How to diversify your portfolio by investing overseas
Portfolio diversification is one of the most important things you can do as an investor.
Sure, this point could easily be applied to your choice of company stocks on the stock exchange but there’s more to investing than just looking at opportunities within your own country. Have you considered investing overseas?
There are a few benefits in putting faith in overseas companies — namely the diversification of where your money is going.
For example, if the market in your home country goes down, you can rest assured knowing that you still have overseas investments that may make up any lost costs.
What to look for when investing overseas
When you first jump into overseas investing, it’s important not to go in blindly.
Depending on what country you’re interested in, current events may strongly affect the returns on your investment. Whether it’s a dip in the economy or larger governmental shifts, doing background research on your country of choice is essential.
For example, large-scale events like the recent COVID-19 pandemic have caused the international market to suffer. In 2020, foreign direct investments (FDI) in 2020 fell by 42%, according to a study by the United Nations Conference on Trade and Development (UNCTAD). This was largely due to the uncertainty of how foreign markets would fare in the wake of worldwide lockdowns and quarantines.
The same report also found that it would be wise to invest in technology and health care sectors overall due to their important role in the midst of the pandemic.
While the amount of FDIs that are made are not projected to go back up until 2022, low interest rates meant to attract investors could mean more opportunities for investing.
If you are currently eyeing the foreign market, now would be a great time to dive in.
Potential ways to invest overseas
Now that you’ve decided to enter the world of overseas investing, the next question you may be asking yourself is, “How?”. Whether it’s in Asia, the United Arab Emirates or elsewhere, there are multiple ways in which you can use your money wisely.
Before investing, it may be wise to take a look at the MSCI EAFE Index, which can give you a sense of how foreign investments are doing in the region.
Real estate
Purchasing foreign real estate has traditionally been the method that many investors choose to rely on.
There are a few reasons why many decide to make real estate investments overseas rather than back at home.
For one, having an additional real estate property overseas gives many potential investors a vacation home, while simultaneously providing a continual source of income in rent when they’re not using it.
Additionally, if the property is in a location that is experiencing high potential for growth — say, a city like Kuala Lumpur — the market value of your foreign property will likely follow suit. Investing in a foreign country’s housing market could also shield your monetary assets at home if the markets fall in your home country.
While investing in overseas real estate has its advantages, it can also quickly become pricey. Oftentimes, investors will have to go through local firms in order to purchase a piece of property through the right means. Certain countries may also pass legislation making it harder for foreigners to own property. Managing a property overseas could also get costly over a period of time, especially if you don’t visit that often.
It’s best to balance the pros and cons of investing in overseas real estate and see if it’s right for you.
Startups
In a world where startups are plentiful, they could be a great option for you to look into.
A platform like Marketlend, which provides access to investment opportunities with small and medium enterprises from all over the world, could help you get the job done by allowing you to buy into existing loans and invest in overseas companies quickly.
Marketlend makes overseas investing easy and streamlines the process with our friendly platform.
Enquire about how you can start investing in different markets at Marketlend and start investing today.