Struggling to make millions on your home turf? Foreign markets could hold the key to successfully diversifying your investment portfolio. With some of the world’s most prolific stock markets shrinking, many investors are looking toward developing economies in order to secure higher returns. But without comprehensive knowledge of another country’s trading landscape, currency, or even language, this can be a daunting prospect.
However, many subscribe to the philosophy that good investments are built on both stable assets and fast-growing securities with high earning potential — and this is just what overseas investment may offer. So, if you’re going to invest abroad, where should you start? Let’s take a look at some of the best options offered by foreign markets.
Citizenship by Investment, or ‘CBI’ for short, is the process by which benefactors invest in a country in exchange for the rights to live and work there. Investments are typically made into real estate, infrastructure or sustainable development funds. CBI programs come with many benefits, including citizen’s access to some of the most beautiful locations in the world. They also offer global mobility across a range of countries further afield, should you apply for a passport in your host destination after citizenship has been granted.
A number of impressive locations around the globe have CBI programs. One notable example is Dominica, whose program has been voted the world’s best for six consecutive years by the global CBI Index Report. Investing in CBI, for example by Dominica’s real estate route, could prove to be a lucrative venture — providing the opportunity to own shares in desirable hotels and resorts in a burgeoning tourism market. Additionally, CBI offers the potential for business owners to expand their operations internationally and establish new avenues for profit.
A global mutual fund is a type of fund that invests in companies overseas, pulling from a diverse pool of securities that span the international market. Global funds are typically viewed as a safe way to invest funds abroad as they offer a selection of diversified investments into companies growing in emerging markets. In turn, these provide a great opportunity for return as they comprise some of the fastest developing economies in the world — which PWC reports “could grow around twice as fast as advanced economies” by 2050.
Global funds offer several options to generate high returns. One option is to invest in passive funds that have less associated risk and are spread across companies operating in several countries. Alternatively, investing in actively managed funds that have dedicated managers overseeing them offers a higher potential return on investment, but more associated risk. This is because it is at the fund manager’s discretion to invest in the companies that they expect will outperform the market, based on past trends — but as any privy investor will tell you, these are not always a guarantee of profit.
Exchange-traded funds (ETFs) are another common means of foreign investment. Essentially, these are funds that hold a basket of different international bonds and stocks, to help investors to diversify their international portfolio. ETFs, Investopedia explains, typically “track a particular index, sector, commodity, or other assets, but unlike mutual funds, ETFs can be purchased or sold on a stock exchange the same way that a regular stock can.”
This means that traders can build their portfolio with a range of stocks purchased as part of one transaction, and don’t have to wait until a day after the market closes to trade, as they would with a mutual fund. ETFs can contain all types of foreign investments, including bonds, stocks or commodities, but tend to demand fewer broker commissions than buying each of the stocks individually. Some popular ETFs include the SPDR S&P 500 ETF Trust and the Invesco QQQ Trust, commonly used as trading vehicles among prolific active traders.