Investing Abroad – 5 Things You Need to Know Before Investing Overseas | Investing overseas for the first time is as exciting as it is challenging. Whether you’re looking to diversify your portfolio with foreign investments, a curious newbie investor, or an expat looking to invest in your new home country, it is important that you approach this new territory with as much research and understanding as possible. To kick things off, here are five things you need to know from the get-go:
1. Your tax obligations
Despite the world being more globalized than ever, there is a lot of confusion surrounding taxation on international investments and transactions. If you’re not sure about your tax obligations and reporting requirements regarding foreign investments, you should consider partnering with an experienced tax accountant who can help answer these kinds of questions. This way, you can be confident in your decision-making and will have nothing to fear come tax time.
2. The trading hours
Trading hours are very important in the stock market, and they differ all around the world. So, if you are investing in international stocks, it’s important to take note of each market’s trading hours and the time difference if it’s in a different time zone. Then, you can plan your investment activity accordingly. You may want to save the different world clocks on your phone or smartwatch to keep on top of this.
3. Be conscious of exchange rates
Remembering to check exchange rates is a simple detail, but when you’re caught up in learning about a new investment opportunity in a different market and country, it can be easy to overlook. If you’re using different currencies, it pays to stay informed about the currency of your target country and the exchange rate with your home (or banking) country. It can also help to understand the stability of the currency in your target country. If it is volatile, this can have a significant impact on your investments.
4. Know the risks
All investments carry a level of risk, but taking your money overseas is in a league of its own. Make sure you know exactly what you’re getting into before you buy into anything. Risks to be conscious of in overseas investments include:
- Volatility and dramatic changes in market value
- Political risk that can affect a national economy
- Fewer or different regulations
- Increased prevalence of fraud and manipulation
None of this is a given for any particular country, and many investors have positive experiences with foreign investments. However, knowing exactly what can go wrong is useful for determining your investment budget, evaluating the risks you’re willing to take, and validating the types of investments you are comfortable with pursuing.
5. Cultural awareness helps
Cultural awareness is important for any activity you undertake overseas, investing is no exception. Before you get into the financial details, learn as much as you can about your target country, even if you are not physically visiting in the near future. Understanding the politics, economy, society, and culture of the country in which you intend to invest will help inform your decisions.
When it comes to investment, decisions based on real-world factors are generally going to yield the best returns. Thankfully, this kind of research is enjoyable to do, and even if you decide against investing in a certain country, you’ll have gained plenty of valuable information that may serve you at another time.
Now that we’ve covered the basics, the rest is up to you. Whether it’s contacting the right taxations experts for professional advice or getting to work researching your countries of interest, your incredible international journey starts here.