If you’ve settled on a strategy for offshore investing and are considering investment funds as a part of your portfolio it’s helpful to know what to look for to avoid an underperforming investment. Offshore investing is all about finding outside opportunities that aren’t readily available in onshore investment circles. Maximizing returns and minimizing risk still applies for any offshore endeavor just as it does for domestic investments.
Do the due diligence as you would on any domestic investment and research the financials of the entity supporting the offshore fund. You’re looking for financial stability and positive long term performance. Location is also very important with offshore funds since the investment laws can vary from country to country. Don’t make assumptions on the types of protections and provisions afforded to the investors. Know what you’re getting into forwards, backwards, upside down and sideways. Knowledge is the power to protect yourself.
Also look at the longevity of the fund. How long has it been in operation? A relatively new fund may require extra scrutiny to the fund backers. Do they have the experience and a past history of success? If that’s the case it could be worth you time and money to continue investigating. Assess the possible returns by researching the past performance of the fund. Look at how it’s performed through various economic conditions. Has it been managed well through political, economic or environmental instability? Look where the fund is at now: does it compare favorably with other investment opportunities? A continued positive trend is a good indicator of a steady rate of return in the future. Make projections for the next few years based on a possible range of market moves over that period. The projections should indicate a decent level of return even through the worst case scenario. If not then move on to something else.
Since you’re looking for a low maintenance versus higher yield ratio, look also to any expenses you could incur while owning the investment. Know the financial obligations behind your investment and if the fund structure will let you minimize any domestic or offshore tax obligation. Consider the new tax laws coming into effect (FATCA) and the amount of capital gains tax you will be responsible for every year. You may not have considered the sort of bookkeeping and transaction fees associated with handling the funds. Research these and add them into the mix. Compare and contrast your projections against the obligations you’ve uncovered. Are they favorable? Will the fund still perform to the expectations you set for your portfolio? Is there more risk, over time, versus a rate of return?
There’s no reason you can’t make an offshore investment fund (or funds) part of a balanced investment strategy. By not skimping on due diligence, risk assessment and management you’ll make a more informed and wiser choice of funds for your portfolio. Know yourself and have an honest look at your risk aversion and you’ll come out ahead every time.