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The biggest portal about international asset protection and diversification

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Offshore Investments: Is the Game Worth the Candle?

Offshore investments imply putting your money into assets outside the country of your residence. Investment instruments may include shares, bonds, real estate, or other assets that you acquire in foreign countries. 

Far-sighted people have always been looking for possibilities to invest not only in their country but also beyond. Today, individuals and legal entities from all over the world show enormous interest in offshore investment to diversify their investment portfolios and use potential possibilities in various markets.

However, investment offshore has its risks, of course. Let’s have a close look at its advantages and disadvantages to see whether an offshore investment is a good idea for you personally.

Offshore Investments

Invest Offshore: Is It Legitimate?

In fact, you are making investments offshore if you invest in any locality outside the country of your residence. 

The citizens of many developed countries are making their investments offshore without being aware of that as many private and governmental retirement programs invest the money received all over the world.

Offshore investments are absolutely legitimate for companies and ordinary citizens alike on the condition that they invest without engaging in tax evasion, financing terrorism, or laundering proceeds of crime.

If you decide to invest in buying a house at the warm seaside in Portugal to spend your retirement age, this is actually an offshore investment! You invest in McDonald’s shares through an American broker, and surprise – this is called offshore investment, too! And opening a multi-currency account in Switzerland or Nevis gives you the same status as you invest beyond your home institutions.

Offshore Investments: Advantages

Investment diversification. Offshore investments will help you diversify your portfolios and reduce the risk associated with investments in one market. This is based on the fact that economic conditions, political risks, and other factors that influence one market and scare off investments may have no effect whatsoever on the other one. In some cases, investments will not only help you preserve a part of your assets but also increase them. Diversify and invest!

Higher income investment opportunities. Invest offshore to have access to investment possibilities that are not available in your country of residence. For example, a jurisdiction that is growing at a faster pace or has a quickly developing economy can offer possibilities to invest at a higher rate than a stable market. On the other hand, it would be reasonable to invest in security and keep large amounts in a stable financial environment with reliable offshore banks that offer a high level of data protection (for example, you don’t want Mexican cartels to find out the enormous (in their opinion) investments on your Mexican account).

Investment by currency diversification. People that invest in foreign currency (in offshore destinations or just abroad) can considerably protect their investment portfolio from currency rate changes and may even draw benefits from forex market fluctuations. For example, if the cost of the national currency is going down, investments in foreign currency may increase in value and thus ensure hedging against national currency devaluation. You can open a multi-currency account in an offshore jurisdiction to invest your savings and receive or accept payments in different currencies, thus cutting down on conversion and commission fees. There are cases when you can get access to a currency that is unavailable in your home country but is a great asset to invest in.

Investment in countries that have tax incentives. Some countries and offshores offer tax incentives for non-residents who invest in their economies, which makes offshore investments an attractive option for those seeking to reduce the tax burden. Besides, tax rates in some countries are lower than in others, making it possible to invest more profitably. The offshore tax incentives can be used by individuals who decide to invest (for example, Nevis tax residents do not pay any capital gains or inheritance tax) and legal entities (Panamanian companies do not pay the tax on the profits derived outside the country).

Offshore Investments: Disadvantages

Political risk may affect your investments. Investment in offshore markets carries potential political risks, such as changes in government regulation or political instability, which may produce a considerable influence on the profits generated by your investments. There have also been several major offshore scandals in recent years that tarnished the reputation of offshore destinations as good places to invest in. Therefore, we strongly advise you to seek expert help prior to making investment decisions, choose the jurisdictions where the situation is stable, and invest wisely by diversifying your portfolio among such destinations.

Currency risk may impact investments. Investment in foreign currency may also face currency risk as the foreign currency can lose its value as compared to the national currency. It may have a negative influence on the profits you generate from your offshore investments and potentially entail considerable losses.

Investments require expenses on offshore structures organization and maintenance. Investment in offshore zones is often connected with higher commissions and costs, such as a currency exchange fee, brokerage commissions, or taxes. These expenses may reduce the profitability of your investments or even the general amounts of profit derived from the money you invest offshore. However, it would be wrong to save on the preparations before you invest: if your documents are not executed correctly, you may be turned down and lose an opportunity to receive services (or invest) offshore or even have problems with the law.

Possible investment difficulties. Investment in offshore zones may be hard and work-intensive. You may be required to know foreign norms, laws, and accounting systems before you invest. Besides, if you decide to invest funds, you may have difficulty finding reliable information and professional support in offshore markets. With that in mind, the best step would be to thoroughly study the topic of foreign investments on our portal (InternationalWealth) and seek advice from our team members specializing in offshore investments. 

We can help you to invest offshore wisely by:

  • Choosing suitable instruments to invest in abroad.
  • Setting up a structure for offshore investments (sometimes you just need a bank account, while other cases may require a fully-functional structure with trusts, funds, and offshore LLCs to invest)
  • Preparing the investment documents
  • Registering offshore companies and opening accounts for investment or operations
  • Getting a residence permit or a second passport
  • Keeping accounting in your new offshore company

Book an individual session with the portal experts at [email protected] to ask any questions on how to invest reasonably and safely.

Is the Offshore Investment Game Worth the Candle, Anyway?

Offshore investments will potentially give you a lot of advantages, including diversification, access to new investment possibilities, and tax incentives. However, remember about possible investment risks (including political and currency risks) and higher commission fees if you invest large amounts. 

If you intend to invest your funds offshore in the near future, please make a thorough revision of your financial goals, investment risk tolerance, and personal circumstances, and seek professional advice from our team if you feel that you cannot make a sufficiently deep analysis before you invest.

In the end, the answer to the question of whether offshore investments are a good idea in your personal case will depend on the individual financial situation and investment goals you set.

We wish you stable and profitable investments in offshore destinations!

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