Pros and Cons of Offshore Investing

Offshore investing has been a popular means of investment for many years. This type of investment can provide you with a number of advantages and disadvantages. Here are some of the pros and cons associated with offshore investing.

Pros

One of the biggest advantages that comes with offshore investing is tax reduction. The companies that you will be investing with will be located in countries that have much more favorable tax situations then you are used to in the United States. These companies might not have to pay anything to the local government because they are not necessarily doing any business in that country. They are only taking investments from foreign investors and conducting business overseas. Because of this, the company will not spend nearly as much on taxes as domestic investment firms do. Because of this, they will be able to increase substantially the amount of return that you can earn.

Another advantage of this type of investment is that you will have access to alternative forms of investment. Offshore investing companies do not have to worry about the rules of the Securities and Exchange Commission (SEC) when choosing their investment strategies. This opens up a world of investment opportunities that you previously were not aware of. Many of these investment opportunities can be very lucrative and can increase your returns even more.

By investing in another country, you will also be able to diversify your assets. If all of your money is tied up in domestic markets, you could be negatively affected if a recession were to take place. By putting a portion of your money in foreign markets, you will be able to safeguard your portfolio against a downturn in the economy.

Another advantage of offshore investments is confidentiality. Many offshore investment firms promise their clients complete confidentiality and will not release your financial information to anyone.

Cons

Although there are several advantages of investing offshore, you will have to deal with some potential problems as well. One of the biggest disadvantages is that this type of investing is not nearly as safe as investing domestically. Even though less regulation can be looked at as a benefit, it can also work against you. Without someone looking over the actions of the investment company, your funds may not be as safe as you would like. There are many stories out there of individuals investing in foreign companies and then losing their entire investments. If you are going to invest in a foreign country, make sure that you are investing in a country that has some type of financial regulations.

Many people have talked about being able to avoid paying taxes with offshore investments. In the past, this was a major benefit of investing in other countries. However, due to recent changes in IRS policy, this is no longer the case. Regardless of where your income is generated, you are going to have to pay income taxes on the money.

blog comments powered by Disqus
Scottrade