The definition of an “international” investment has the potential to vary greatly, depending on who you ask. Even companies as American as McDonald’s and Coca-Cola derive significant revenues from outside of the United States. To some extent, investing in large multinational companies will give you a degree of international investment exposure. Furthermore, some non-U.S. companies can be invested in directly if they have American Depositary Receipts (“ADRs”) listed on a U.S. securities exchange.
But what if you want to target your investing with greater focus? What if you have an investment idea that’s focused not only on a particular country, but perhaps also a specific industry within that country? If you have an IRA with a traditional custodian, then you won’t be able to move beyond investments in large publicly traded multinational companies, or perhaps actively managed international mutual funds in which you have no input into the underlying investment decisions.
Fortunately, a self-directed IRA comes with the investment flexibility and freedom that you need to enable you to accomplish these goals.
Direct Company Investments
Self-directed IRAs allow you to make direct investments in private companies, and the IRS regulations governing IRAs do not limit these investments to domestic companies. This means that you can use your self-directed IRA to invest directly in foreign companies, on whatever terms and conditions you are able to negotiate.
Foreign Real Estate
Real estate is a popular investment for self-directed IRAs, and there’s nothing in the IRS regulations to prevent you from investing in real estate outside of the United States. Of course, the process for investing in real estate has the potential to be significantly different than a domestic real estate investment, so you need to plan ahead.
For example, some countries have laws that limit or restrict how noncitizens can purchase property. So if you’re interested in making a real estate investment in a particular foreign country, it’s important to first educate yourself on what limitations or restrictions you may face. It’s also important to understand what types of ongoing obligations you may have with respect to that property (taxes, fees, maintenance, etc.), and that you have adequate resources within your self directed IRA to cover those obligations.
Experienced investors may also wish to use their self-directed IRAs to engage in foreign currency transactions. This advanced type of investment strategy can be very rewarding, but it requires a deep understanding of how the currency markets function, and potential investors must be sure that they understand the risks that go along with it.
International investments can be a great way to diversify the investment risks in your self-directed IRA. Because those investments are subject to different legal and regulatory requirements, however, it’s absolutely essential that you fully understand every aspect of a potential transaction before you invest.
Quest Trust Company helps change people’s lives and financial future through self-directed IRA investment education. Quest Trust Company helps people invest in what they know best and build their financial future on their own terms.