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.
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.