DON’T PUT ALL YOUR EGGS IN ONE BASKET.
The Truth About Global Investing and Why You MUST Consider It!
By GARY A. FERRARO

Contributed by Guardian Trust Company (Asia) Ltd

IMPORTANT WARNING: This article has been offered in good faith by Investorsoffshore.com to provide assistance to investors but does not constitute investment advice or recommendations. Investors should not rely upon the information given in order to choose types or routes of investment but should make their own independent enquiries before making choices. Investorsoffshore.com has taken reasonable care in researching and presenting the information herein but makes no representations as to its accuracy and accepts no liability for actions taken or not taken as a result.

Nearly all investors have heard the term “Global Investing” or “Offshore Investing” at some point during their quest for successful, superior investment performance for their investment portfolios. They have heard the stories and read the news yet few investors really understand the compelling, incredible benefits, advantages and investment returns that can be achieved with global investing and even fewer know where to begin and who to turn to.

What is Global Investing? Global Investing is a comprehensive investment strategy focusing on the creation of, execution of and monitoring of a well-diversified, risk-tolerant, world-wide portfolio of investments across a broadly diversified, balanced spectrum of investment categories and asset allocations, which includes both investments located within and outside the country or residence of the investor.

Global Investing takes into consideration the importance of and relevance of, or lack thereof, different geographic areas and markets of the world, societies, cultures, social trends, financial systems, demographics, economic and financial trends, industrial trends and requirements, political trends, natural resources trends and geology.

Investors are often surprised to learn just how many products and services they use which are NOT made in the country where they are a citizens and/or reside. The list of brand names would be long and quite familiar. The MESSAGE learned is LOUD and CLEAR. Virtually all investors are “Global CONSUMERS” – yet not many are “Global INVESTORS”.

The time has come for all investors to open their eyes to and participate in the immense investment opportunities the world's markets offer. If you are not already actively engaged in global investing, then you are hurting and diminishing your financial and investment performance in a MASSIVE and DEVASTATING way. To Survive and thrive as an Investor, you will need a radical shift and new approach to investing. The Solution is Global Investing.

The COMPELLING CASE for Global Investing is clear!

1) OPPORTUNITY and CHOICE is DRAMATICALLY Increased.

1. Investors who put their money only in their own country’s equity markets (stock markets) are missing out on usually the VAST MAJORITY of the world’s total investment market place and total market capitalization.
2. These same investors also deny themselves access to approximately 75% of the total equity/stock market universe.
3. Many of the LARGEST industries in the world are dominated by companies NOT domiciled in the home country of most investors.

2) DIVERSIFICATION and its CRITICAL importance.

While most investors tend to focus primarily on domestic markets, there is a world of investment opportunities beyond their shores. The importance of diversification across different geographic regions, diverse economies, financial systems, societies and cultures, demographics, investment styles, market caps and industry sectors has become quite clear, yet most investors lack foreign exposure.

Through a global investing strategy, individual investors can gain exposure to the leading global companies, world economies, business cycles, worldwide currencies, stock-price valuations and obtain access to global leaders in industry and government. The largest and most sophisticated investors and financial institutions have FOUR times the allocation to international stocks and investments as compared to the average individual investor. Not surprisingly, this global investment allocation produces results that are a MINIMUM of 20 PERCENT better than the typical non-global investment strategy.

3) RISK REDUCTION:

Global investing has been repeatedly proven to demonstrate LOWER RISK. Despite the common misconception and conventional wisdom that the international markets are “too risky”, the facts are that the greatest risk individual investors are taking is to NOT be investing enough of their portfolio (or any of it at all) – in global markets.

Global investing also creates lower portfolio volatility. When you invest and diversify globally you actually REDUCE the risk to your overall portfolio. This has been repeatedly PROVEN in studies which show that investors holding both domestic and global investments have consistently experienced LOWER volatility in EVERY five-year period cycle since 1974.

4) DIVERSIFICATION AWAY FROM THE NORTH AMERICAN AND US INVESTMENT MARKETS.

For a very long time the U.S. markets were heavily invested in by global investors. The tide is now turning and it is clearer than ever before that any global investor who is TOO HEAVILY allocated to investments in the U.S. markets is facing the potential for catastrophic investment losses.
The US Dollar has fallen DRAMATICALLY against most major currencies not only over the short term but over the long term. In fact, in October, 2007 the US dollar reached its lowest point in decades and the trend is “going lower”. If your primary local currency is pegged to the US dollar, you better watch out and take action now. The US dollar is also regarded as a fiat currency backed by the "Full Faith and Credit of the United States of America" yet the United States Federal Deficit is at an all time MULTI-TRILLION DOLLAR HIGH.
Add to that such facts as: 1) the strong, steady rise of Gold and Silver prices; 2) that Oil prices are at all time highs; 3) that major countries like Brazil, Russia, Germany, and China and most of the Middle East have announced they are anti-US dollar and are switching out of dollars into Euros for financing and for conducting trade in oil; 4) significant reductions in foreign reserve holdings of US Treasuries; 5) that the Middle East continues to have tremendous instability and problems that is NOT going away anytime soon; and, last but not least 6) HUGE, SERIOUS problems in the US housing and mortgage markets.

5) DIVERSIFICATION AWAY FROM THE RISK OF DERIVATIVES.

Derivatives are a ticking time bomb and the financial weapons of potential financial mass destruction. The Total global derivatives market is valued at a staggering US $272 TRILLION based on recently available estimates. This figure is more than SEVEN times the size of the entire global economy. Even more disturbing is the fact that of this total, nearly one third of these derivatives (approximately US $77.6 trillion) are held by and concentrated in only three American Banks (JP Morgan Chase, Bank of America and Citigroup), based on recently available estimates. Currently only several banks hold most of it. Every investor would be wise to thoroughly investigate if their bankers are among the list.

6) DIVERSIFICATION AWAY FROM THE RISKS ASSOCIATED WITH MONEY SUPPLY, CREDIT AND DEBT.

Many financial systems, like the USA, are a system of debt created by the printing of money and the creation of credit, which is essentially money in digital form. This creation of credit is now out of control in key areas of the world financial markets, which will result in further devaluation of certain currently important currencies like the US dollar, the subsequent rising of inflation rates, very likely real estate crashes in certain markets, another highly likely stock market crash of bigger proportions, a continued surge of personal and business bankruptcies and a resulting domino effect of bank and insurance company failures.

7) PERFORMANCE.

Many of the world’s best performing stock market indices and mutual funds are NOT located in the country of citizenship and residence of most investors and the investment return of many of them is up an astounding 1,000 plus percent. It is not unusual at all for global markets to OUTPERFORM an investors domestic markets. It is also not unusual for the top ten companies in each industry sector to be located outside of the country of citizenship and residence of most investors.
Global investing also creates higher return in relation to risk. Consensus from worldwide studies has shown that a minimum 40 PERCENT global allocation has given investors the highest return per unit of risk. Historical data have also proven that the optimal exposure to international stocks and investing, as a means for reducing risk, has changed very little over the years.

8) VALUATIONS.

Very often non-domestic markets have much more ATTRACTIVE and REALISTIC Valuations. As an interesting example the Price per Earnings Ratio P/E. of stocks in the important China Shanghai A-share market is much higher that the P/E of the very same stocks listed on the Hong Kong Hang Seng stock market.

9) DEMOGRAHIC TRENDS.

Non-domestic markets for many investors have much more favorable demographic trends. Currently these trends are much more favorable in Europe and Asia, where age and population peak there many years from now. In contrast, the US population is an aging society and has peaked, and there are fewer new births. China and India are currently power house markets of hungry, aggressive consumers.

10) CURRENCY TRENDS.

Non-domestic markets often have much more favorable currency trends. For example, the US dollar continues to fall both long term and short term against virtually every currency of the world. The foreign currency market is the BIGGEST market in the world yet many investors do not take advantage of the potential for investment profit that is inherent in this huge market.

11) ASSET PROTECTION.

Very often global investment using non-domestic markets can assist an investor in achieving better asset protection than if done domestically. Using proper planning and legal structures like the Nevis-based LLC (Limited Liability Company), IBC (International Business Corporation) or Trust, foreign investments can be made through these legal entities to achieve many objectives including asset protection and/or tax planning.

12) TAX PLANNING.

Global investment using non-domestic markets can often assist an investor in achieving better tax planning or tax deferral than if done domestically. Using proper planning through legal structures like the Nevis LLC, IBC or Trust, or by using foreign variable life insurance or variable annuities, an investor can create powerful potential tax deferral and tax planning as well as asset protection.

13) INTERNATIONAL TRADE AND BUSINESS.

Non-domestic markets can assist an investor or business owner in the profitable expansion and diversification of their business activities to other markets. In fact a business may find that it can build greater revenues and profits by primarily or solely selling its goods and services outside of its domestic markets.

14) SAFETY OF PRINCIPLE.

Non-domestic markets can often provide greater safety for capital or other tangible or intangible assets. The foreign currencies of another market are often stronger and more stable to conduct business and investments. In addition foreign jurisdictions are often more friendly and stable, including many banks and financial institutions which are stronger, more stable, have been around longer and have fewer failures.

The reality is that global investing offers unrivaled opportunities for superior investment returns, prudent investment diversification, lower risk, potential tax planning benefits, potential superior financial privacy, asset protection and estate planning. The bottom line is clear -EVERY investor should be investing globally.

About the Author:
Gary A. Ferraro is the President and Chief Executive Officer of Guardian Trust Company, the Wealth Management Institute, and the Kredit Privee’ Group of companies. He may be contacted at Guardian Trust Company via phone at 852-2251-8178 or via e-mail at admin@guardiantrustcompany.com


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