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My 7-Step Blueprint for Successful Offshore Investing
During the last 15-plus years I’ve opened numerous offshore brokerage accounts, from New Zealand to Africa to Eastern Europe.
Today I am sharing with you my blueprint for opening an overseas brokerage account. So when it’s time to go global with your greenbacks, you won’t have to bushwhack the trail and learn through your own trial-and-error.
When you know the right questions to ask, opening an account is quick and easy. Start to finish, you will be trading directly overseas in 10 days to 2 weeks. Let me show you how…
Tip # 1: Open One Account to Trade Many Markets
Don’t limit yourself to Austria when you can trade London, Paris, Moscow and more than 20 additional markets from the same account. Always ask overseas firms which exchanges they trade.
What you want are what I call Matryoshka firms. Like Russian nesting-doll toys that hide dolls within other dolls, Matryoshka firms offer multi-country access from a single account.
You’ll find firms that trade across all or a portion of Asia. Some European firms allow you to trade across nearly the entire continent, including Russia. And you’ll even find Matryoshka firms in Africa and the Middle East.
You want to be efficient when trading around the world, so the more exchanges you can access through a single brokerage account, the easier it is for you.
Tip # 2: Find Out if You Also Need a Bank Account
In the United States dividends flow directly into your brokerage account. Don’t assume the same thing is true in the rest of the world.
I own Australian shares through a New Zealand account. “Share registries” in Australia keep tabs on investors who own shares in a company, but do not deposit dividends or other payments into overseas accounts.
What they will do is deposit a check directly into a local Aussie bank, or mail the check to your house … in America. However, your local American bank teller won’t know what to do with it.
When opening your brokerage account, always ask the firm whether dividends will flow directly into your brokerage account, or if you’ll need to open a separate bank account instead.
If the latter, ask the brokerage firm if it can recommend a local bank it works with.
Note: This is not your typical “offshore bank account.” It is not a private bank account with six-figure minimums or personalized investment management. It’s just a plain-vanilla savings account.
It’s quite simple to open these accounts at a local bank, and then provide the bank information and account data to the share registry. The dividends and other payments will flow into your savings account and you’ll get confirmation from the share-registry and the bank.
Tip # 3: Don’t Let Share Prices Confuse You
U.S. investors are accustomed to stocks trading between roughly $10 and $100 a share. Stocks less than $5 (and especially less than a buck), are tagged as “penny stocks.”
However, this is not true elsewhere.
In many places, including Singapore, Australia and even the United Kingdom, you can find blue chips and the most widely held and reputable companies in the country trading in the neighborhood of just $5 per share — and frequently for less than a dollar.
Because of local financial culture, companies in many markets sell billions of shares to the public, rather then the tens or hundreds of millions common in the U.S.
Perfect example: Singapore Press Holdings, a blue chip media company, trades at less than S$4 a share and has a U.S. dollar market cap of $4.7 billion. Gannett, a well-known U.S. media giant, trades above $12 and has a market cap of $3 billion.
The key difference: Singapore Press has 1.6 billion shares outstanding, while Gannett has less than 240 million.
Tip # 4: Remember, English is the Universal Financial Language
Don’t let lack of foreign-language skills deter you from global profits, because finding an English-speaking platform is easier than you think.
Point of fact: I do not speak Arabic.
Yet I easily trade online in Egypt and the United Arab Emirates.
Most stock exchanges and foreign brokerage firms operate English-language shadow sites. You’ll often find the link on the homepage marked by a Union Jack flag, the word “English,” the letters ENG or, sometimes, a “Select Language” drop-down box.
Tip # 5: Ask About Additional Paperwork
When you open an account, email the firm to ask whether you must be registered with any centralized regulator or agency — and if so, what paperwork you must fill out.
In Singapore, for instance, the Central Depository Agency maintains all the shares investors buy and sell, and electronically records the movement of those shares in and out of brokerage accounts.
So Singapore investors need a CDP account, which is no big deal. Other countries impose similar requirements.
Because the paperwork is necessary, brokerage firms generally take care of it for you, though some will email the required paperwork and tell you where to send it.
Tip # 6: Wire Transfers Are the Best Way to Send Money Overseas
Transferring money overseas is easy. The international system for doing so is long-standing and well-tested. Wire your money on a Monday or Tuesday, and your cash often makes it to your account overseas by the end of the week.
But there is a hitch to be aware of. Credit unions aren’t always set up handle international wire transfers.
Many are small and rely on larger, centrally located affiliates to manage these kinds of transactions. The problem: They can take weeks to complete an international wire transfer. No one wants their money in limbo that long.
If you bank with a credit union, ask if it can handle international wire transfers directly and how long the process takes. If the answer is more than a few days, open a simple savings account at a super-regional or national bank and wire your money from that bank instead.
Tip # 7: Report Your Overseas Accounts to the IRS
Staying compliant with the IRS is easy. And make no mistake – it is absolutely necessary.
If your offshore brokerage and bank accounts total more than US$10,000 at any time during the tax year, you must file IRS form TD F 90-22.1 by June 30 the following year.
You can download the form from the IRS website at www.irs.gov.
It’s Simple When You Ask the Right Questions
If you do just one thing this year to prepare for America’s troubled financial future, open a brokerage account overseas.
Huge profit opportunities exist overseas that most investors miss out on because they assume opening a foreign brokerage account is either exceedingly difficult or impossible. Neither is true.
Don’t be one of the investors who misses out on these opportunities.
Until next time, keep a global view …
Jeff D. Opdyke
Senior Editor
The Sovereign Society
P.S. I’m in Denmark researching some great Scandinavian plays right now. And I’ll be in Los Cabos, Mexico in November, where you can join me at the annual Offshore Advantage Academy. To learn more about the event, and to take advantage of special Early Bird pricing, click here.
Other Posts from the Author
- The Fed is Telling us the US Dollar is Toast - February 14th, 2012
- On Election Day, Don't Encourage the Bastards - February 13th, 2012
- Why the Chinese Yuan is the Currency To Own for the Next Decade - February 6th, 2012
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Jeff, hi:
I am a Canadian citizen living in the U.S w/Green Card status. I have long been interested in opening up an offshore account to access funds outside the U.S. but understood it was difficult. Have recent laws relaxed?
I’m not convinced it is a simply process.
Sincerely, Jessie Robertson
I am not a taxpayer and find it extremely difficult as no US Bank will even open an account for me without a SSN/SIN/EIN US Gov’t Beast ID number. I’m sure Customs or Airport Security would confiscate 10′s of 1000′s of Fed Notes before traveling an international flight.
The ONLY way I can see is transferring the wealth to something like diamonds and transporting them in your pocket, exchanging them abroad for another currency and opening a Banking and Trading account.
When they issue ONLY an embedded chip in you for ID and access to the computer zeroes they allow to have, then its all over. I for one refuse to live in such a world.
What are the brokerage fees at the typical offshore brokerage Co.
Are there any insurance coverages like FDIC?
Thanks
Dear Jeff,
Which brokerage did you use in New Zealand?
Can you recommend any other offshore brokerages?
Thanks,
James
Hi James,
I am interested to know if you received recommendations on offshore brokerages and also which New Zealand brokerage Jeff from The Sovereign Society used.
Thanks, Jaya
[...] directly – and I think you should, since it’s safe and easy – I’ve put together seven steps to walk you through the [...]
Tip #7 – Only required for those who are defined as a “U.S. person”. This is confirmed via Form TD F 90-22.1 in which you will find on page 6 of that form…
“Who Must File this Report. Each United States person who
has a financial interest ….”
The definition of a “U.S. person” has not been presented in any of your discussions. The definition can be located at 26 USC 7701 (a)(30) which describes only statutory legal fictions created by the Congress. See http://www.law.cornell.edu/uscode/html/uscode26/usc_sec_26_00007701—-000-.html
A statutory “U.S. person” is not a living being but one created as a ‘nom de guerre’ and is presented to the unaware public ‘sub silentio’ in order to mislead Americans into making the false claim that they are legal fictions created by the Congress and are thus the property of the National Government.
I am not the property of the National Government nor am I a legal fiction. Making claims when one does not know the meaning only can lead to enslavement…and heavy taxation for a tax never levied upon the American people. The Federal Income Tax the IRS pursues against Americans was only levied upon the National Government itself….and not the American People. Just read the Legislative Intent of the 16th Amendment to the Constitution written by Pres. Taft, June 16, 1909, and published in the Congressional Record of the US Senate on pages 3344-3345.
Best to get it straight first….but fear may not allow you to do that.
Good afternoon Mr Brown,
Our customer service centre can help you with those details. Please call them on 1 888 358 8125.
Thank you
Teresa
Jeff,
Love the 7 tips. Love your SS newsletters. This year I’m planning on subscribing to both Emerging “Market Strategist” and “Global Growth Strategist.” I’m new to this world and need your help. Could you please provide a list of ‘Matryoshka-like’ overseas brokerage firms in the world so I can start doing me research? I take full responsibility for the firms I choose and do not hold you or the Sovereign Society. Otherwise, I don’t know how to start looking for overseas brokerage firms other than doing a Google search.
Very gratefully yours,
Bill Crowley