6 Tips for Successful Offshore Investing

The thought of offshore investment looks at the same time attractive and scary to many people. They have a vague idea that it is supposed to be quite profitable, but lack of knowledge about actual ways to start and doubts concerning the legality of the whole thing prevent them from even sitting down and learning enough to make an informed choice.

In reality, there is nothing frightening or supernatural about it – virtually anybody can try his hand at offshore investing. Here are a few tips to get you started.

1.   Don’t Get Confused by Share Costs

In the United States, shares’ costs usually vary somewhere between tens and hundreds of dollars. If stocks cost less than $5 per share, they are derogatorily classified as “penny stocks” and are treated as unstable, doubtful and inadvisable to buy for anyone but speculators. Thus, if you have some experience in trading US stocks, the situation in offshore markets may call for a serious paradigm shift. The thing is, in many countries even the most respected blue-chip companies trade $5 per share and less – simply because they often issue billions of shares instead of tens or hundreds of millions of them like in the USA.

2.   Find Good Advice

The fact that it is easy to get into it doesn’t mean that you should do it without getting any background knowledge and support from those who are already well-versed in this kind of thing. Getting sound advice, both financial and legal, is instrumental for successful international investing, and you certainly should find an experienced advisor to lead you into this fascinating world, at least at the beginning.

3.   Report Your Overseas Accounts to the IRS

In the past, offshore investment was often used for tax minimization, because many smaller countries have great tax incentives for foreign investors. However, in recent years the US government introduced a set of more restrictive laws delineating offshore investments, and today US citizens and residents are taxed according to their worldwide income, not just what they’ve earned within the USA borders. As a result, if your offshore brokerage and accounts ever exceed $10,000 in the course of a year, you should report it to the IRS before June 30 of the following year – or risk getting into a lot of trouble.

4.   Define Your Risk Tolerance at the Very Beginning

It will be of great help when looking for investments and explaining your requirements to your agents. Are you okay about the possibility of losing a considerable part of your money for a potentially higher tradeoff? Or do you prefer smaller returns paired with guaranteed security?

5.   Decide between Direct and Pooled Investment

Direct investing allows you to greatly save on brokerage fees, but requires a lot of paperwork to get out of the way first and may be hard for people inexperienced in this line of work. Pooled investments, e.g., such as managed funds, give you an access to a wider range of stocks than you can access directly. Both ways have their pros and cons, and which of them to choose is mostly based on your particular situation.

6.   Diversify

Remember that offshore investing is governed by the same rules as investing in general. Therefore, make sure you don’t put all your eggs into one basket and don’t invest all your assets into one company. Many people go for international investments to give themselves greater freedom – so make use of this freedom and hedge your bets!

Investing offshore needn’t be scary or intimidating – with a right approach and a bit of sound advice, you can pull it off even if you never tried your hand at stock exchange in your life.


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July 1, 2016 6 Tips for Successful Offshore Investing