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Investing Abroad? Verify First, and Then Decide

Posted On   date25/02/2014

Investing Abroad?  Verify First, and Then Decide

Investing in stocks and bonds has been the rage for some time – and while it often does yield good outcomes, it should be done with care.  Investing in relationships or partnerships with individuals overseas can be even more risky.  Some people have little idea of what they’re buying, whom they are buying from and the associated risks. Investors often neglect many important steps of international investing and dive right in headfirst. Here are some things to consider before deciding where and what to invest in:

Check for concrete details.

You need to verify the company to fight fraud – you don’t want to make an investment with an unknown company.  An easy way to spot a fake company is if you see no proof of its existence.  Prior to investing, take a moment to do some research and make sure the company has a physical, concrete location.  Find a phone number and call it to see who answers.  Know your limitations, and understand that if the company is in China, India or Russia, for example, searching the internet alone isn’t sufficient to lower your risk.

Look around the website.

While you’re gathering contact information, check out the rest of the website.  Look for things like correct grammar and customer testimonials.  Also check out a “company history” or “about us” section on the site to see more about how long the company has been in operations and its mission.  Look for trust seals such as Truste, McAfee and the Better Business Bureau, and search the web for references.

Determine the country risk.

Once you have decided you’re ready to invest, check the ratings from Moody’s, Standard & Poor’s or other large rating agencies that can tell you more about the investable country.  Higher ratings are safer than countries with a lower credit rating. This is a great way to analyze the country prior to investing.

Also examine a country’s economic and financial fundamentals.  Look at a country’s gross domestic product, inflation and Consumer Price Index readings as you consider investing.  Also check the availability of attractive investment alternatives and the recent performance of stock and bond markets.  It is important to become well informed about the risk of each country before you invest your hard-earned dollars.

Also consider the country risk related to fraud. Romania is seeing fraud cases continue to rise, and it is not the only country with these problems.  Russia, Malaysia, India and China fraud schemes are also booming.  Investors need to be aware of false investments and fake companies prior to signing.

Other important considerations.

After an investor decides where to invest, he or she has to decide which investment vehicles to invest in.  There are numerous ways to invest abroad from stocks or bonds, internationally focused ETFs, mutual funds, individuals or companies.  The choice is usually based on the investor’s knowledge, risk profile, and available opportunities.  Always start with a smaller risk.   If you’re dealing with an unknown individual in a foreign country, be safe and be sure to contact a professional to conduct due diligence.

International private investigators are playing an increased role in verifying international investments for both individuals and corporations.  Verifying opportunities means verifying if a person is who he or she claims to be, or if a company is legitimate and reputable.  It means verifying cash flow, physical address and operations, checking cash flow and bank records, and more.  Wise investors use due diligence and international asset search services as a form of insurance, to make sure the investment is a smart one!

C. Wright
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