Taking your hard-earned cash and turning it into more is the goal of many working professionals. It seems rather straightforward but not all investments are made equal.
Investing money abroad could be more advantageous to your portfolio. Better interest rates and a stronger currency are just some of the benefits that you might experience when investing on foreign soil.
Even if you don’t have savings and are lacking a job it is possible to obtain loans for unemployed people.
Below we take a look at how to go about investing abroad and what you should know before doing so.
Table of Contents
Invest In Hedged Instruments
It is important for people who have no knowledge about currency trading and the importance of understanding the concept that currency trading is the most important asset in an investment strategy.
In the case of currencies that appreciate one will have to depreciate. This is why investing in other currencies can be very profitable.
Hedging allows investors to adjust the buy price for a given asset and reduces potential adverse impacts from future currency fluctuations.
When you invest abroad, leave the risk to the exchange rate unabated.
Avoid listening to ‘expert’ advice offered by friends & ‘Well-Wishers’. Do your own research!
Don’t invest in someone who gives you the best advice even though they’re a good friend. Do some research on reputable websites.
Research emerging markets and international markets before investing or alternatively seek assistance with your investment portfolio from financial experts.
Don’t put all your eggs in one basket – Build A Globally-Diverse Portfolio To Spread Your Risk
Risk is an indispensable component in financial investments and foreign investments are not an exception.
However, in the case of investments in other foreign countries, there are other risks – ‘forex’ risk – you have to keep in mind.
It can result in losses due to fluctuations in currencies. Depending on where you live you may be at an advantage or disadvantage. Make sure that you invest in currencies that are stable and strong to mitigate risk.
This is why investing in multiple currencies is the smart choice. Spreading the risk out instead of depending on one investment to succeed.
How can you move your savings abroad?
An easy way to move funds can be to open overseas investment accounts in a foreign country.
Making a property investment is a great choice especially if you can get a good deal in an emerging market.
It may cost money transfers between foreign and national accounts. As a receiver, you are also susceptible to fees when receiving foreign currency to your local account.
Generally, international fees are more expensive than the national fees and the fees differ depending on how your transfer is completed (online, in person or in a regional office).
Banks are also likely to charge conversion fees which increase the cost of your transaction. Making a swift decision on preserving your savings abroad is essential.
Advantages of investing in overseas markets
Investment in local economies can be beneficial because the market knows better, but it leaves investment in local financial cycles to be manipulated.
Another potential benefit to investment abroad is the opportunities for exposure to markets with different economic forces.
When some regions experience a downturn, others can see growth which could smooth your return.
Another benefit of investing in a foreign country is the fast-tracking of citizenship.
Disadvantages of international investment
Unlike other investment types, investments abroad can involve risks. However, because foreign investments are unique, there are some risk factors that are worth keeping in mind.
Direct investment
Direct investing means purchasing inherited assets like shares or property. The only difference was the property’s location.
Although it gives you control over your investments as you choose, there is still a downside. When you have invested in Australia directly, the taxation and regulatory regime will be different depending on where and how the return will be based on your income.
Foreign countries may have different laws than Australia, which could be a problem if you do not study them first.
Indirect investment
Indirect investments are transactions by buying an asset from another person.
An indirect investment example includes managing investments in Australia or purchasing shares in Australian companies that have foreign exposure.
This allows you to gain more exposure abroad while losing control over the investment decision itself and the investment you are making directly.
Indirect investment can be more costly because it will incur fees.
