International investments with an offshore account can potentially provide greater returns, more diversification and better asset protection than investments at home.
Attractive Returns and Lower Risk When Investing Internationally
During the past 10 years, guess which asset class of investment did the best and which one did the worst? You may be surprised to hear that emerging markets stocks, which are generally perceived as “risky” did the best, returning 277 percent while the U.S. S&P 500 stocks fared the worst, giving the investors only 33 percent for 10 years. Emerging markets generally refer to the developing countries such as Brazil, Russia, China and India, the famous “BRIC” economies.
If you hold a basket of world bonds excluding the U.S. bonds, the return would be 123 percent compared to the 75 percent in U.S. bonds. Even holding a bunch of commodities would reward you with 90 percent in the past 10 years. Investing in a diversified range of international investments is safer than investing only in the U.S. markets over the long term due to the divergence in the countries’ economic performances.
Dollar in a Perennial Decline
One of the reasons that international investments have been lucrative was due to the long-term weakness in the U.S. dollar against other foreign currencies, thanks to the large trade deficits, rising national debt, money-printing and high budget deficits in the U.S. In other words, the U.S. economic policy leads to a weaker U.S. dollar.
If you only invest in the U.S. and you are a U.S. citizen, you will forgo huge foreign currency gains over the long term by putting all your investments in the U.S. The euro went up 37 percent while the Singapore dollar rose 34 percent against the U.S. dollar since the end of 2000. The Canadian dollar rose a staggering 47 percent against its neighbor, the U.S. Dollar, during the same period.
Are International Markets Risky?
When investing internationally, country and institutional risks need to be carefully taken into consideration. Country risks can include political risks, ability to repay its debt or sovereign risks, economic risks, exchange rate risks, expropriation risks as well as capital repatriation risks.
Advanced economies such as the U.S. or the U.K. are not risk-free either: The U.S. was stripped of its “triple-A” credit rating a year ago because of its rising debt-burden and the inability to tackle effectively the burgeoning trend. The economic performance of many developing countries has actually been much better than that of the advanced economies, making the emerging countries an important part of international investments.
Investing Offshore is Easy
In the U.S., there are very few options to invest in foreign currencies while the costs of international investments are high. To maximize the range of investment opportunities, one can consider setting up an offshore account in a thriving offshore financial center such as Belize.
An offshore account is an account set up in a jurisdiction other than your own home country. Belize, whose official language is English, adopts an English banking system and offers many financial services such as setting up offshore banking accounts, offshore companies called International Business Companies (IBC), or trusts.
Interest rates on your offshore banking deposits and dividends or capital gains on your international investments received by your IBC are not taxed by the local government. This will help your international investments to grow on a larger base. By law, Belize keeps confidential all accounts information thus offering better asset protection. Another bonus? You can open an offshore account in Belize without traveling to the place with the help of an international bank or consultancy and monitor all the transactions online.