Researching Before Investing Abroad
Researching well before investing abroad is the most important tasks for an international investor.
Though it is a discipline that pays off anywhere, it is particularly crucial in places unfamiliar to us.
Closely following global market trends and events helps to keep track of not only attractive opportunities, but of unfair practices and unscrupulous scams too.
Whether or not an investor is suited to international investing depends upon many factors, but the primary one among them is their ability to handle risk.
Trends have shown that younger investors who wish to invest for the long term or who are in their peak earning years seeking to maximize their capital.
However even they should take care to do some detailed research before investing abroad.
Some important steps that can be taken by investors to protect their interests are: 1.
Do not rush into international investments just because many others seem to be doing it too.
Even if business and investment news give the impression that it is a very attractive thing to do, do not throw in your money recklessly.
Investors must make sure that their investment is appropriate for their financial objectives and more importantly, for their ability to deal with risk.
2.
Before investing abroad investors should research something about the market they want to invest in.
What are the regulation policies and rules of that market? Are investors in the market protected from investment fraud and abuse? Which government agency will address an investor's query and assist him in case of any problem? Keep these questions in mind before making international investments.
3.
Though appropriate investment in global markets is a good way of diversifying an investor portfolio, the investor can also check alternatives of his home companies that provide foreign exposure.
Many top Indian companies, especially in the IT sector, are listed on foreign exchanges and get a significant portion of their revenue from sales overseas.
Investing in the stocks and bonds or mutual funds of these companies is another option available to an investor.
This will ensure that the investor's money remains invested in his home-regulated market while getting international exposure as well.
4.
Do remember that even if investing overseas is a "hit" activity, it does not necessarily mean that the quality of the investment opportunity is particularly good, or better than opportunities available in your home market.
In fact, due to enforcement complications, the actual level of risk - even in established foreign markets - may be considerably high.
If once your money is gone, it would be next to impossible to recover it, due to the practical difficulties of pursuing court action against foreign entities and individuals.
5.
Compare past performance of the funds you wish to invest in.
Investors should review the five years' performance of funds to gather the history of its performance.
Its show during bear and bullish phases should give an indication of its investment-worthiness.
6.
Where the fund invests is the most important information regarding a fund that an investor should find out.
Does it invest in risky emerging markets such as Mexico or some other South American markets or in established markets such as US, UK or Japan? One can find out how much a fund has allocated to different regions and countries by contacting the fund for more information or looking through its website.
7.
Understanding each fund's basic investment style helps to make a decision regarding investment.
To do this an investor needs to ask a few right questions.
For example, is the strategy of the fund growth-orientated or value-oriented? What is the management strategy of the fund? Is it directed by one person, a team or a group of analysts? What are its top holdings? A fund's top holdings show what industry sectors it invests in.
8.
As with any other kind of investment, one should also review fees, charges and other expenses, especially since costs do go up in international investments.
Be vary of funds that raise expenses after a single good year or after a year of heavy advertising.
It is definitely possible to find no-load funds with reasonable expenses that perform as well or better than funds with loads and above-average expenses.
The bottom line is that look before you leap into foreign markets.
Don't be discouraged by obvious difficulties, but take care to do your homework on the foreign market and company before investing internationally.
Though it is a discipline that pays off anywhere, it is particularly crucial in places unfamiliar to us.
Closely following global market trends and events helps to keep track of not only attractive opportunities, but of unfair practices and unscrupulous scams too.
Whether or not an investor is suited to international investing depends upon many factors, but the primary one among them is their ability to handle risk.
Trends have shown that younger investors who wish to invest for the long term or who are in their peak earning years seeking to maximize their capital.
However even they should take care to do some detailed research before investing abroad.
Some important steps that can be taken by investors to protect their interests are: 1.
Do not rush into international investments just because many others seem to be doing it too.
Even if business and investment news give the impression that it is a very attractive thing to do, do not throw in your money recklessly.
Investors must make sure that their investment is appropriate for their financial objectives and more importantly, for their ability to deal with risk.
2.
Before investing abroad investors should research something about the market they want to invest in.
What are the regulation policies and rules of that market? Are investors in the market protected from investment fraud and abuse? Which government agency will address an investor's query and assist him in case of any problem? Keep these questions in mind before making international investments.
3.
Though appropriate investment in global markets is a good way of diversifying an investor portfolio, the investor can also check alternatives of his home companies that provide foreign exposure.
Many top Indian companies, especially in the IT sector, are listed on foreign exchanges and get a significant portion of their revenue from sales overseas.
Investing in the stocks and bonds or mutual funds of these companies is another option available to an investor.
This will ensure that the investor's money remains invested in his home-regulated market while getting international exposure as well.
4.
Do remember that even if investing overseas is a "hit" activity, it does not necessarily mean that the quality of the investment opportunity is particularly good, or better than opportunities available in your home market.
In fact, due to enforcement complications, the actual level of risk - even in established foreign markets - may be considerably high.
If once your money is gone, it would be next to impossible to recover it, due to the practical difficulties of pursuing court action against foreign entities and individuals.
5.
Compare past performance of the funds you wish to invest in.
Investors should review the five years' performance of funds to gather the history of its performance.
Its show during bear and bullish phases should give an indication of its investment-worthiness.
6.
Where the fund invests is the most important information regarding a fund that an investor should find out.
Does it invest in risky emerging markets such as Mexico or some other South American markets or in established markets such as US, UK or Japan? One can find out how much a fund has allocated to different regions and countries by contacting the fund for more information or looking through its website.
7.
Understanding each fund's basic investment style helps to make a decision regarding investment.
To do this an investor needs to ask a few right questions.
For example, is the strategy of the fund growth-orientated or value-oriented? What is the management strategy of the fund? Is it directed by one person, a team or a group of analysts? What are its top holdings? A fund's top holdings show what industry sectors it invests in.
8.
As with any other kind of investment, one should also review fees, charges and other expenses, especially since costs do go up in international investments.
Be vary of funds that raise expenses after a single good year or after a year of heavy advertising.
It is definitely possible to find no-load funds with reasonable expenses that perform as well or better than funds with loads and above-average expenses.
The bottom line is that look before you leap into foreign markets.
Don't be discouraged by obvious difficulties, but take care to do your homework on the foreign market and company before investing internationally.
