Tag Archives: offshore investing

Should investors worry about inflation?

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In definition, inflation takes place when there is a noticeable rise in the prices of both goods and services, resulting in an equal fall of a currency’s purchasing power. This event has majorly caused serious financial woes especially for fix-waged earners, but this period can also be challenging especially for investors looking at long-term goals.

How inflation affects investors will depend on their choice of investment. Basically, as the implicit value of money fails, long-term investors have to worry about how inflation can slowly take away real savings, devaluing investment returns and at the same time, decreasing their long-term purchasing power.

Unprotected investment portfolios that lack enough diversification can be the top victim of inflation. For instance, investors who look forward to a stable income stream from fixed income securities find inflation as their number one threat. Most fixed income securities carry the same rate of interest until maturity, making its purchasing power vulnerable to decline.

As a response to the risks posed by inflation, experts—such as LOM Financial—suggest investing in equities as a more flexible and safer alternative. With this type of investment vehicle, there’s a higher possibility that the value of one’s investment can have the chance to fight the effects of inflation.

However, investing in equities doesn’t protect you from other threats that could make you lose your money. This investment option carries a high risk and should be carefully studied and assessed. Such risks are understandably a major consideration in how portfolios must be designed, including offshore discretionary management accounts.

Of course, your investing strategies should ultimately depend on your financial goals and how you want to survive in the world of investing. The only way to protect yourself from these risks is to stay informed, learn from your failures, and remember the lessons of your success.

Offshore financial centers and how they thrive on near-zero taxation

Image source: LOM Financial

 

Most countries generate revenue via different sources and national taxation is one of them. Two of the biggest national income providers come from the citizen’s personal income tax and the domiciled companies’ corporate taxes, but what happens to jurisdictions who decided not to impose them?

Offshore financial centers (OFCs) are often asked the same question: how can these geographically small nations afford not to impose corporate and personal income taxes? Since it’s impossible to support the economic growth of these countries, how will they make up for the loss from the absence of these revenue-generating systems?

The truth is, OFCs enjoy several benefits than other nations but it doesn’t mean that they’re completely tax-free. The taxation system in the Cayman Islands, for instance, supplement the loss of corporate taxes by imposing several measures like increasing tax requirements for imported goods, resulting in a higher cost of living. This means that while employees enjoy a completely zero income tax environment, they have to pay higher for their daily, living expenses.

One of the most interesting facts about the Cayman Islands is the number of domiciled companies in this jurisdiction: approximately over a hundred thousand – that’s almost twice their territory’s total population. This impressive statistics also means one thing: while there is no corporate tax collected from over 100,000 companies based in this offshore investment center, the government still earns by imposing registration fees as not just a one-time payment since an annual renewal fee for continued operations is also required.

Indeed, tax revenues from a growing business environment as well as the spending power of a particular population make up a large percentage of the national income, but there is also one sector that contributes to its total earnings: the tourism industry. From this highly active sector, tropical OFC destinations earn from collecting departure taxes as soon as tourists exit the country.