Due to globalization, foreign investments take one of the most important roles in distributing money capital among countries. Investments through offshore companies are primarily intended for international investors. According to experts, around 1/4 of the global money supply is located in offshore financial centers.
Despite long-term confrontations between American organizations and offshore corporates, foreign investment continues to be a legitimate tool for tax planning. Tax optimization is of high importance for both companies around the globe and individuals. For example, it means that a business gets necessary investor protection from corporate failures or fund mismanagement. Moreover, it gains access to the entire market for offshore investment products, which maximizes its wealth potential.
What Is Foreign Direct Investment (FDI)?
Most people do not understand what offshore companies and offshore investments are. Even in the movies, we often see devious characters who illegally “hide money offshore”. But this is just a reputation fabricated by Mass Media and TV: foreign funds are mostly legal.
Simply saying, foreign investment means holding your money outside your country of residence. It may be a fund in a foreign company or your own business registered in another country, which is becoming common practice these days.
Depending on your financial goals and purposes, there are different offshore investment instruments available in the market:
- Offshore insurance bonds are highly-rated among foreign investors because they allow the investor to own and manage a diverse portfolio while keeping the advantage of significant tax benefits.
- International funds can provide excellent access to many global markets, minimize risks, and potentially generate higher returns. Simply put, these are mutual funds in a foreign country.
- International real estate is one of the most common and well-known types of investment. It is an especially popular choice among retirees, as they can turn to these properties as a second choice. Besides, for many, it is an attractive option, offering stable income with the potential for growth.
- Precious metals: gold, silver, and platinum are “old, but gold.” They are always in the market; and are commonly traded overseas, just as in any country. Their value fluctuates all the time, which influences the purchase price.
- Offshore venture provides capital with high growth potential in exchange for an equity stake in a foreign country.
The Advantages of Investing Overseas
Let’s take a closer look at the main advantages of foreign investing:
- Tax optimization. FDI means favorable tax regimes and reduced costs.
- Country and currency diversification. Capital in one of the foreign jurisdictions is an excellent backup option: economic changes, inflation, business problems with the state or partners – all these difficulties are much easier to overcome if you have a “financial cushion” in one of the world’s stable currencies from a reliable jurisdiction.
- An opportunity for accumulating and increasing capital abroad.
- Access to a wide range of investment tools and strategies that may not be available in an investor’s home country.
- High reliability and strict regulation.
- Confidentiality. Many overseas investments have security legislation, meaning strict bank and corporate privacy rules.
Is Investing Offshore Right for Me?
In any business or investment, it is essential to have a personal money management strategy to help you plan for the future. For first-time investors, it might be more challenging to invest in general, let alone FDI. Therefore, it is always better to consult with specialists about risk tolerance, taking into consideration the amount of potential investment. Einvestement specialists have broad experience in the field, so a consultation is likely to be highly educational and beneficial.
As for foreign investment, it is more common than you think. For example, pension funds and investment funds are included here. Investing offshore may be a good idea to “spice up” or diversify a portfolio, even for those who prefer traditional, low-risk investments. The main principle to adhere to are the same as with any investment: rely on common sense and a licensed investment platform.