Many of us are looking for ways to generate extra income, and for some, investment in individual stocks and shares, or through funds, is an increasingly attractive option. If you have money set aside that you would like to grow, and you are prepared to do your homework, investing can be a good way to boost your financial wellbeing. The developments in technology and regulation that have transformed the financial markets in recent years make it easier than ever to get involved.

Investing in your own country is the most common route to getting started in this kind of financial activity, but there are opportunities further afield. Making a foreign investment can be a good way to get an advantage financially, but like any type of financial activity, it isn’t something that you should enter into lightly. Here are the key things that you need to know about foreign investment:

The basics of foreign investment

Foreign investment refers to any flow of capital from one country to another. On a large scale, foreign investment plays a major role in economic growth and in keeping the wheels of the global economy turning. Foreign investment is undertaken by a wide range of actors, from governments and large corporations to individual investors, and falls into two main categories: direct and portfolio.

Direct foreign investment

Sometimes known as Foreign Direct Investment or FDI, this type of investment is focused on creating a business interest in another country, perhaps through setting up or buying a business, or building property overseas. This usually involves a significant and long-term interest in that other country, and because it often requires a large financial commitment, it is usually undertaken by major companies, institutions or venture capital operations.

While this kind of financial investment is often welcomed by the other country, it also requires a long-term commitment, and is not easy to pull out of if things go wrong. That’s why FDI is usually undertaken in the same way as setting up a business in your own country, with the same anticipated level of planning, administration and daily control over the running of the investment.  

Foreign Portfolio Investment

For individual and smaller investors, there’s another option, known as Foreign Portfolio Investment (FPI). This type of investment involves buying into financial assets based in a foreign country, often stocks and bonds purchased through an exchange. This type of investment typically requires a shorter term and less intense commitment than FDI, and as with domestic stocks and funds investing, it is often focused on realising a profit in the short to medium term.

The other advantage of FPI over FDI, for the small investor, is the fact that securities can be more easily traded than other assets such as businesses or property, so if things go wrong or if your circumstances change, it is easier to withdraw from your investment, ideally with a profit.

Types of FPI

There are many ways in which to get involved in investing in foreign securities. The most straightforward way to do this is to purchase stocks through exchanges based in other countries. But it is important to note that share dealing through foreign exchanges can be more involved than using a domestic exchange. Your domestic broker may not be able to help you, so it’s often a good idea to look for reputable investment companies that operate in the country you are looking at. Al Masah Capital, based in Dubai, is a good example of a local investment broker operating in the Middle East.

By going through a local financial investment specialist, you will also be able to benefit from their expertise and familiarity with the rules and regulations that can affect investments into that country, which can help to ensure your investment runs smoothly, with no unpleasant surprises.

In addition to investing in stocks through foreign exchanges, you have the option of investing in exchange traded or mutual funds. These forms of foreign investment entail less risk for the individual investor and are widely available in most parts of the world. Their advantage is that they offer a chance to dip your toes into foreign investment while you become familiar with the practice, and can be a good way to get to know how a foreign market operates.


Foreign investment is no longer restricted to major corporations and investment funds. Thanks to regulatory changes and developments in online technology, it is now possible for the shrewd investor to boost their financial status by getting involved in investments overseas.