Investing in foreign countries

David_Baratheon

Hi everyone, I am interested in investing abroad, but I am a British citizen with no ties to other countries or property there, and a middle income earner, so don't have billions of pounds in wealth to open a factory or something.


I am interested in this from both a financial and economic perspective. I want my investment to be both profitable for me, and beneficial for the country I am investing in.


I was thinking about currency. Owning currency would drive up demand right? Which would in turn, drive up the currency value which is good for the country. But how do you buy currency? Forex is just a bet on the currency so you don't really own the currency, and British banks only really offer the chance to own Euros and Dollars in an account and they come with hefty fees that make it not worth while. You cant open an account in that country because you don't have an address there. Obviously you are not going to want to buy it from the Bereux de Change who charge extortionate exchange rates and would mean you physically storing your wealth in your house.


I am also interested in how you would buy government bonds from foreign countries, as presumably that would help buy debt from the country which would be put to use building infrastructure etc presumably.


I also considered stocks and shares, but my Halifax stocks and shares account only offers European stocks and shares plus USA. What if you wanted to invest in a developing country where the returns are higher and you wanted to aid the development of that country, e.g. India, Jamaica, Turkey, Israel etc.


Is there other forms of investment that I have not mentioned and how would I go about making those investments and how would they benefit the country I am investing in?

I am mainly interested in the practicalities of how to invest from this forum since its not an economics forum but if anyone does know the economic side of things I will appreciate the answers. I will repost this question in some economics forums and post the links here in case anyone is interested in that side of things, but if anyone here has any ideas it will be received with great interest.


Thanks and best wishes


(Removed by Forum Team)

Archi_Bald

You can buy funds and invest in any part of the world or any market that you fancy. You can do this on your Halifax platform.

ermine

(Removed by Forum Team) wrote: »

I am also interested in how you would buy government bonds from foreign countries, as presumably that would help buy debt from the country which would be put to use building infrastructure etc presumably.

I also considered stocks and shares, but my Halifax stocks and shares account only offers European stocks and shares plus USA. What if you wanted to invest in a developing country where the returns are higher and you wanted to aid the development of that country, e.g. India, Jamaica, Turkey, Israel etc.

Index funds, ETFs etc. Take India for instance - the funds mentioned here did well last year. Mean reversion usually implies the results won't be repeated... You can buy funds that buy government bonds.

With all due respect, your reasons for investing seem mixed and probably want refinement before you act on them. if you want to help a country, then charitable giving or indeed investing directly with people through microfinance might be a good way.

Speculating in their currencies seems an indirect way to go, and given the huge flows on the forex markets you aren't going to shift the needle on the dial even it did help them. And say you were George Soros and had zillions and bought rupees enough to drive the currency up- you've now made it harder for Indian companies to sell their products abroad. They might not thank you for that

You can also consider ethical funds which avoid some of the more egregious problems of unfettered capitalism.

I am tickled by your description of Israel as a developing country. They have a seriously awesome high-tech industry.

jimjames

Archi_Bald wrote: »

You can buy funds and invest in any part of the world or any market that you fancy. You can do this on your Halifax platform.

I'd echo this, you can get almost any kind of fund including trackers covering any region and all at low cost compared to buying shares in that country. To get beyond that level would need a seriously large portfolio.

David_Baratheon

So what about buying currency? You often hear about a countries currency dropping because investors pulled their currency out during some sort of political issue. Is there a way to buy currency from a country and store it, both as an investment and also currency storage? I don't see it as true currency trading unless I could physically access those funds in that currency if I wanted them. So lets say I stored some rupees or shekels in an account, presumably I would pay less than if I was getting them from Thomas Cook? And I could withdraw some of them before travelling to that country so that I could spend them during a trip?

Say for example dollars dropped to a weak value against the pound. Could I buy dollars at a good price and store them with minimal or no fees (or even interest) and then withdraw some of those dollars if I was going to America or ordering some type of product from America?

bowlhead99

(Removed by Forum Team) wrote: »

So what about buying currency? You often hear about a countries currency dropping because investors pulled their currency out during some sort of political issue.

Yes, but as mentioned above, don't go thinking that your one-off £1000 purchase of their currency is going to 'save' them from the effects of the other trading activity on the world stage ($3-4 trillion of currency transactions every day on the currency markets).

Is there a way to buy currency from a country and store it, both as an investment and also currency storage? I don't see it as true currency trading unless I could physically access those funds in that currency if I wanted them.

A 'storage system' for currency, is called a bank account.

Say for example dollars dropped to a weak value against the pound. Could I buy dollars at a good price and store them with minimal or no fees (or even interest) and then withdraw some of those dollars if I was going to America or ordering some type of product from America?

Yes.

But of course, a 'good price' is often taken to mean by reference to recent prices and not long term prices, so you might buy dollars now at 1.55-1.60 per pound which is a better price than 1.40-1.50, so when you go to America if the price is back at 1.40-1.50 you will be able to spend your cheaply-bought dollars and call yourself a winner. However, if the market spot price during your America trip or at the time of your purchase of the American product is 1.65-1.75 or 2.00-2.25, you will wish you had held out to buy the dollars later.

The problem is you can only see what is a good price for dollars - or shekels, or rupee, or rand or ringgit or real or ruble or riyal or renminbi - by reference to recent past and not the future, because you don't know what the future would bring. The whole sum of everyone's views on what the future will bring is already in today's price.

I have a store of dollars in my dollar bank accounts. However, most financial services groups are not in the game of providing 'storage' (and later, physical access) for minimal or no fees. You will find it is easier if you have more money, because they are more likely to want you as a customer so fees may be waived or reduced and because a monthly fee is relatively smaller as a percentage of a large balance than a small one.

So lets say I stored some rupees or shekels in an account, presumably I would pay less than if I was getting them from Thomas Cook?

To buy the rupees from a currency broker who purchases currency on the market for you and transmits it electronically to your account will get you a better rate on large amounts of money than the high street bureaux de change.

Example if the USD/GBP mid-market rate on the interbank market is 1.5725, you might find a specialist currency broker will buy at 1.5700 and sell to you at 1.5650 (plus a wire fee to transmit the money to your account). Meanwhile a random high street brand name might sell to you at 1.543 (plus a fee to mail the money to your house) or 1.54 or less for you to collect it at their shopfront, or 1.53 at an airport by pre-ordering or 1.40 if you just turn up at the airport without pre-ordering.

So, if you are dealing in amounts where the total cost of sending pounds electronically to the broker and getting the broker to send dollars to your dollar account, is relatively low (e.g. £30 on £3000 is only 1% and on £30,000 it's only 0.1%) then it is much better to deal electronically than to use the physical offices of travel companies which might charge 2-4% or more.

And I could withdraw some of them before travelling to that country so that I could spend them during a trip?

Yes, if you have currency in a bank account you can withdraw it before you travel.

But if you use the broker method to buy currency and put into your currency account, you have the running costs of your foreign currency bank account to consider and the inconvenience of later needing to go to a bank branch to withdraw the physical currency (which might be in London if you are using Citibank to 'store' your dollars or Euros, or in Islamabad if that was the nearest bank you could find which would store Pakistani rupee for you).

Obviously if you have a debit card linked to your currency bank account it is rather easier to use it to buy your food and travel and souvenirs while travelling in the foreign country - I have those with my Lloyds and Citi accounts - but you don't get the best interest rates or lowest charges on accounts that have debit cards.

I guess what it sounds like you are looking for is a currency broker who also stores money for you in their own currency bank accounts so you don't need to find your own high street bank that will store your shekels and rupees.

The problem is that companies focussed on being currency brokers do not also want to be licenced as retail banks which is a whole other level of regulation and cost, and there is simply not enough demand for the service at the price they would need to charge to make it profitable to offer banking services (or 'currency warehousing' services, as you might prefer to think of it) to the public. As such, they are generally simple money-changers.

If you have a currency bank account that they can send the money to, the fx broker can do that, but if you agree to leave the money with them for a while before collecting it in cash, you will get a worse rate, if they even allow it, and you don't have the same protection on them going out of business as you would with cash in a bank account.

To go back to the title of the thread, if you want to 'invest in foreign countries' then the most efficient way to do that is to use a collective investment scheme, like buying a share in an investment trust or ETF through a stockbroker, or buying an investment fund on an investment platform. Any of these can hold shares in companies or bonds/loans to companies or governments around the world, and your money is pooled with that of other like-minded investors to buy a whole portfolio of foreign investments.