Betting the world - International investing

By Jakob Jelling
Cashbazar.com

When you’re looking for ways to build up your net worth, it’s worth taking a look at international investing. With the dollar weak against the euro and other currencies, and with a dozen emerging economies in Asia and Europe, there’s a lot of money to be made with American currency invested in the rest of the world.

Profits are often higher in international investing because there are specific advantages in overseas markets. Cheap, easily available labor reduces the highest expense of any business, and looser environmental restrictions make it cheaper initially to build factories and other business structures. Labor in emerging economies is also eager to work, and may be more productive than domestic labor. And because the pool of available workers is large, instead of getting the bottom of the barrel as factories normally do, international factories and businesses can usually choose from the best workers, further improving the relative value of the labor.

If you have moral qualms about paying forty cents on the dollar to someone who’s just not an American, rethink your position. Costs of living in many places overseas are relatively low, and a sudden influx of American cash from international investing can cause hundreds of small businesses to spring up around the factory, providing everything from groceries to small parts for factory products. Quality of living starts to rise in these areas as foreign governments, eager for tax revenues and an improved economy, invest in the infrastructure in the area. Far from contributing to poverty and taking advantage of other people’s misery, international investing is very much a win-win; the investors win, and the newly-employed workers win.

Unique Risks of International Investing

International investing brings with it a host of unexpected risks. In the United States and Europe, we’re used to a life of relative comfort, free from war and most diseases. In emerging economies, horrors we’ve eradicated from our lives are a daily reality.

Natural disasters, as highlighted dramatically in 2004’s tsunami, can wreak havoc on the countries you may have invested in. Volcanoes, earthquakes, and floods can all completely wipe out an investment. Before engaging in international investing, check out the area around the proposed or existing factories, and find out what they’re insured against and how the investors are protected in case of a disaster.

Wars, completely nonexistent in America and much of Europe, are a daily reality to many in emerging economies. You should check out the country itself, the political situation and the realities of its situation prior to investing. You should also look at the laws governing business in the country, and determine for yourself how profitable it will really be; some types of government can take an enormous cut from the profits, which comes right out of a shareholder’s pockets.

In addition to these things, disease can cause the fall of a business (think about Africa and the AIDS virus), and it may have difficulty finding qualified employees because of a lack in the educational system. Yet, when you look at all the risks compared to the potential profit from international investing, it may be worth it.

It’s not all bad, either. It’s possible to combine socially responsible investing with international investing. When you invest internationally, you have a chance to change the lives of hundreds of people who might otherwise have no chance.

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