Investing is always a risk, however, it’s much riskier if the market that you’re investing in is unfamiliar to you. Such is the case with foreign market investments. So, why do people do this? Well, first, a lot of countries have programs, laws and regulations that are meant to attract foreign investors. This means that the terms that you get offered here may be far superior to those that you can look forward to in your home region. Second, by making all the right moves, you can greatly profit in the long-term, due to the fact that you’ll have the option to invest in a future economic powerhouse, while the costs are still fairly low. Either way, here are six tips to help you overcome the challenges of investing in foreign markets.
#1. Have investment goals
To determine whether your investment was a successful one, you must first define what you see as success. The best way to do this is to set some investment goals. Do you want to create a steady stream of revenue or increase your capital to invest it into something big? Do you have any personal goals (getting married, buying a home or starting your own business) that you want to finance this way? As soon as you have this planned out, you will know the exact direction that you should take.
#2. Find proper tools and resources
The key to investing in a foreign country lies in having a reliable platform that you can use for education and investment ideas. For instance, foreign investors in Australia can use various portals to monitor the ETFs they invested in, read about the latest occurrences on the market and get invaluable insights and research analysis of the market. To have an advantage over your competitors, as well as increase your own odds, you need to have proper tools and resources on your side.
#3. Consider the repatriation of profits
Repatriation of profits is not an easy task. First, you need to be aware of the fact that you might have to pay your taxes twice (once in the country of investment and once in your home country). This depends on your citizenship, the nature of your profit/income and your permanent state of residence. Needless to say, this is a complex scenario and you need a financial expert to untangle it. So, hire professional accountants to help you make this so much easier.
#4. Learn about local politics
One of the most important things you need to keep in mind is the fact that the investment market is heavily affected by the country’s politics. For instance, depending on the next elections in Australia, the value of the real estate in Sydney may go down anywhere between 3 and 11 percent. Where this drop will land mostly depends on who wins the elections. Every country that you decide to invest in has a similar (probably even more extreme) correlation between the country’s political life and investment market.
#5. Study the local currency
Another thing that will have an impact on your investment is the local currency. In a scenario where this currency and your own make a big pair, for instance, AUD/USD (again with Australia), you might want to find some resources online to help you figure out the history of correlation. This correlation may determine your own financial potency in the region, which is definitely a significant thing. Of course, the correlation between AUD and USD is not as severe but there are some regions where the USD will have a much greater relative value.
#6. Diversify your investments
The last thing you need to keep in mind is the fact that no matter how lucrative an investment may appear; you need to resist the urge to put all your eggs in one basket. Therefore, you need to try diversifying your income and spread your investment fund into several categories. For instance, you might want to invest in stocks and bonds, businesses, cryptocurrencies and precious metals. Keep in mind that these investment types are different in nature and rules that govern their markets. This means that no matter what happens, you’ll always have at least one of your assets safe.
As you can see, investing in the foreign market has some extra steps to ensure your success. Sure, money talks every language in the world but by doing your share of homework, you’ll also make it proficient in all of them. With these six tips on your side, you’ll make this task a lot easier.