Offshore investments often get a bad reputation, but contrary to some popular myths, this investment strategy is perfectly legal when done properly. Investing in foreign markets can help you diversify your portfolio and take advantage of international trends when you maintain your portfolio carefully.
Consult a Financial Advisor.
Managing offshore investments is a complex business that’s best done with professional assistance.
While it’s important to take an active role in your money management, a financial advisor can help you stay on top of matters like tax liability and distribution of assets. With a financial advisor, you don’t have to worry about losing track of investments due to a widespread offshore strategy. Your financial advisor can also streamline activities like moving money from one country to another.
Choose your financial advisor carefully. Advisors who are fiduciaries must by law disclose any conflicts of interest or compensation programs that they participate in. A non-fiduciary advisor might recommend investments that aren’t ideal for your profile because they receive a commission on it and you would be none-the-wiser. Fiduciaries must also disclose all fees and other expenses you will incur for their services. Always choose a financial advisor with extensive experience in offshore investments.
Diversify Your Investments.
Offshore investments help diversify your portfolio by giving you a stake in foreign markets. Foreign markets move independently of the U.S. market and therefore balance your risk by spreading your investments out globally.
Diversification is also important among your offshore investments. Ideally, your portfolio will include at least three types of offshore investments, such as stocks, bonds, and real estate. If you have a strong preference for a single type of investment, such as stocks, you can still diversify sufficiently by selecting stocks in various industries. This approach will minimize your offshore risk.
Follow the Currency Market.
An important concern with offshore investments is the currency market. If the value of foreign currency falls in relation to the U.S. dollar, this will negatively impact your entire foreign investment if you’re looking to cash out on it. On the other hand, this fall could present an opportunity to purchase more investments in the particular market if you expect the value of the foreign dollar to rise again in the future.
This issue is even more complex for expats who travel frequently. In this case, it’s important to keep an eye on all currency markets and their value in relation to one another. When you send money online, you need to consider whether it will gain or lose value to the recipient. Before investing in any foreign market, you should examine how much your dollar is worth in local currency so you can invest accordingly.
Consider Your Residency Carefully.
If you’re an expat, it’s important to consider all the legal implications of your chosen residency. Before you establish residency in a particular country, consider whether it’s prudent to hold on to your investments, cash them out, or move them. Tax laws vary greatly from one country to another. This is another time when a financial advisor will prove extremely valuable.
Offshore investments are by no means a way to evade taxes. You should consider taxation laws around the world when you’re selecting your place of residence as an expat so you can select the environment that works best for your individual situation.
Reevaluate Often.
One of the easiest traps to fall into with offshore investments is neglecting regular maintenance. It’s not enough to build a strong portfolio with ample diversification. You need to reevaluate your strategies often. If you’re balancing several offshore investments, you may want to move money from one foreign market to another in accordance with particular trends.
In addition to the currency market and investment market, you need to monitor tax laws in all countries where you maintain investments as well as your country of residence. Tax laws are tightening in the United States, so it’s important to maintain an investment profile that is in compliance with all applicable laws while still offering viable opportunities for profits.
Managing offshore investments is a complex process, but it offers some distinctive benefits that make it a worthwhile option for savvy international investors.
