Offshore Investment – The Ideal Way for Saving Your Wealth

What Is Offshore Investment?

Offshore investment refers to a wide variety of investment strategies that take advantage of tax benefits offered outside of an investor’s home country.

There is no scarcity of money-marketplace, bond and equity assets offered by trustworthy offshore investment companies that are fiscally sound, time-tested and, most importantly, legal.

What Is Offshore?

Offshore explains the repositioning by an entity of a trade process from one countryside to another, typically an operational process, such as manufacturing, or supporting processes. Even state governments make use of offshore investment. More recently, off shoring has been associated primarily with the sourcing of technical and administrative services supporting domestic and global operations from outside the home country, by means of internal (captive) or external (outsourcing) delivery models.

“Offshore ” is usually to portray a country where there are also no taxes or low taxes for foreign persons either individual or commercial.

It is a truth that offshore investment havens have crafted a unique legally recognized and tax free climate for overseas individuals and businesses. They offer specifically to them. More than half the world’s assets exist in such asset havens.

Monetary privacy, a steady legal environment and realistic rulings are the trademark of these jurisdictions.

When we converse about offshore investment financial companies, the term invokes up an image of enormous, shadowy monetary monoliths, investing funds without any transparency.

Advantages

There are many reasons why people like investments in offshore:

1. Tax Reduction

Many nations, recognized as tax havens, offer tax inducements to overseas investors through an offshore investment. The positive tax rates in an offshore investment possible country are intended to encourage a vigorous offshore investment atmosphere that magnetizes outside wealth. For tiny countries like Mauritius and Seychelles, with only a few reserves and a small population, offshore depositors dramatically increased their economic activity.

Offshore investment occurs when offshore depositors outline a company in an overseas country. The corporation acts as a shield for the investors’ financial credits, shielding them from the higher tax load that would be acquired in their home nation.

Because the corporation does not engage in local operations, little or no tax is enforced on the offshore investment company. Many overseas companies also benefit from tax-exempt category when they put in in U.S. markets. As such, making ventures through overseas corporations can clutch a distinct benefit over making investments as an individual.

2. Confidentiality

Numerous offshore investment jurisdictions have confidentiality legislation which creates it is an unlawful offense for any worker of the financial services commerce to disclose possession or other information about their clients or their dealings.

But in the examples where unlawful proceedings can be proved, identities are being disclosed. Thus the Know Your Client due diligence documents are becoming just more complex.

Disadvantages

The main drawbacks are those of costs along with ease.

Many investors like to be capable to meet up and speak to the person setting up their incorporation of offshore investment companies and traveling to the tax haven costs funds.

In a number of nations you are taxed on your universal revenue, so not disclosing offshore investment returns is illegal. In other countries having offshore accounts are unlawful for individuals but authorizations can be obtained from companies.

Several banks in offshore jurisdictions need smallest amount in investments of US$ 100,000 and higher, or to possess assets locally.

The kinds of offshore investment companies usually existing are:

Trusts
Resident Offshore Company
International Business Company
Protected Cell Company
These types of companies also exist.

E.g.: Many mutual funds and hedge funds whose investors favor ‘ off shore country’ ventures.

But for average financiers like us too can form offshore companies of relatively small size to fulfill our most everyday needs. Or we can put in, via our off shore investment expert, into offshore companies to own investments in special funds.

There are various uses:

Trading Companies
Professional Services Companies
Shipping Companies
Investment Companies
Intellectual Property & Royalty Companies
Property Owning Companies
Asset Protection Companies
Holding Companies
Dot Com Companies
Employment Companies
Trading Companies

Import/Export and general trading company’s activities are also compatible with the structure of offshore investment companies. The offshore investment company acquires orders from the supplier and has the goods distributed directly to the customer.

It does the invoicing to the customer and saves the difference in a tax free country. E.g. Products from China to Kenya could be invoiced by a Seychelles or RAK offshore incorporation and the revenues retained there.

Individuals utilize offshore investment companies to acquire mutual funds, shares, property, bonds, jewelry and precious metals. Sometimes they will also apply these companies to trade in currency, equities and or bonds. The wealthy will also have diversified offshore investment companies for different division of possessions; for different countries or by different categories of investments.

The diversification evades the risk. But also in cases where capital increases taxes are levied, e.g. in property or equity, sometimes it is cheaper to sell the company rather than the individual asset itself.

Professional Services Companies

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Ease Into the World of Investing

The United Nations does it. Governments do it. Companies do it. Fund managers do it. Millions of ordinary working people – from business owners to factory workers – do it. Housewives do it. Even farmers and children do it.

‘It’ here is investing: the science and art of creating, protecting and enhancing your wealth in the financial markets. This article introduces some of the most important concerns in the world of investment.

Let’s start with your objectives. While clearly the goal is to make more money, there are 3 specific reasons institutions, professionals and retail investors (people like you and me) invest:

For Security, ie for protection against inflation or market crashes
For Income, ie to receive regular income from their investments
For Growth, ie for long-term growth in the value of their investments
Investments are generally structured to focus on one or other of these objectives, and investment professionals (such as fund managers) spend a lot of time balancing these competing objectives. With a little bit of education and time, you can do almost the same thing yourself.

One of the first questions to ask yourself is how much risk you’re comfortable with. To put it more plainly: how much money are you prepared to lose? Your risk tolerance level depends on your personality, experiences, number of dependents, age, level of financial knowledge and several other factors. Investment advisors measure your risk tolerance level so they can classify you by risk profile (eg, ‘Conservative’, ‘Moderate’, ‘Aggressive’) and recommend the appropriate investment portfolio (explained below).

However, understanding your personal risk tolerance level is necessary for you too, especially with something as important as your own money. Your investments should be a source of comfort, not pain. Nobody can guarantee you’ll make a profit; even the most sensible investment decisions can turn against you; there are always ‘good years’ and ‘bad years’. You may lose part or all of your investment so always invest only what you are prepared to lose.

At some point you’ll want to withdraw some or all of your investment funds. When is that point likely to be: in 1 year, 5 years, 10 years or 25 years? Clearly, you’ll want an investment that allows you to withdraw at least part of your funds at this point. Your investment timeframe – short-term, medium-term or long-term – will often determine what kinds of investments you can go for and what kinds of returns to expect.

All investments involve a degree of risk. One of the ‘golden rules’ of investing is that reward is related to risk: the higher the reward you want, the higher the risk you have to take. Different investments can come with very different levels of risk (and associated reward); it’s important that you appreciate the risks associated with any investment you’re planning to make. There’s no such thing as a risk-free investment, and your bank deposits are no exception. Firstly, while Singapore bank deposits are rightly considered very safe, banks in other countries have failed before and continue to fail. More importantly, in 2010 the highest interest rate on Singapore dollar deposits up to $10,000 was 0.375%, while the average inflation rate from Jan-Nov 2010 was 2.66%. You were losing money just by leaving your savings in the bank.

Today, there are many, many types of investments (‘asset classes’) available. Some – such as bank deposits, stocks (shares) and unit trusts – you’re already familiar with, but there are several others you should be aware of. Some of the most common ones:

Bank Deposits
Shares
Investment-Linked Product1
Unit Trusts2
ETFs3
Gold4
1 An Investment-Linked Product (ILP) is an insurance plan that combines protection and investment. ILPs main advantage is that they offer life insurance.

2 A Unit Trust is a pool of money professionally managed according to a specific, long-term management objective (eg, a unit trust may invest in well-known companies all over the world to try to provide a balance of high returns and diversification). The main advantage of unit trusts is that you don’t have to pay brokers’ commissions.

3 An ETF or Exchange-Traded Fund comes in many different forms: for example, there are equity ETFs that hold, or track the performance of, a basket of stocks (eg Singapore, emerging economies); commodity ETFs that hold, or track the price of, a single commodity or basket of commodities (eg Silver, metals); and currency ETFs that track a major currency or basket of currencies (eg Euro). ETFs offer two main advantages: they trade like shares (on stock exchanges such as the SGX) and typically come with very low management fees.

The main difference between ETFs and Unit Trusts is that ETFs are publicly-traded assets while Unit Trusts are privately-traded assets, meaning that you can buy and sell them yourself anytime during market hours.

4 ‘Gold’ here refers to gold bullion, certificates of ownership or gold savings accounts. However, note that you can invest in gold in many other ways, including gold ETFs, gold Unit Trusts; and shares in gold mining companies.

With the advent of the Internet and online brokers, there are so many investment alternatives available today that even a beginner investor with $5,000 to invest can find several investment options suited to her objectives, risk profile and timeframe.

Diversification basically means trying to reduce risk by making a variety of investments, ie investing your money in multiple companies, industries and countries (and as your financial knowledge and wealth grows, in different ‘asset classes’ – cash, stocks, ETFs, commodities such as gold and silver, etc). This collection of investments is termed your Investment Portfolio.

Some level of diversification is important because in times of crisis, similar investments tend to behave similarly. Two of the best examples in recent history are the Singapore stock market crashes of late-2008/early-2009, during the US ‘Subprime’ crisis, and 1997, during the ‘Asian Financial Crisis’, when the price of large numbers of stocks plunged. ‘Diversifying’ by investing in different stocks wouldn’t have helped you very much on these occasions.

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