By Erica-Anne Strydom
Investment migration is a crucial strategy for high-net-worth individuals seeking to diversify their assets, reduce exposure to regional and global volatility, plan their succession, and gain citizenship or residency in a foreign country.
Increased offshore exposure and the more diverse your assets are, the lower the risk of impact by market volatility.
However, as with all investment strategies, in order to gain optimal returns it’s important to have a long-term vision and commitment.
The benefits of long-term investments across diversified offshore asset classes:
- Getting favourable returns: Historical data shows that equities outperform other asset classes over time. Share values can never fall into the negatives, but they can show infinite gains. A diversified strategy that is designed to support specific goals can maximise returns over the long-term.
- Reducing market risk: Investors who act without guidance often time markets poorly, due to their decisions being led by their emotions. Taking market timing out of the equation reduces investment risk, lessens the potential for lost opportunities, and ensures that investments benefit on the upswings.
- Outstripping inflation: Typically, long-term investments involve a greater share of a portfolio being allocated to growth assets, which carry higher risks but also hold the potential for greater rewards. Keeping your investments untouched for longer periods helps to outpace inflation and thus increase the purchasing power of the invested capital.
- Riding out market fluctuations: Markets do not only go in one direction; they fluctuate continuously in response to economic, political, and global events. If you exit a market in a downturn, you effectively lock in your losses. On the other hand, if you remain invested during the drops, you stand to benefit when the tide inevitably turns.
- Compounding interest: The longer you remain invested, the longer your money will grow as a result of the exponential effects of compounding. Taking a long-term view also offers an opportunity to reinvest profits, which in turn increases the potential for further profit.
- Diversifying assets: By diversifying from domestic investments, offshore investments hedge against economic and currency risks.
- Gaining global opportunities and enhanced mobility: Gaining a secondary citizenships or residency enables investors who are otherwise limited by their primary citizenship to access new markets and more favourable tax regimes.
- Planning for succession: Offshore trusts are an excellent vehicle for growing and protecting wealth and transferring assets to future generations. However, building wealth with the goal of leaving a financial legacy requires strategic planning. Wealth preservation and succession planning go hand-in-hand.
Investors looking to grow wealth, structure their estate optimally, start a company, or obtain citizenship or residency should only do so after consulting with professionals who are familiar with the investment and trust structures, legislation, and tax regimes in destination countries.
By adopting a well-informed, long-term investment migration strategy, high-net-worth individuals can secure their financial future, protect their assets, and create a lasting legacy for future generations.
Erica-Anne Strydom is business development consultant at the Sovereign Group
PERSONAL FINANCE