As the global economy becomes increasingly interconnected, investors are seeking opportunities beyond their domestic markets. However, venturing into international investing requires a distinct approach and mindset. Juan Espinoza, a seasoned global value investor, sheds light on the essential factors distinguishing successful ventures abroad from potential stumbling blocks. “Key factors when investing internationally are not quite the same as investing in the U.S.,” he cautions.
Shift Your Mindset
The first and foremost consideration when delving into overseas investments is the need for a fundamental mindset shift. What works in the familiar terrain of domestic markets may not necessarily have the same effect internationally. “I have seen a significant number of investors trying to transition their domestic market skill set towards the international arena and really stumbling,” Espinoza shares. He further emphasizes the importance of reassessing the factors that drive success, acknowledging that the dynamics of international markets can differ significantly from those in the U.S. Understanding the nuances of local economies, regulatory frameworks, and cultural contexts is paramount to making informed investment decisions.
Rely On Local Advisors
One of the most crucial factors for success in international investments is utilizing the expertise of local advisors. Espinoza stresses that while advisors are commonplace in the investment world, their role becomes indispensable when operating in unfamiliar territories. Local advisors offer invaluable insights into geopolitical dynamics, regulatory changes, and market sentiment, helping investors stay informed and adapt their strategies accordingly. “In many cases, you just need advisors that will keep you updated on what’s happening on the ground,” Espinoza says. Whether providing macroeconomic analysis or legal counsel, these advisors serve as the eyes and ears, bridging the gap between distant investors and local realities and keeping investors up-to-date.
Incorporate the Impact of Time on Investment Returns
Another key consideration highlighted by Espinoza is the impact of time on international investments. Unlike the sense of urgency often seen in developed markets like the U.S., resolving special situations abroad can be a protracted process. “The resolution for a relatively simple situation can quickly become very complex,” explains Espinoza. Factors such as legal complexities, bureaucratic hurdles, and political instability can significantly prolong the timeline for investment outcomes. Understanding and managing expectations around a realistic timeframe is essential for avoiding frustration and dilution of annualized returns.
Navigate Stakeholder Dynamics
Espinoza underscores the significance of identifying and engaging with various stakeholders in international markets. Unlike the U.S., where the focus might primarily be on shareholders and management, overseas investments often involve a broader spectrum of stakeholders, including government bodies, regulatory authorities, and local communities. Recognizing the influence and interests of these stakeholders is critical for navigating complex international landscapes and mitigating risks.
As investors increasingly look beyond their borders for opportunities, understanding the unique challenges and nuances of international markets becomes imperative. Juan Espinoza’s insights emphasize the importance of mindset, local expertise, and time management in achieving success in overseas investments, particularly in special situations. By embracing these principles, investors can navigate the complexities of international markets with confidence and prudence, unlocking opportunities for growth and value creation on a global scale.
