Seasoned investors often look to make investments wherever they feel gives them the best opportunity for the highest return. In some cases this may lead them to invest outside of the U.S. And individuals who have a self-directed IRA may also be interested in using that account to make international investments.
Identifying International Investments.
Your first line of research should be to investigate relatively straightforward investments such as stocks, mutual funds and exchange-traded funds to see if you can find investments that have appropriate international exposure.
Keep in mind that not everyone who is interested in international exposure will want to embrace that exposure to the exclusion of other markets. For example, did you know that a significant portion of the revenues from one of the most iconic American brands – McDonald’s – comes from their international territories? You may be able to find a number of different options with your research that can provide you with the level international exposure you are looking for.
Have a Trusted Advisor.
If you are interested in other types of international investments, including those that are “on the ground” outside of the U.S., then make sure that you always have expert assistance and advice to help you understand all of the parameters of any potential investment.
For example, it’s not uncommon for areas outside of the U.S. to have restrictions or limitations on who can own real estate. In some instances noncitizens are prohibited from owning property outright. If you want to pursue that type of investment, then you need to structure some type of non-majority ownership interest along with a local investor in order to close the deal. Getting expert assistance on these types of arrangements is essential.
Understand Your Taxes.
Recall that while self-directed IRAs provide you with the maximum degree of investment flexibility as compared to other retirement savings vehicles, certain aspects of your investing may have negative implications. For example, borrowing money inside an IRA in order to purchase real estate or make other investments will generally trigger UBTI (unrelated business taxable income) implications. Certain international investments may trigger similar concerns.
By the same token, you’ll need to understand whether making an investment internationally will subject you to any legal requirements or obligations as a result, including any foreign tax liabilities. Many countries have tax treaties with the United States in order to prevent undue taxation of investments, but it’s important that you research and understand all the implications of a potential investment.
Have an Exit Strategy.
If you do choose to invest in assets that are physically located outside the US, be sure to have given some thought to your long-term investment strategy, including when and under what conditions you will want to exit your position or liquidate your investment. If this process is more time-consuming than you are used to for a corresponding U.S.-based investment, for example, then you’ll need to plan accordingly.
As with any investment, the most important aspects to investing internationally, particularly if you are using your self-directed IRA, is to have a plan and do your homework.