Georgetown Trust Blog

4 Questions to Ask before Making an Offshore Investment

Posted by Georgetown Trust on Dec 30, 2014 2:50:00 PM

dollar-_monument-_offshore-investing-TSInternational investing has the potential to help investors create a great deal of wealth and achieve a level of financial security that would be difficult to manage using other methods. The degree of success that you attain with offshore investing depends a great deal on how well you qualify each opportunity that comes your way.

When a particular offshore investment catches your eye, take the time to ask yourself a few questions about the background, projected performance and the relation of that performance to your financial goals.

1. What is the History of this Opportunity?

Understanding how the offshore investment has performed in the past can make it easier to understand the ups and downs that occurred within specific types of economic climates.

What you hope to see is that the asset did very well in a number of different situations with only minimal and short term losses along the way. This is a clue that the investment has a great deal of resiliency and is likely to continue a similar pattern in the future.

If the opportunity is new, then turn your attention to the history of the entity that is creating the investment. For example, take a close look at the backgrounds of the leading officers who are in charge of the new company that is about to launch the IPO.

If they have a proven track record of success, it is worth your time to look at the investment a little more closely.

2. How is the Investment Expected to Perform?

Every offshore investment comes along with projections for future performance. Your task as the investor is to determine if those projections are valid based on past performance and the facts used to develop those predictions. You also must determine if the projected performance is attractive enough to merit buying into the opportunity.

Don’t look just at the projection itself. Take the time to understand how it was developed and what information was taken into account. See if you agree with the projection based on what you can find out from various sources. If you find the projection is sound and not just wishful thinking, delve into the opportunity a little further.

3. What are the Risks?

There is no such thing as a risk free investment. That includes any type of offshore investment. Try to anticipate any factor or event that could prevent the opportunity from reaching its full potential. Use those scenarios to determine how that would affect your profit margin. If you feel the risk is in line with the potential returns, then proceed.

When it comes to offshore investing, the need to assess risk takes on a whole new dimension. You are not just interested in the potential of the investment and the stability of the issuer. You are also concerned with the governmental laws and regulations that will impact that offshore investment.

As part of your assessment, always consider how those laws will affect your returns for whatever period of time you believe it will take to earn the profits necessary to justify the purchase. Even if you are considering an investment based in a stable environment such as the nation of Belize, it still pays to make sure you understand the laws that will apply.

4. How Does the Investment Fit In With My Overall Financial Goals?

The true assessment of any offshore investment has to do with its ultimate value to you. Will the asset help to add another layer of diversity to your portfolio? Do you believe that owning the asset for the short or long term will allow you to achieve or at least more closer to attaining one of your goals?

An opportunity may have all the earmarks of being successful, but if it doesn’t move you forward, it is of little value. Rather than committing resources to something that ultimately does not provide the returns you want, move on to something that will.

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