Part of any sound investment portfolio is diversification. How you allocate your funds and where is just as important as what you’re investing your money into. As more markets begin to flounder and reflect a growing global economic crisis it is becoming more important not to have all of your financial eggs in one basket. While simply investing in onshore accounts may seem like the logical, patriotic thing to do more and more governments are feeling the economic downturn as well. This could put your onshore investments at more risk than you’re willing to take. If that’s the case you might consider investing some of a diverse portfolio into offshore markets.
Many investors consider offshore investing as something shady and, perhaps, criminal in nature; it’s something gangsters and drug-traffickers do to avoid the authorities. This couldn’t be further from the truth and there are several reasons you should at least look at an offshore investment strategy as part of a well-rounded investment portfolio.
Probably the first reason people consider offshore invest is tax savings. To an extent this is very true. Many tax haven countries offer incentives for foreign investors, incentives designed to promote a healthy alternative for outside wealth. Many foreign companies also enjoy a tax-exempt status when investing in US markets, which makes investing in foreign corporations even more attractive. However, it is important to note the recent laws designed to close the offshore loopholes. The IRS now states that U.S. Taxpayers are now taxed on worldwide income. Be sure you are knowledgeable of the laws and use a reputable investment firm.
A second advantage of offshore investment is flexible diversity. Many offshore accounts are much more flexible than the regulated and restricted investment opportunities in some countries. This flexibility opens investors nearly unlimited access to all major exchanges and international markets. Also, opportunities in developing nations continue to increase as the privatization of formerly government run business and industry continues to expand.
Confidentiality is also a major attraction for offshore investors. Many high-profile investors don’t want the general investing populace to know what stocks they invest in. If the typical investor knows of a share targeted for a large volume purchase by such an investor, he or she may also decide it’s also a good investment and ride the coattails and run up the share prices. The secrecy legislation and strict corporate and banking confidentiality laws makes it an ideal market for those large volume share purchases. And, instead of seeming shady and secretive, there are clear identity disclosure laws in instances where drug-trafficking and other illegal activities are suspected or concerned. This helps keep shareholders and their investments safe.
Every investor’s situation is going to be unique. Not everyone is going to be able to afford the cost of investing offshore with many offshore accounts requiring large minimum investments. This sort of leaves the everyman investor out of the equation. But, if your portfolio is strong enough and your stomach is strong enough to accept the risks, it can still make a difference to shift a portion of your portfolio into offshore investments. As always, with any investment, do your due diligence and research before you decide!
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