rely heavily on the state of the American economy can balance a portfolio and provide stability and growth. Many have continued to grow despite the economic climate of the United States and the aftermath of the financial meltdown. Other countries have also experienced economic slowdowns, but many international markets continue to thrive because they are further from the center of the economic crisis. These markets can provide opportunities to realize profits even in the poor economy, because they are not closely tied to the US banking or housing industries and are unaffected by American unemployment. International markets can provide a cushion against these recession-based losses.

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International Investing During The Recession

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The US recession that began in 2008 has affected international trade in several ways. The slowdown of the economy, closure of US banks, implosion of the housing market and rampant unemployment have resulted in lower consumer confidence and a reluctance to invest in both domestic and foreign companies. The loss of manufacturing jobs means that fewer goods are produced for export to foreign markets, while unemployed consumers are not spending money on goods made either in America or overseas.

In response to the decline in business at home, the US has implemented many trade restrictions on foreign companies to lower competition for American goods. Increased tariffs, import limits, and restricted access to US roadways for transporting goods have created some protections for American manufacturers and producers. However, consumers with less money to spend are seeking out foreign-made, lower-cost items.

The decrease in sales resulting from the recession has affected American and international manufacturers. While American companies have suffered due to the loss of consumer confidence and lowered profits, many foreign manufacturers have been able to ride out the recession because sales within their own domestic markets have been relatively unaffected. While the United States was on the brink of economic collapse, other countries were enjoying an unprecedented prosperity caused largely by the growth of export markets.

The recession has shown that diversifying assets across industries, sectors and geographies is beneficial. Investing internationally can protect assets even though the American economy is experiencing slow periods. By including investments that are not dependent on the US economy, the entire portfolio can remain more stable. An investor should always remain aware of the risks, and investing during a recession requires special care. However, a diverse portfolio is the key to long-term growth, and there are international opportunities that have benefited investors even during this downturn.

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