Foreign Investment | Emerging Markets Investing

One of the most complicated things in investing can be doing foreign investment.  There are many advantages to investing overseas, like in emerging markets for example.  But it also comes with many risks as well.  If you want to get into investing in foreign companies as an investment strategy, read this post first.

First of all, there are many advantages in investing overseas, especially emerging markets.  There are a lot of great deals out there and a lot of good opportunities to make great money.  Companies, industries and entire economies in the emerging markets have room to grow.  That is why they can grow at 8-10% a year with no problem. If that happened in the US it would break the system.

Secondly, you are competing with less investors.  Foreign investments are inherently more risky.  That means you will have less of a pool of investors and traders to compete with.  That means you can get to good deals easier and at a lower price.  As investors flood in, assets and investments become more expensive and less lucrative.

Thirdly, there are many great foreign companies to pick from.  The US is slowly losing steam when it comes to big businesses.  There are many overseas companies that are growing at high speeds and making tons of money.  Investing in foreign stocks gives you the opportunity to cash in on these non-US companies.

Fourthly, it is also a great way to diversify.  The global economy doesn’t always follow the US market.  Although they generally move in tandem, there are cases where it might be more wise to invest overseas for a while.  Spread your risk.  The US stock market, historically, has always been a good investment but there might be periods when it’s best to stay out and into something foreign.

If you really want to grow in foreign investing, look at small cap funds in the emerging markets sector.  That’s where you will see the most growth in a growing economy.

In terms of the disadvantages, there are many of those as well.  Of course, foreign investing is going to be very risky.  You are dealing with stocks and companies that are in economies where the regulatory system and the financial system has not fully developed.  That means that are a lot of scams and frauds running around.  That also means boiler room operations are quite common.

In fact, many penny stock corporations, even ones that end up on the New York Stock Exchange have foreign origins.  That is because it is easier to operate overseas as a scam.  It is also easier to stay under the radar or disappear completely should a fraud be found out.

That is why it might be best to be in a EFT or index fund that tracks overseas markets.  This way, should one company be a complete fraud or dud, you are not the one scrambling from it.  This also enables you to diversify should one asset falls to the ground.

To recap, some good stocks to invest in the emerging markets are small cap stocks in growing sectors.  Find small companies that are leaders in their industry.  But make sure their industries are growing and have good future potential for continued growth.

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