Ever heard you should be diversified in a proper investment portfolio?
What does this mean? Stocks, bonds, real estate, commodities?
Those might make sense but what about different currencies? What happens if the currency you’re investing in crashes?
What about if something major happens in the country where you’re investing?
If you truly want to diversify you should diversify not only between asset classes but also currencies and parts of the world.
On the flip side this might just give you a massive increase in what you can earn on your money.
Some potential benefits of investing abroad:
Consider interest rates are much higher in some parts of the world. What’s the consequence? Potentially higher yields or higher rents. Be aware it could also mean the opposite sometimes high interest rates accompany falling currencies and you lose out.
Or maybe your local housing market is suffering but another market real estate is starting to boom and you can take advantage by investing abroad.
Maybe there are opportunities in private businesses to do much better because it’s a less competitive business environment.
Protection of Assets
Maybe you want to move some of your money and your assets away from the control or reach of a certain government.
Maybe you want to have assets someplace where you can hold them privately without anyone knowing your business.
Maybe you want to have a back-up plan in case something goes wrong in one area of the world.
What all could happen?
You could get sued, there could be a war, the government could turn and attempt to confiscate assets, ….the list goes on and on.
The bottom line is you can sleep a lot better at night when you’ve got at least some of your wealth globally diversified the world is just too uncertain.
Did you know various investment types don’t have the same reporting requirements as say banks and other financial institutions? In other words you can hold huge amounts of money there without it ever being reported?
Of course investing abroad can create other uncertainty…
Reasons to be Careful About Investing Abroad
The same factors that keep people caught in the box of their own country can hurt them if they jump out of it.
Chances are good there are better opportunities outside your country BUT and this is a big BUT it assumes you know what you’re doing.
Some concerns might be:
- The laws could be different in this country than your home country – for example maybe property laws don’t protect you the same
- The language could be different from in your country – meaning if something goes wrong it’s harder to get it addressed
- You might not be able to take for granted infrastructure like in your country – for example checking title on a property might be easy in Canada or US but in much of Africa it doesn’t mean much
We’ve worked with clients to save them hundreds of thousands or millions of dollars by avoiding common pitfalls. Sometimes it’s something simple like realizing foreclosure laws don’t work the same in another country so you should structure the deal differently. In other cases it’s knowing trusted contacts to introduce you to.
Some Tips to Invest Abroad Better
Work with trusted contacts who are credible. If you’re not sure contact us and we can introduce you or help you to vet a particular company.
If it’s too good to be true it very often is. If someone is promising you 18%+/yr return chances are that’s going to result in a huge loss instead. Make sure you understand the numbers behind it to see how what they are offering is possible and don’t get greedy. There are plenty of opportunities out there it’s not a rush most of the time.
Don’t put all your eggs in one basket. Investing is risky, something could go wrong anywhere and the less you know the more that could be the case
Always put structuring in place to protect yourself in the event something goes wrong.
Make sure you have as much control as possible through the process.
Get as close to the source as possible to verify things for yourself. A Nigerian scammer once sold an airport that didn’t exist to a bank in another country for $242 million so don’t feel bad for being cautious.
When in doubt contact us, it’s no obligation, we’ve helped many clients navigate complex issues and avoid risks while maximizing the benefits of investing abroad.