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What Is a Private Foreign Investment?

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  • Written By: Laura M. Sands
  • Edited By: Heather Bailey
  • Last Modified Date: 17 October 2014
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A private foreign investment is an investment made by a private individual or a private entity in a foreign country. This type of investment differs from other investments made by a foreign public or governmental entity in another country in that it is made by an individual or a private entity. Also known as a personal foreign investment, this type of investment frequently provides economic stimulation in other countries. It is not always the case, but certain foreign investments are sometimes considered to be a type of foreign aid, especially when made in third-world nations or other struggling economies. Strict rules apply to foreign investments and may vary according to the country where a private foreign investment is being made.

Depending on the country, a personal foreign investment may include an investment for personal use or may include a commercial investment. A commercial foreign investment is one made in an industry that would be considered commercially useful as opposed to another investment involving more personal use, such as residential real estate. A personal foreign investment may include a variety of investment types depending on what is permissible by the country where an investment is being made, as well as what investments are available.

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A private foreign investment is often one made in the private sector, as opposed to public exchanges, but investments are not always limited to this type. Personal investments may also be made in public entities, which are frequently referred to as a public foreign investment. Examples of a public foreign investment include those made in a foreign country’s public transportation system or in a foreign stock exchange.

In some instances, a private foreign investment may be integrated into a visa program, which offers individuals access to foreign travel. In the United States, such a program is called an Employment Based or EB5 program. This program essentially allows foreign individuals who invest in America while creating domestic employment opportunities to obtain a visa to enter America faster than a visa would normally be granted through a traditional application process.

Many also view a private foreign investment as a sound strategy when trying to diversify an investment portfolio, as one country’s economy may be better off or worse off than another at any given time and can be leveraged in a profitable fashion. A private foreign investment is also at times useful as a hedge strategy when purchasing a different country’s currency to offset the cost of supplies or products from a country. Some also use a this type of investment to retire in a foreign location while benefiting from equity when investing in real property. Experts warn, however, that it can be risky when a government is unstable or in places experiencing political upheaval.

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