Globalization has made boundaries blur and activities are no longer carried out on a national basis. Especially, economic activities like banking, financing and investments are no longer restricted to a specific country. They have attained a worldwide status and can be practiced from various points in the world. The greatest impact of globalization can be seen on the investment sector with offshore investment emerging as a major investment branch or segment.

What is Offshore Investing

Offshore investing refers to the investments made outside the geographical and legal boundaries of a country. When investors purchase securities or properties outside their own country, it is known as offshore investing. Likewise, if an investor purchases shares, bonds or mutual funds from companies that have there headquarter outside the country of their residence then it is known as offshore investing. For example, if investors in United Kingdom invest in securities or properties outside the British economic law purview then it is called offshore investing.

Advantages of Offshore Investing

Offshore investing allows a domestic investor to invest in foreign currencies through the right channels. There are several advantages of offshore investing and some of them are as follows:

1) It is necessary for any investor to diversify his currency holdings. There was a time when the US dollar was a powerful and all-encompassing currency. However, in the previous few years, the US dollar has lost almost a quarter of its value. The dollar is facing a stiff competition from other prominent currencies like the Euro. Diversification of currencies allows the investor to gain the positives from all the currencies. This diversification becomes extremely easy and smooth for an investor through offshore investments. They can invest in foreign banks and companies having branches in their country for this purpose.

2) Offshore investments allow an investor to capitalize on the gains and profits that accrue as a result of growth and development in the foreign markets. Investors of a country can enjoy the benefits of the boom in the economy of another market.

3) If the investors want to keep their assets confidential and away from any attention then the best way is to invest the income in foreign countries. Countries usually do not have a measuring rod or any method of tracing the investments once they are outside the domestic circuit.

4) Offshore investments provide a cushioning for the investors in conditions of a terrorist attack. The domestic market of a country is severely affected if it is hit by a massive terrorist attack. Hence, in such condition the investors are left with no choice but to abandon their investments or get very low returns. Offshore investments ensure that atleast some portion of their investments are secure and growing.

5) A large number of investors invest in offshore investments to enjoy the benefit of tax exemptions that offshore investments normally offer. Several countries enjoy the status of being tax havens that offer tax holidays to foreign investors. These tax exemptions are given primarily to attract foreign capital and investments in the country.

Tips for Offshore Investing

It is always important for an investor to make investment decisions extremely carefully and systematically. Some of the prominent tips for offshore investments are as follows:

1) It is necessary for the investor to first check the growth prospects of the country to which the investment company belongs. Investor must not only opt for offshore investment only on the basis of the credentials of the company. It is vital that the country of origin has tremendous growth prospect and a burgeoning economy. This is because these are the factors that would eventually determine the rate and the amount of returns that an investor would get on his investments.

2) The investor must carefully analyze the profile and quality of the goods and services offered by the company in which he is planning to invest. Also, if the nature of the goods and services are beyond the understanding of the investor must refrain from investing in such companies. Investors must be careful of not falling victim to any hype that surrounds a foreign company.

3) Investors must keep in mind the overall picture of the market for a commodity or service in that country and then make the investment decision. This is the fundamental factor that must determine the offshore investment decision of an individual.

4) The investor must have a clear idea about the extent of risk that he is assuming while investing in the offshore venture and whether he is able to sustain that risk for the specific time period.

Types of Offshore Investing

Realistically speaking, there are various types of offshore investing options available for the investors. However, the most important types of offshore investing are as follows:

1) Private Banking: When investors invest in private banks located outside their country it is known as private banking. Private banking helps the investor in providing utmost secrecy with respect to the details of the investor. Private banking helps the investor in comprehensive investment management. It helps the investor in holding large amounts in transit and also offers the facility of bridging finance to the investor.

2) Fund Investments: Fund investments refer to investments made in a specific type of assets and securities. This means that an individual can invest in British shares or Russian energy establishments or Japanese technological firms. Fund investments help the investor in diversifying and spreading the risks so that their risks are reduced and the rewards are increased.

3) Equity Investments: Equity investments are the fastest growing investment types in the world. Offshore equity investments include equity investments that include direct investments in publicly quoted equities. Mutual funds invest in equities to a great extent.

4) Pension investment: Pension investments carry tax benefits mainly in countries that have high tax impositions. High tax countries provide encouragement to retirement savings through techniques like pension plans; investment gains pension funds and such other tools. These are partially or completely tax-free techniques, which is beneficial for the investors.

Offshore investments provide some of the best investment options to the investors in various countries. This can be beneficial for the investors as well as the companies in which they invest. They get the capital required for the development of the country while the investors are benefited by the increasing returns.