Investments in a foreign country: available options | InternationalWealth.info (2024)

Smart investors realize that geographical asset diversification is as important as a diversified stocks portfolio. Investing abroad can help solve a number of different tasks such as obtaining second citizenship, for example. We must admit it is not easy to choose the country that you want to invest in and the type of asset that you would like to purchase. Below we discuss some foreign investment opportunities but we recommend that you should seek our experts’ advice on the matter after reading the text.

Making an investment may appear scary, as some risks are certainly involved. Investing in a foreign country could make you think even harder before making the move. However, investing abroad can bring some benefits that are unavailable for the domestic investor. We do not suggest that you should invest abroad right after you have finished reading the text. Our intention is to set you thinking about the opportunity.

What types of investments can you make abroad?

If you have some idle capital, you can put it somewhere and hope to receive some dividends after a while. If you choose to invest abroad, you can make a direct or an indirect investment.

• Foreign direct investments. You can purchase assets in a foreign country directly, without using the services of any intermediaries. For instance, you can put money in real property or a business venture abroad. The authorities of the country where you are investing will welcome your capital, as you will be making a long-term investment in all likelihood and thus contributing to the economic development of the country.
• Foreign portfolio investments or indirect investments. Acting as a natural person or as a corporate entity, you can also purchase company shares that are traded on the stock market. This form of investment is less exciting for the authorities of the country as the investor can easily exit the position at any point in time. It happens that foreign investors sell their shares back only a few days after purchasing them. In addition to company shares, you can also make an indirect investment in some debt instruments such as bonds, for example.

You have a vast choice of foreign assets that you can invest in. Below we briefly describe the main investment asset types:

• Company shares: Securities in general and private company ownership shares in particular are the most popular objects of investment. When you buy company shares, you become its co-owner. Many large corporations such as General Motors, Apple, Facebook, and so on are public companies, which means anybody can buy their shares. If you purchase shares of a foreign company, you may be able to receive a profit if the price of the shares grows in the future. Naturally, the price may also fall but that is what investing is about. Brokers buy and sell stocks for their clients. You can hire a stock exchange form or an individual broker.
• Bonds: When you purchase a foreign bond, you actually lend money to the seller. A private corporation or a government agency can issue bonds. Companies issue corporate bonds, municipal authorities issue municipal bonds, and national governments issue state bonds and promissory notes. The buyer shall keep the bonds in his/ her possession for a set period of time. During this period, an interest is paid on the money that the bondholder has lent to the bond issuer. After the set period expires, the bond issuer will buy the bonds back at their nominal price. The rate of return on bonds is normally much smaller in comparison to the rate of return on company shares but the risks are much lower. This is not to say that this is a zero-risk investment: the company may go bankrupt and the national state may theoretically default on its obligations. Anyway, investing in state bonds is probably the safest form or foreign investments.
• Mutual funds: A mutual fund attracts money for numerous individual investors and puts it in several different assets. Mutual funds can be managed actively or passively. In the former case, the fund manager will aim to exceed the average market index because his/ her reimbursem*nt depends on the amount of profit that the fund makes. A passively managed fund aka index fund simply tracks the main stock market indices such as Dow Jones Industrial Average / S&P 500 and copies the investment structure. As far as the associated risks are concerned, they are a bit smaller than the risks involved in investing into company shares as the investments are more diversified.
• Exchange-traded funds: An exchange-traded fund is similar to a passively managed mutual fund because the investments are made by tracking the market indices. The difference is in the form of investment that you bring: you bring money to a mutual fund and you bring publicly traded stocks to an exchange-traded fund. This option is recommendable to newbies, as the fund managers will diversify the stocks portfolio for you.
• Deposit certificates: Obtaining a deposit certificate is a way to make a low-risk investment. You deposit a certain sum of money in a bank for a fixed term and the bank issues a deposit certificate to you. When the set term expires, you get your money back plus an interest. The longer the term, the higher the interest. At the same time, if you want to withdraw the money before the fixed term expires, you may face a serious fine.
• Cryptocurrencies: This is a relatively new investment option. Bitcoin is the best-known cryptocurrency even though there are many other cryptocurrencies such as Litecoin and Ethereum, for instance. National governments are normally detached from cryptocurrencies and these are traded on crypto exchanges. At the same time, some national states are developing Central Bank Digital Currencies at the moment. Investments in cryptocurrencies are risky but they can bring hefty profits.
• Real estate: You can invest in a number of different types of real estate abroad. You can purchase a cottage, an apartment, a commercial building, a farm, or a trailer park. How can you earn profits by owning real property abroad? Foreign investors often rent their property on a lease and hope that the price is going to become higher at some point in time so that they can sell the property at a profit. The main disadvantage if investing in real estate abroad is the large amount of money that you have to bring as real property usually costs a lot. A Real Estate Investment Trust (REIT) can come to the rescue, however. REITs gather money from many individual investors and purchase some profit-generating pieces of property on the investors’ behalf. If you use a REIT, you will also be spared the need to manage your real property abroad.

Incentives to invest abroad

There are many incentives to invest abroad whatever country you come from. And increasing your wealth is not the only reason why you should consider investing in a foreign country.

Investing abroad for the sake of geographical asset diversification

Geographical asset diversification is an investment strategy that allows establishing presence in foreign countries whose economic cycles do not correlate with the economic cycles in your home country or in the country of your current residence. This strategy allows decreasing the risks in the long-term perspective because having assets in several countries will make your financial position more balanced.

Moreover, you can increase your overall return on investments if you put money in different countries. You can find some investment objects abroad that are unavailable in your home country.

In most cases, you will want to invest in well-developed countries, which is more secure. In addition, you can consider investing in the developing economies, which may yield a higher return on investment.

Below we list some ‘rich’ countries (with high GDPs per capita):

The list of developing countries (with medium GDPs per capita) includes the following ones:

Putting money in a country with a weak economy would be too much of a risk for a foreign investor. Besides, ‘poor’ countries do not offer the required infrastructure to foreign investors.

Investing abroad for tax planning purposes

A large number of people putting money in foreign countries’ economies do so for the purpose of lessening their tax burdens. There are low-tax jurisdictions (tax shelters) where you could relocate your company head office, for example, or part of your business enterprise thus gaining some tax benefits. Some foreign countries offer serious tax incentives to foreign investors in an attempt to attract more capital from abroad.

Some experts doubt the efficiency of tax incentives as an instrument of attracting foreign investments. Some national governments do offer such incentives anyway. In particular, they may offer tax cuts to those investors who put money in certain sectors of economy such as agriculture, for example, or in certain territories such as rural areas, for example.

As far as the types of tax incentives available in foreign countries are concerned, you can find a foreign state that offers a tax break if you invest in a certain type of assets there. In other places, your tax rate will be lowered if you invest in an industrial plant, for example, or in personnel training, or in research and development, or some other things. The latter type of incentives attracts investors and at the same time, it does not cost the national budgets too much unlike tax breaks may do.

Foreign citizenship by investment

Some countries try to attract foreign direct investments by ‘selling’ their citizenship to foreign nationals. They use the money generated by their citizenship-by-investment programs to finance various social programs, research and development, labor market modernization, and so on. Because they have to compete for the foreign investors’ attention, they make some really tempting offers.

The economic citizenship programs started appearing a few decades ago and several important improvements have been introduced since that time. The immigration authorities of the countries administering citizenship-by-investment programs have had to be highly inventive in attracting capital from abroad.

If you are a relatively wealthy and a law-abiding person, you can acquire a second passport within a reasonable timeframe by following a standardized and perfectly transparent application procedure. You can make an investment in a business venture in the host country, in real estate there, or in state bonds. You can also create jobs or make a fixed-term bank deposit to qualify for citizenship of some countries. Alternatively, you can make a non-returnable donation to the state fund, that is, you can literally buy foreign citizenship. More often than not, the foreign citizenship can be acquired without leaving the comfort of your home. The timeframes will be different from one country to another. The application process can take from eight weeks to three years depending on where you apply for second citizenship.

Caribbean countries offer an ideal combination of investment opportunities, security, and tax incentives to foreign investors

If you are thinking of acquiring foreign citizenship by investment, you should first consider the Caribbean states running such programs. Five countries in the region ‘sell’ their citizenship to foreigners. All of them have rapidly developing economies, inviting tax incentives, and a wide choice of investment objects. That is to say, you can make a lucrative investment in the Caribbean that is likely to return with a profit and acquire a second passport as an extra.

Caribbean citizenship-by-investment programs are the most popular such programs in the world. This is not surprising, however, as the countries in the region offer some highly attractive bonuses to foreign investors ‘purchasing’ their passports. The following countries in the Caribbean basin offer citizenship-by-investment opportunities: Dominica, Saint Kitts, Grenada, Saint Lucia, and Antigua. The main characteristics of the national citizenship-by-investment programs include the following ones:

• The minimum required investment amount is US$ 100,000 (which is the lowest ‘price’ of a second passport in the world market).
• The shortest timeframe of foreign citizenship acquisition is two months.
• The foreign investor ‘purchasing’ citizenship of a Caribbean country will be able to enter more than 140 countries without visas when holding the Caribbean passport. These include Great Britain, Schengen zone countries, and Hong Kong, among others.
• Holders of Caribbean passports are entitled to spend up to 90 days in any European Union country within any six-month period.
• Citizens of Grenada in particular are free to spend 30 days in China without applying for a visa. Besides, citizens of the country are eligible to apply for an American E2 visa that is a non-immigrant visa but it gives the legal right to reside in the USA for an extended period.
• If you invest in citizenship of Saint Kitts or of Antigua, you will have to pay no personal income tax on your global earnings (you will have to become a tax resident of the country for this purpose, though).
• You can file a family application for Caribbean citizenship by investment and acquire second passports for your spouse, children, parents, grandparents, brothers, and sisters.

Professional Wealth Management (PWM), a consulting company, has recently published a rating of citizenship-by-investment programs for 2021. The index includes 14 states in total. Dominica and Saint Kitts have equal scores and they share the first place. The second place goes to Grenada, the third place goes to Saint Lucia, and the fourth place goes to Antigua.

Professional Wealth Management Company has been ranking citizenship-by-investment programs available in the world since 2017. The programs are assessed by nine criteria that include the following ones:

• Freedom of movement around the world with the national passport;
• The living standards in the country;
• The minimum required amount of investment;
• Absence/ presence of the personal visit/ residence requirement;
• The timeframe of citizenship acquisition;
• The efficiency of the application processing;
• The strictness of the due diligence procedures;
• The possibility to include family members in the application for citizenship;
• The reputation of the citizenship-by-investment program in the investment immigration market.

The popularity of citizenship-by-investment programs has been growing at an especially amazing pace over the last few years. There are various reasons why people seek foreign citizenship but mainly they acquire golden passports to increase their personal security and the number of visa-free destinations available to them as well as obtain new business and educational opportunities.

We are also witnessing an increase in the number of foreign investors who seek access to high-quality medical services and efficient tax planning instruments.

The Caribbean citizenship-by-investment programs allow attaining these and many other important goals as well as generally improving your lifestyle.

Expert support to those wishing to invest abroad

If you are seriously considering investing abroad, it will make good sense to consult a specialist who will help you choose the optimal investment option. Professional assistance is especially important if you are planning to invest in a foreign passport.

We will be happy to tell you more about the requirements to prospective citizens of the Caribbean states mentioned above. Please click on the Contact us icon above and select the means of communication that you prefer. We are looking forward to hearing from you!