What Is The Difference Between Onshore And Offshore Investments?

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Deciding between onshore and offshore investments can be tricky – without the right knowledge. This is why it’s essential to do proper research into the type of investment you are getting into prior to confirming anything. 

Lance is interested in investing some extra funds offshore in order to diversify his portfolio. He wants to learn as much as possible. 

The difference between onshore and offshore investments often lies in the regulations that govern the investments. 

Where the fund is based is a key differentiating factor. 

Onshore funds are subject to fiduciary regulations of that country, while offshore investments are often chosen for tax purposes. It’s key to enlist the help of an experienced, qualified financial advisor in this regard. 

Onshore organisations are generally limited to completing their activities in the country in which they have been registered, although they aren’t limited too much. 

Offshore companies on the other hand, can only complete activities outside the countries they are registered in. These entities are usually created to protect assets. 

The purest form of investing in another jurisdiction involves moving money out of South Africa by converting Rand to a foreign currency. It’s key to consider the exchange rate before investing offshore. Also vital to keep in mind is the fact that you are still liable for income tax and taxation on dividends earned.  

While strategic asset allocation is important, even more key is selecting the right option for you and your objectives as an investor. Offshore investments can be done by direct investment or by investing in local funds with offshore interests. Lance needs to consult a financial advisor in order to get the best returns. 

One of the main benefits of understanding the difference between onshore and offshore investments is that the latter enables one to diversify their portfolio. Investing in other currencies should be done with a medium to long-term strategy, with the use of professional advice. 

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