Preventing Fraud Abroad

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I could use some insight from an industry professional. I’m a recent college graduate planning to travel abroad until the new year. My plan is to identify some investment opportunities for my brother and me.

The long story short is that one of our investments in a tech startup several years ago just paid off, which then put us in a position to expand our investments and diversify even further. My brother is adamant about more real estate investment but I’m trying to keep an open mind.

That’s why I could use some guidance. I need a second opinion when it comes to identifying the best investment opportunities abroad. Aside from real estate, what are some other possibilities? And how can I avoid exploitation and fraud?

Having already had some investment success should give you more confidence than the average investor. That’s a bigger deal than you think, too. The right mindset is crucial to successful investing -- more so than most are willing to admit, but the most seasoned investors always say otherwise. Contributor Jochen Siepmann at Entrepreneur wrote a salient article highlighting just why your mindset is so critical. He begins with a famous quote from Warren Buffet: “until you can manage your mind, do not expect to manage money.”

Confidence can increase the likelihood of decisive action, especially when it matters most. However, those decisions should always be guided by logical reasoning. That’s not to say that your intuition shouldn’t be a contributing factor, but it shouldn’t be the primary contributing factor. The right mindset primed with a sound long-term strategy is the first step. The next step is learning how to best identify viable investment opportunities.

Your brother isn’t the only one drawn to real estate investments. Real estate is often one of the first things that come to mind when people begin to consider investing for the first time. You shouldn’t disqualify real estate investment without considering your options, though. Lucky for you, you wouldn’t be forced to travel very far, because five of the top ten cities for real estate investors in 2017 were located right here in the US. In fact, according to Forbes contributor, Kenneth Rapoza, Los Angeles and Boston ranked first and third, respectively. You might be disappointed to learn that not a single European country earned recognition until honorable mentions were taken into account.

However, there’s no shortage of other investment opportunities. Foreign direct investment (FDI) is something else you might consider. Kimberly Amadeo at The Balance wrote an informative article highlighting the pros and cons of FDI. You should start your research there. It won’t take long to realize there are countless opportunities to capture significant shares of emerging market countries, which continue to see rather insulated growth. In other words, you should consider targeting at least a few of those emerging markets for your business trip.

Should you decide to visit some of them, many of the opportunities you’ll encounter are apt to be business-related. Local entrepreneurs can be lucrative investments because they often have years of tacit cultural knowledge. Some require seed funding for product launches or competitive acquisitions. Either way, you’ll have to exercise sound judgment. The business angel approach was highlighted by Calita Kabir at the University of Navarra’s IESE Business School. The model is simple enough to execute on a consistent basis, without much previous experience and nuanced enough to capture the most salient information.

To your last point, it’s imperative that you understand the risks involved with making foreign investments. As you can imagine, things become much more complex when you’re operating outside of our domestic jurisdiction. The threat of fraud, extortion, and other malevolent behaviors is very real for Americans. For instance, Howard Fensterman filed a lawsuit against the UAE for investment fraud, and that isn’t the first time that American businesspeople were victimized. Justin Kuepper at The Balance does an excellent job of explaining the different risks you could be susceptible to while investing abroad. While his pointers were exclusive to stocks, many of the takeaways are applicable on a universal scale. You can also visit the public resource on international investing maintained by US Securities and Exchange Commission (SEC).

Don’t let all this information overwhelm you. Much of this can be referenced with ease when you return stateside. Most critical is creating your final itinerary and then investigating as much as you can about those markets before your arrival. Create a questionnaire you can use more than once, and remember that you should tap into as much local expertise as possible.

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