Investing in foreign assets and property is a strategic way to diversify your portfolio and get a high return. But knowing how to use forex to take charge of your finances is the first step, as not all foreign investments are created equal. When it comes to personal finance, the right decisions will ensure a secure future.
The advantages of investing in foreign real estate
There are several advantages that come with using forex to take charge of your personal finances, particularly when you are investing in property overseas. First off, you can use a foreign investment property to earn passive income, just as you would with a piece of real estate that you purchase domestically. If you choose to rent out a home that you bought in another country, you can make income on a consistent basis in an emerging market or in an already established and strong market, regardless of what your local economy and real estate market are doing.
However, if you do choose to invest in foreign property to earn passive income, it is a good idea to also invest in the expertise of a property manager who will take care of maintaining the property inside and out. A property management company will also ensure that your rent is collected on time each month, and you can use an international money transfer service like OFX to bring your money home affordably, promptly and securely.
A second reason to invest in foreign property is to diversify your portfolio. Investing in domestic real estate will leave you vulnerable to the fluctuations that occur in the housing market, so your return might end up suffering in the long run if there is a crash in housing prices and the overall value of real estate. But by spreading your money into various real estate markets around the world, you can hedge your exposure to local downturns. In the same way that you would diversify your stock portfolio, you can diversify your real estate investment portfolio by opening yourself up to opportunities overseas.
The benefits of currency diversity for your portfolio
When investing in companies priced in foreign currencies, foreign exchange rates may allow you to benefit from currency diversity. Rather than being invested solely in one economy, and being subject to the fluctuations of that economy, you can make foreign investments that will ensure your money can keep growing even if your local economy takes a hit.
Sudden currency fluctuations can make blue chip investments from abroad relatively cheap overnight. If you’re prepared to capitalise on these movements, you could be strategically placed to profit.
To get started, preparation is key:
- Do your homework and create a list of undervalued companies with solid fundamentals.
- Keep an eye on upcoming central bank announcements and major political events.
- Use Limit Orders or Forward Contracts to lock in your desired exchange rate.
The perks of investing in hard assets
Hard assets, including farmland, gold, or diamonds, can be used as a hedge against inflation and are often considered sensible investments in an otherwise volatile climate. Beneficial exchange rates can make investments in jewellery, collectibles, vehicles and art extremely attractive when sourced from overseas.
In the event of a lawsuit that puts your assets at risk, offshore investments are often more difficult for a plaintiff to access and may be protected by foreign jurisdictions.
Gain the ability to access foreign credit
By developing a foreign investment portfolio and making a significant investment abroad, you may also gain access to a credit base that is broader, as you may be able to get credit in another country. This may help you to get more competitive rates on future loans or access new credit lines faster.
Using OFX to make smarter foreign investments
If you’re ready to take the plunge in overseas investing, be sure to follow the applicable local laws and get an advisor to help you understand the tax structure and implications of your foreign investments. Be advised that banks often take a hefty 5% margin on foreign currency payments, so using a specialist money transfer service like OFX can help you keep more of your money.
By using a Forward Exchange Contract or Limit Order, you can lock in the ideal exchange rate even if you are not ready to make a transfer right away. In fact, you can lock in a rate for up to one full year to protect yourself against currency fluctuations, if the sale gets delayed.
Discover new lucrative investments & take charge of your personal finances
Ultimately, diversifying your portfolio with overseas assets can provide a number of benefits to your bottom line. Just as you would carefully evaluate an investment opportunity at home, you need to take the appropriate steps to protect yourself when you invest overseas by doing appropriate due diligence or hiring a professional consultant.
Before making a purchase, consider the political and economic stability of a region, as well as the currency exchange rates that are at play. With the right strategy and research, you can avoid hefty fees, pay the appropriate taxes, and ensure your accounts are tracked and reported accurately.
You already know the benefits of leading an international life. Shouldn’t your portfolio do the same?
IMPORTANT: The contents of this blog do not constitute financial advice and are provided for general information purposes only without taking into account the investment objectives, financial situation and particular needs of any particular person. OzForex Limited (trading as OFX) and its affiliated entities make no recommendation as to the merits of any financial strategy or product referred to in the blog. OFX makes no warranty, express or implied, concerning the suitability, completeness, quality or exactness of the information and models provided in this blog.
