Any seasoned investor, or even someone new to the scene, understands that there is an amount of risk that goes into an investment. Market volatility can be caused by a variety of factors, from social and economic issues in a country to inflation. No matter the reason, when you invest your money into an asset, identifying risks and providing strategies to avoid them plays a key role in wealth management and financial planning. Investors want to keep in mind how much they may lose if a deal goes sour or a market crashes.
Let’s dive into one of the most important rules of investing.
Just like in everything you do, when making an investment you are opening yourself up to many financial risks, such as high inflation, volatility in capital markets, bankruptcy, recession, and more.
In order to make the risk smaller, and to minimize the probability that your investment will run into a risk, investors and fund managers practice risk management.
There’s a good chance that one of your sources of income may take a drastic hit. Due to an array of events, certain markets may not be as strong as others. In the event that you make all of your investments in one sector, such as real estate, all of your investments could be at risk in the event of a crash. If you invest in many different kinds of markets and investments, the chances that all of your sources of income are hurt at once is low.
Diversifying your portfolio is one of the most well known and reliable risk management strategies. By having multiple different sources, you can rest easy when one of your investments falls through.
Now that you know why you should diversify your portfolio, let’s look at how you can do so with a foreign investment.
Foreign Real Estate
Investing in foreign real estate is one of the most popular ways to diversify a portfolio. real estate investments can lead to residency and, in some cases, a quicker road to citizenship. In rare cases, immediate citizenship is offered after a high enough investment in real estate. This is especially attractive for those looking to expatriate or those who want to earn a second passport in order to extend the amount of visa-free travel that is possible. This can play a key role in offshore retirement or years of stress-free travel.
There are also a lot of tax benefits that come with investing in real estate offshore. In fact, it is one of the few ways that an American can legally keep some of their money offshore privately. When real estate is held directly in an investor’s name, as opposed to in a trust or LLC, the investment is not reportable.
One of the most important (if not THE most important) reasons investors choose to buy real estate internationally is to save their wealth abroad. By owning foreign real estate, an investor can keep their money outside of the reach of their local government. There are also greater returns in the real estate markets of other countries.
Diversification and hedging are two perks of alternative investments since they have little correlation with standard asset classes, making alternative investments the perfect addition to your portfolio. This has led many institutional funds, like pensions, to place a small amount their portfolios to alternative investments such as gold.
One of the biggest uses for gold is for diversification. The trick to diversification is finding investments that are not correlated with one another. Historically, gold has always done the opposite of what stocks and other financial instruments have done. For example, the 1970s were not strong years for stocks, but gold was thriving. In the 1980s and 90s, stocks were up but gold was down. When the 2008 financial crash occurred, investors were leaving behind the dropping stock market and began buying gold again.
Storing your gold in Swiss vaults has been a proven way for those who would like to protect their gold to do so safely with trusted banks. Switzerland has historically been one of the leading countries in terms of offshore gold storage. The country has one of the world’s largest reserves of gold per capita.
Whether it’s a bank or a private vault, Switzerland’s options for storing gold have always been held in high regard.
There are many reasons one would choose to invest in a foreign currency, mostly protecting from risk. For one, diversification plays a key role in any healthy portfolio. By buying other currencies, you can hedge yourself against losing out from another investment or also gain from economic strength of another nation.
There are many benefits of the Swiss franc as an investment option. One of these benefits is Switzerland’s strong economic system with controlled requirements and slight growth. This stems from the size of the country. The small country has an equally small population that takes advantage of its natural resources. There are limited investments required for production and agriculture that support the strong economy.
The economy is so strong that there is no national deficit. The Swiss income exceeds its expenses, so the currency is fully backed by a self-reliant economy. The country also boasts low unemployment, high per capita income, and a popular banking destination utilized worldwide.
Foreign exchange, forex, or FX, accounts allow investors to trade all major currency and some emerging market pairs. The forex market allows companies to move money across borders easily, minimize foreign currency risk, and maximize returns. Most simply put, this is the market where you can buy other currencies, like Swiss and Chinese currencies for financial gain. With the help of Alpen Partners advisors, you can protect you or your company with foreign exchanges.
Alpen Partners Wealth Management International AG, the sister company of Alpen Partners Wealth Management AG, is now a registered investment advisor with the U.S. Securities and Exchange Commission (SEC). Together with our partner Swiss private banks, our company can now offer the full Swiss private banking experience to American clients, both resident and non-resident.
Building on many years of experience in private banking in Switzerland, Alpen Partners Wealth Management International AG provides investment advisory services to U.S. clients. Swiss banking is highly regarded around the world, well known for being sophisticated and discreet.