Foreign investing is a tricky business to get into, but it can also be very rewarding. The USA might have a strong economy, but it only makes up for a portion of the world economy, which means that foreign investing can open up a lot of opportunities for you. In financial terms, this is called diversifying your portfolio.
You can invest outside the U.S. through stocks, mutual funds, exchange-traded funds and other currencies. We look at some of the pros, the cons, and a general introduction to investing your funds abroad. Since property is one of the best-known ways to invest money abroad, we also look at the benefits of purchasing property in a foreign country.
There are many risks involved with foreign investment. Generally speaking, the biggest risks exist because investors aren’t familiar with the markets and risks in other countries. When living in the USA it is easy to be aware of the current risks and the financial landscape, but this is not necessarily the case abroad, so make sure you familiar yourself with the risks in your country of choice before taking the leap.
Markets in developing countries are growing rapidly. A good place to look at is investing in energy or technology. Countries such as Brazil, India and China have rich resources and entrepreneurs leading the way for improved economies. These markets are also referred to as emerging markets and when the USA goes through uncertain financial times, it could be a good investment.
Buying property in another country is another why to diversify your portfolio. This is much different than investing in bonds and waiting for you money to grow. Property requires ongoing management and administration, but there are many benefits. Here are a few benefits of investing in property abroad.
You own a second home abroad
If you’re in the market for a holiday home, or a second home, you might want to look at property abroad instead of a home within the USA. Buying a seaside home in Mexico, for instance, is much cheaper than New Jersey and you diversify your portfolio while you’re doing it.
You can retire abroad
Buying a home abroad can also mean you have a place to retire in. The cost of living in a country abroad is often much lower than in the USA. Have a look at our previous post about the best places to retire abroad for a guide on where to start looking.
You’ll get a culture kick
Buying property abroad means you’ll get a chance to truly get to know a foreign country. Mostly when we travel, we only spend a couple of weeks in one place and we stay in hotels and travel in groups. When you own a property abroad, you’ll get to know the culture completely when you spend your holidays here.
Other reasons to invest abroad
Many countries (known as tax havens) offer tax incentives to foreign investors. The favorable tax rates in an offshore country are designed to promote a healthy investment environment that attracts outside wealth. The countries in question will most likely be small and with emerging economies.
If you’re looking for confidentiality, foreign investment may be your answer. Many offshore jurisdictions offer the complimentary benefit of secrecy legislation. These countries have enacted laws establishing strict corporate and banking confidentiality.