(ThyBlackMan.com) Making an investment in a different country is never an easy decision. There are plenty of factors to be taken into consideration and angles to consider. The most important angle you need to constantly keep in mind is knowing what your money is worth abroad. How much can a single unit of your currency buy abroad? Does a bottle of water here cost as much as it costs there? If I make an investment offshore, will it get me enough return in my own country in my currency?
These are all legitimate questions you need to ask yourself before taking that step and investing your hard earned money in an overseas investment. This is how you can know your money’s worth in a different place.
How much can it buy?
Do a simple calculation. Let’s say 100 units of my money buy me X in the USA for profit Y. If the same 100 units can buy you the same X in your country for the same profit Y or less, then this is a poor place to invest in. It simply means your currency does not hold much weight in that country and you will not be gaining anything by investing there. Also, you need to know what your money can buy abroad. How valuable is your currency if you decide to buy something with it in another country?
What’s the demand for my currency?
Traditionally speaking, money’s value is determined based on the demand for it. So if there’s no demand for your currency in foreign country X, then the value of your money there isn’t very high. That’ll probably make it a poor choice for investment because your currency doesn’t have enough purchasing power there. The easiest way to learn the demand for your currency in a country is through currency converters. So if you said ZAR to GBP is equal to 0.056, this means the ZAR doesn’t have high demand in GP, and hence doesn’t have much buying power.
It’s easily attainable abroad
Some foreign currencies are virtually useless outside of their own countries. Take the Nepalese Rupee, for instance. You cannot convert the Nepalese Rupee in any country except Nepal –– or maybe some exchanges in India. That is because the currency is so weak and virtually not worth anything outside of Nepal. If you’re in the USA for instance, you can’t convert the Nepalese Rupee into US dollars. You won’t find any exchanges with that currency. That’s why you’re told that while you are still in Nepal, you need to make sure to convert all your currency before you leave the country, otherwise you are going to get stuck with plenty of useless bills.
A must before investing overseas
Knowing your money’s value isn’t a luxury or something you can afford to ignore. If you’re going to be making an investment overseas, you have to know your money’s worth or else you risk wasting your money in a failed investment or even worse, getting into one without fully knowing what you need.
In this day and age, you cannot afford to go blind in an overseas investment without knowing exactly what your money can and cannot buy.
Staff Writer; Gary Hall