Offshore investments have gotten a bad rap in the past for illegal activities like tax evasion and money laundering. While this still happens occasionally, occurrences are much less frequent. Now, a record number of individuals are taking advantage of offshore opportunities, and it’s 100% legal. There are several ways to use an offshore investment to your advantage. Let’s look at a few, and discuss how to use online trading to take advantage of these benefits.
Tax Reduction
It is possible that a small country’s economy would be vastly improved by investments from wealthy countries. An easy way to draw this kind of foreign capital to a small remote country is to provide lower tax rates for International Business Companies. This way, foreign investors can save money on corporate taxes, and the country can use the extra cash to build infrastructure and improve the standard of living for their citizens. More recently, however, G20 governments have begun to regulate this, in some cases taxing worldwide income rather than just domestic income.
Diversification
Many investors are unsatisfied with the narrow range of investments offered inside their home countries. Not only do they receive a wider range of investments offshore, but they are able to invest more aggressively as regulation are often more relaxed in desirable investment products.
Privacy
Breach of privacy is heavily penalized for a firm handling customers offshore investments. This is useful if you don’t want your private investments publicized for the market and general public to see and react to.
Advantages to Online Investing
Online trading for an offshore investment strategy is offered through many different global stock brokers. There are many useful features and benefits to online trading as opposed to offline trading. The most obvious is cost. Online commissions usually range from $5 to $25 per trade, depending on volume and what broker you sign up with. The next most important is time.
The logistics of using a broker is very inefficient compared to online trading. The broker is a middleman between you and the trader, and it takes several minutes to arrive at an agreed upon price. With online trading, you can just click the “buy” button, and the transaction takes place instantly.
Online trading also affords you greater control over what and how you buy. If you work through a broker, he may not buy the stock you want because he thinks it is an unwise purchase. Also, many brokers have a minimum number of shares requirement to buy. Neither of these are an issue if you trade online.
That being said, many online firms still offer the services of a broker for managed accounts, and unless you are a stone cold investing machine, it would be wise to use them. At the very least, it’s nice to have them at your disposal.
Since you will be trading offshore, your broker will be familiar with the local regulations and tax laws that may affect your purchases and because this is probably unfamiliar territory, consulting with your broker may be a wise decision.
In summary, the benefits of offshore investing are shrinking, but still very real, and taking advantage of them through online trading is highly beneficial.
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