Investing in foreign countries is a relatively new option for individual investors. Luckily, the advent of internationally focused mutual funds and exchange-traded funds (ETFs) has made it easier than ever. But, is investing abroad a good decision? As always, the decision to invest in foreign countries depends largely on your investment objectives.
Why Invest in Foreign Countries?
The primary rule of investing is to seek the highest risk-adjusted return for their capital (also called “alpha”). Basically, you want to maximize profit made beyond the amount of risk taken in any given investment. One of the best ways to accomplish this is through diversification, which has been mathematically proven to enhance risk-adjusted returns.
An effectively diversified portfolio holds at least 8-10 uncorrelated assets (or, assets that do not move in relation to each other) spread across various industries and geographies, which ensures that an adverse event in one market will not negatively affect the entire portfolio. As a result, investing in foreign countries (geographical diversification) is an important way to enhance risk-adjusted returns through diversification.
Invest in Australia
Built on 22 years of uninterrupted annual growth, Australia’s robust and diverse economy is the only economy to consistently rank in the world’s top five most resilient economies since 2008. Australia’s growth is underpinned by its strong trade ties with Asia, Europe and the Americas.
Australia is ‘triple A’ rated by all three major global ratings agencies. Real Gross Domestic Product (GDP) growth is projected to outperform every major advanced economy to 2018.
Invest in Canada
Canada is consistently ranked as one of the best countries in the world to live. It is easy to understand why thousands of people choose Canada every year. From its strong, stable economy and vibrant, cosmopolitan cities to the breath-taking beauty of its natural environment, Canada offers newcomers opportunities and a quality of life that are second to none.
Invest in Dubai
In 2012, the Global City Competitiveness Index by the Economist Intelligence Unit ranked Dubai at No. 40 with a total score of 55.9. According to its 2013 research report on the future competitiveness of cities, in 2025, Dubai will have moved up to 23rd place overall in the Index.
Indians are the top foreign investors in Dubai realty.
Why invest in Dubai?
1. Congenial atmosphere for business.
2. Cosmopolitan environment.
3. Prosperous economy.
4. International business trade center
Invest in New Zealand
New Zealand is recognised globally as being a safe place to invest and do business. It ranks first in the world for: –
1. Protecting investors (World Bank Doing Business report 2014)
2. Lack of corruption (Transparency International Corruption Index 2013)
3. Starting a business (World Bank Doing Business report 2014)
Anti-corruption NGO Transparency International continued to rank New Zealand Number 1 for honesty and integrity in its public sector in 2013, the eighth year in a row the country was either first or first equal in the Corruption Perceptions index.
New Zealand has a strong banking sector that weathered the global economic crisis well. The parents of the four largest banks are Australian-owned and are all in the top 21 of the Global Finance World’s Safest Banks index.
Invest in Singapore
The economy of Singapore is a major Foreign Direct Investment (FDI) outflow financier in the world. Singapore has also benefited from the inward flow of FDI from global investors and institutions due to her highly attractive investment climate and a stable political environment. Singapore’s government promotes high levels of savings and investment through policies such as the Central Provident Fund, which is used to fund its citizen’s healthcare and retirement needs. Singapore’s savings rates have remained among the highest in the world since the 1970s. Global businesses find it advantageous to site their headquarters in Singapore. Strong trade and investment makes Singapore the most competitive Asian country (Global Competitiveness Report 2008). The World Bank also ranks the Republic as the world’s easiest place to do business (Doing Business 2009 report).
Invest in South Africa
South Africa, unlike other emerging markets, has struggled through the late 2000s recession, and the recovery has been largely led by private and public consumption growth, while export volumes and private investment have yet to fully recover. The long-term potential growth rate of South Africa under the current policy environment has been estimated at 3.5%. Per capita GDP growth has proved mediocre, though improving, growing by 1.6% a year from 1994 to 2009, and by 2.2% over the 2000–09 decade, compared to world growth of 3.1% over the same period. South Africa is ideally positioned for access to the 14 countries in the Southern Africa Development Community (SADC) with a total population of over 180 million people. Most imports into SADC are manufactured in or transported via South Africa. Well-developed roads and rail links provide the platform and infrastructure for good transportation deep into sub-Saharan Africa. South Africa’s well-developed financial system is unrivalled in any emerging market. Corporations operating in South Africa are well served by merchant banks, brokerage firms, corporate finance houses, and a wide variety of financial services specialists, both in terms of application of modern technology and skill in international finance.