Offshore Investing 101

Advertorial by
Philip Barbour
Director, MBMG International

Most people would agree that tax-free investments bring more individual benefits and that we could all do with better returns than we get from our bank deposit accounts. But few people are knowledgeable enough about markets overseas to take the chance. Its not that complicated actually. The most obvious starting point is to sit down with a good broker who can explain everything in a simple jargon-free manner. However its always nice to have a general idea of the concept before that first meeting.

Investment is for rich people !

This a huge misconception. Regular monthly savings can start from as little as US$75. In a personal meeting with your broker do not feel embarrassed that you may not be saving as much as all their other wonderfully rich clients. Most savers are modest savers and as the broker will receive their commission regardless you are better advised not to exaggerate or impress if you want a meaningful recommendation. As a rough guide you have the option to save on a regular basis or as one lump sum.

Regular Savings Plans

Regular savings are used more commonly for pension plans education fees planning or to repay a home loan. These savings plans follow the same age and salary-percentage rules that your banks and brokers use in your home country. The difference is that your money is being invested in options abroad.

Normally savings plans are taken with the large offshore insurance companies based in jurisdictions such as the Isle of Man, Jersey, Guernsey, Luxembourg or Switzerland. They offer well structured plans and administer the receipt and distribution of your regular savings. Your accumulation occurs with nominal or no tax and can be paid to you upon maturity in any freely available currency in a recognized bank of your choosing. However, it is very important to understand the commitment aspect of these plans as many people are mis-sold.

There are charges associated with taking an offshore savings plan and you will normally be expected to fulfill an initial period of payment before you can exercise your right to stop or reduce payments. If your horizons are less than 3-5 years these are most likely not the plans for you. Just like some investment plans in your own country fees are charged to access your funds before the investment maturity date. If you let it sit of course the effect of compounding tax free growth over a number of years will reap rewards over the longer term and offer the advantages of a personal savings plan: flexibility in savings level (after that initial period before the maturity date) mobility range of underlying investment options and access to your savings.

A real advantage to saving monthly is that you do not have to concern yourself with market timing or identifying the best moment to commit. During the term of your plan the markets will inevitably go up and down and you will average out their movement. This is referred to as Dollar Cost Averaging. You will accumulate more within your plan when markets are low (as they are now) and then as a sustained recovery occurs all the investment units you have been accruing will go up in value - in exactly the same way your house or apartment would go up in value during a property rally.

In an industry that is becoming more competitive by the week ask your broker for any incentives that may be available at present as many of the companies are offering a carrot or two for larger monthly savings or longer term plans. However, DO NOT OVER EXTEND YOURSELF IN LENGTH OF TERM OR MONTHLY SAVINGS LEVEL. You would always be better advised to start comfortably and increase at a later date. A savings plan that you have to stop within the initial period would with most companies lapse without value.

Lump Sum or Single Premium Investments

Sometimes referred to as Bonds these investments are slightly different from regular savings plans. On more traditionally styled equity based products the market timing becomes more important. There is a need to achieve value for money. This is not so difficult when it comes to analyzing the markets. The problem lies in getting the investor to part with their money when the daily news stories paint a picture of doom and gloom. Be warned most investors have a tendency to buy when the markets have already gone up and are therefore expensive and sell when they get scared as the markets fall and are worth less. A terrible mistake.

You should also be aware that the range of products has expanded dramatically over the last five years and the average person now has access to some rather sophisticated products offering positive return in rising OR falling markets and guaranteeing your initial capital.

Smart questions to ask:

1. Is there an establishment fee and if so is it taken at inception up-front or is it divided up over a number of years?
2. Are there exit/surrender fees?
3. Guarantees. Is my product insurance still valid if I withdraw my money before a specified date?
4. Is there a bonus payable depending upon how long I leave my money invested?

All plans are different. You have access to a wide variety of good quality specialist unit trusts you can start off with as little as US$2,000. But through the offshore insurance companies the average starting investment is US$15,000. These plans will like regular savings plans give you access to a wide range of managed funds that you can switch between freely usually free of charge.

For the more experienced investor wanting access to an wider variety of funds together with stocks and shares an investment of US$50,000 gives access to a range of Personal Portfolio Bonds. These offer tax efficiency security and confidentiality while your portfolio is administered by a dedicated service provider that collates a vast range of investment vehicles under one roof.

For More Information

Contact MBMG International at their Bangkok office: Tel. 02-650 3123-4, Fax. 650 3125 bangkok@mbmg-international.com

Please Note: This article does not constitute investment advice by MBMG International or any of its officers. You officers. You should seek the advice of your financial advisor prior to committing to any financial investment.