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For investors looking to diversify their portfolio the international market can be an attractive choice. It provides investment options not available at home and broadening your horizons can only be a good thing. From international shares to Forex and Contracts for Difference the trading opportunities are endless. All of these come with varying pros and cons so do your homework. Here are five ways international investment could benefit you.
1) Diversification – Diversification as the name suggests is investing in diverse markets and sectors. This is a lot easier when you have the choice of the whole world as opposed to just sticking to Australian investments. Often, domestic investments can come with lots of restrictions which means that it is harder to build a diversified investment portfolio. Many offshore accounts give greater flexibility so you have unlimited access to the world markets. Developing countries are an option to invest in, especially when they are privatising sectors that were previously government run. China is one example of the opportunity provided by privatisation.
2) Confidentiality – In business, keeping your money affairs private can be a key priority. When selecting international investments you can choose to invest in countries that have established strict corporate and banking confidentiality rules. If your confidentiality is breached, there can be serious consequences. So, if you find that your identity has been divulged, you will be protected if you select the right country to invest in. It is important to remember that you won’t be above the law and this confidentiality won’t be upheld if you are dealing in any illegal activities or organisations.
3) Asset Protection – Offshore centres have been used for restructuring ownership of assets through trusts, foundations or existing corporations to transfer wealth ownership to other legal entities. Where some people have been concerned by the possibility of lawsuits or lenders foreclosing on outstanding debts, they have elected to transfer a portion of their assets from their personal estates to an entity that holds it outside their home country. This in turn means that their personal estates won’t be seized because their assets will be protected. As an Australian resident, you are generally taxed on any capital gains you make on overseas assets; for example, when you sell an overseas property you must report the gain in your tax return. If you’ve already paid foreign tax on it, check with the tax office to see if you can receive any offset.
4) Tax Reduction – This is slightly controversial as many governments are now allocating lots of time to investigating the use of tax havens. It doesn’t have to be a shady deal though, and you can still benefit by investing in countries with tax incentives for foreign investors. Making investments through foreign corporations can be a big advantage over making investments as an individual. You will need to be aware of the law so you do not fall foul.
5) Invest in different currencies – Similar to diversification, it can benefit your portfolio if you invest in multiple currencies. Currencies fluctuate regularly due to international events and decisions made by leaders but not every currency will react in the same way. The US dollars you hold, say, could shoot up in value and leave you with greater spending power through little or no effort.
Be aware that offshore investment is complicated and it’s important to seek the advice of a qualified financial adviser or lawyer before acting concretely on these facts about international investments. We wish you the best of luck in your wealth building endeavors!