Guide to Global Investing
When it comes to investing, location of investment and how you go about securing the investment matter greatly. And when it comes to investing abroad, it is crucial to know about a country’s macroeconomic environment before you start, as it can greatly affect your returns.
Whether you’re a first time, or seasoned investor, it’s good to be in the know about the current investment landscape. We’ve gathered some expert insights into the world of global investing, so that the next time you’re on your private jet charter, en route to a new country you’ll have plenty to ponder with regards to where you’ll invest next.
Introduction to global investing
When asked what type of investments people can make overseas, David Thorpe, Editor of What Investment magazine advises that “people can buy funds that are run by familiar UK brands but that invest in a fast growth economy such as India. The advantage of this is the fund manager spends all of their time looking at the particular economy, and so can better help investors navigate the many booby traps that naturally arise from investing in a fast growth economy.”
So how does one go about this? David recommends that “the best way for a novice investor to make such an investment is via a fund platform. Although most of the growth in the world at present is coming from emerging markets, those are also amongst the most volatile markets, and the typical private investor should probably keep only a small portion of their overall investment portfolio in those markets, with the bulk continuing to be in developed mature markets.”
David also reiterates the importance of why one needs to look at the stage of a country in which they want to invest, by giving India as an example. The country’s stage determines prices, as he explains, “the key to the investment case for India right now is that it has a young population, and a government determined to introduce more market friendly reforms. India, unlike many of the other emerging markets, is an importer of commodities such as oil, and so benefits from the lower prices.”
How to assess opportunities
Robert Jones, Director of Property Investments UK, explains what factors determine whether a country is safe for investment:
“When assessing individual investments, the target country and even local geographic region is of course very important. Key elements we look at are Stability, Legislation and Exit. Stability of the local region and national government helps create a more secure environment for your investment. Protecting the principle is always paramount. Legislation helps ensure your investment has clear protocols around protecting your asset and in some instances creates barriers to entry on competition which can help maintain a certain level of value to the investment. Exit is whereby a secure country with an efficient tax structure should provide the environment to allow for simple exit strategies which can be planned from day one.”
With that in mind, Robert explains the importance of the local GDP and exchange rate in stating that “both are key indications to the performance of the country’s economy. Many factors can define the exchange rate at any given moment, influenced heavily by confidence, but it does give a snapshot into the health of the local economy and it's position on the world stage. Investing in a country that has stable fundamentals helps retain the value of the investment when made in the local currency or asset values. Being risk adverse we prefer stable markets, economies and exchange rates that show value as key indicators.”
How then, does the local employment rate have an influence on investment potential? Robert explains that “local income and therefore employment rates are often intrinsically linked to most asset classes like property and business acquisition. Wild fluctuations can lead to short term gains and arbitrage, however we personally prefer stability and steady growth which gives a platform for more stable and planned investments.
Property as an asset class is fundamentally driven by supply and demand, and for the demand equation to hold true it requires a solid local employment market and growing population, which helps to ensure continuous security and growth.”
In Robert’s opinion, the best place to start look for opportunities is currently the UK. “The UK has phenomenal advantages currently as the legislation and stability around many investments is solid. The market offers value to many overseas investors and provides them an advantageous position due to local exchange rates, so buying value is possible across different asset classes.
UK property continues to provide solid demand across most sectors and the per annum rental yields is high enough to suit many investors without having to rely too heavily on capital growth. Industry and infrastructure is being invested heavily in areas like the Northern Powerhouse which underlines a very balanced and stable market with a strong potential for growth.”
As an investor it’s always useful to be aware of changing economic landscapes around the world in order to assess the potential risks and returns you might yield. So, next time you’re jet-setting off to a new country, and you’ve got the thought of investing abroad at the back of your mind, keep these insights in mind. You might just find the perfect investment, or avoid a disastrous one.