There are many myths around offshore investing. Somehow when you put the word 'offshore' in front of any word people generally become either confused or suspicious.
Anything that exists outside the proximity of our environment, we fear. Or at least we hold in suspicion.
That's why an unsurprising 1.22% of people use offshore banks, meaning 98.8% of the world's population decide to leave their investments inside their country of residence.
Most people's sense of security extends only so far.
For some reason, the idea of putting assets in a foreign country sounds alarming.
In fact, nothing could be further from the truth, as often foreign banking systems have more security, offer higher returns and provide a better alternative for financial diversification.
This article will try and dispell some of the illusions around offshore investing and why investing in a country other than where you reside, might be a whole lot safer than you think.
What Is an Offshore Investment?
Simply put, an offshore investment is an investment in a foreign country. The primary goal of investing offshore is to diversify your portfolio so that you are not exposed unnecessarily to any single factor.
Whether that's undue political or economic risk, risk in currency fluctuation or banking system.
Keeping all of your investments in a single country is akin to keeping all of your eggs in a single basket.
Offshore investing allows you to diversify, not only in different assets but in different locations.
Offshore investments also provide more choices and because they exist in foreign jurisdictions they have less regulation and can be traded without excessive regulations
A significant portion of the world's funds actually exists outside of the United Staes. The Cayman Islands, for instance, is home to over 30% of the world's mutual funds.
Americans, are restricted from many overseas investment funds, and so using an offshore LLC with an offshore trust is often used as a means around the regulations.
Fund managers would then only be in a relationship with assets in the Trust or LLC rather than with any US clients directly.
In many instances using an offshore LLC is the best structure yo use as an investment vehicle as it provides a layer of security and privacy in financial transactions which can help reduce the prospect of frivolous litigations.
What do I get from Investing Offshore?
Offshore investing is not about getting rapid short term gain, but is just apart of a broader strategy to diversify and reduce risk associated with your assets.
When assets are spread across many classes, sectors, currencies and countries it effectively reduced the chance of being overly exposed to any single fluctuation.
The whole idea of expanding your financial freedom, and going offshore in the first place, is to reduce the risk of any single factor. Such that the failure of any single class, economy, currency, government would not severely affect your financial continuity.
If you already live overseas, then you are well-positioned to make an offshore investing strategy apart of your portfolio.
Generally, ex-pats and global citizens tend to see the benefits and have firsthand exposure to different environments and opportunities which make investing in foreign markets more tenable.
Diversifying your portfolio is essential for any secure investment plan. There are a number of advantages that come when choosing a foreign jurisdiction. Some of the most important include:
- Buffer against domestic changes in exchange rates, inflation and domestic environments
- Access to foreign markets spreads financial risk through currency and asset diversification
- Greater opportunities in emerging markets and in burgeoning sectors with yields that are not found in domestic markets
- Better asset protection and security
- Estate planning flexibility
Like with any investment, there are some risks involved, however, these risks are comparable when balancing out the risks involved when investing all within a single jurisdiction.
Any true financial diversification needs to find the right balance that spreads your risk and maximizes your advantages.
Different Types of Offshore Investments
There are numerous forms of investments that can be made. Some of the most popular, and the few that we generally recommend and have had a lot of success in the past in dealing with are relation too:
- precious metals
- foreign real estate
- foreign currencies
- fixed-term deposits
- hedge funds
- mutual funds
- private equity funds
Offshore Protection has connections with many different offshore destinations, brokerage and investment firms. With nearly 25 years in the business we know where your assets would best be suited for you. Get in touch and find out.
For more information on offshore investing and account setup see: