The modern investment community is changing. American markets, which used to be quite insular, are increasingly inviting investment from abroad, and at the same time American investors are looking for opportunities to make money in other countries. Doing so can be tough, however, as it takes a while to get used to new markets and know what to expect from them. How can you get off to a good start?
Why invest internationally?
Although they’re now beginning to grow again, American markets are still fairly slow. This isn’t all bad as far as the economy is concerned – it makes it easier to keep it stable – but it can be frustrating for investors looking for something more dynamic with the possibility of generating bigger profits. This can make certain foreign markets look very tempting. What’s more, having a wider choice makes it easier to balance investment types in order to establish stability within a portfolio.
Anticipating movement in foreign markets
Many people investing abroad concentrate on just one or two national markets to begin with in order to be able to research them thoroughly. The more you invest, however, the more you’ll get a sense of how these markets are linked – regionally, globally, and by sector. Understanding how this works can enable you to anticipate major changes and watch out for the way changes in one area can cascade into another. For instance, if housing stock in one country is under pressure and quarrying work starts to increase in a neighboring one, it may be worth investing in construction companies in the former ones because it’s likely that they will have access to the materials needed to start growing. With the Chinese economy entering a slump, you can expect pressure on the French wine industry to decrease, lowering vineyard share values but potentially improving the value of bar and restaurant shares.
Tips for getting started
Often the best way to start trading abroad is to do so in a sector that you already know well. Make sure you understand local supply chains, including any seasonal issues that may affect them. From this starting point you can begin to understand related sectors, and so on. You should aim to invest in countries that are politically stable and not at risk of being significantly impacted by any conflicts in neighboring nations.
How the experts do it
People who are really successful at investing internationally can develop a level of expertise way beyond what they can usefully exploit for their own business ends. They’re often happy to advise others who are new to the process. Shahram Shirkhani now makes a career out of advising large businesses as they expand internationally and develop global investment portfolios. Drawing on the knowledge of an experienced investor like this makes it much easier to find your feet.
Investing internationally always means there’s a lot to learn, but it opens up so many more opportunities that most of those who persist conclude it was well worth the effort!