Financial Diversity Might Be More Important Than Ever

If you are like me you are sitting inside your home watching the world move through varying stages of restlessness and paranoia.

Don’t get me wrong there is a cause for concern, however in times of uncertainty its more likely that our feelings of anxiety is more to due with how we personally respond to a uncertainty rather than the crises itself.

The fractures seen in the economies around the world are likely to become more noticeable in the weeks to come. Global institutions are feeling the stress of a system resting precariously in the balance.

Financial Diversity

If the totality of your life is dependent upon the functioning of any single system you are at risk.

If you have all your accounts in one country, along with all your property, investments, IRA, portfolios, you are setting yourself up for a catastrophe.

Within our lifetime we have actually seen numerous countries experience economic downturns, bank failures, capital controls, currency manipulations, and collapses.

If you haven't been living under a rock the last decade you would have seen the disasters that occurred in Greece, Ukraine, and Venezuela in 2008. Whole economies were ruined. And with it entire banking systems and sectors of the economy.

It's not so much about 'if a recession will take place' the question is 'when'.

No system is immune from cycles. The only thing that we can do is to be ready for when it arrives.

Fortunately, we can do more than simply stockpile toilet tissue, and dig a hole in the backyard and bury all our treasures.

To avoid a repeat of the 2008 crises, we must diversify our assets across sectors, asset classes, accounts, currencies, and jurisdictions.

Diversifying assets in such a way that a crash in any one sector, currency, or country will not undermine ones financial future.

Opening an account in a banking system in a country other than your own gives you the ability to hold foreign currency in a second account all the while in a secure and stable banking institution.

Having assets in a part of the world disconnected from your primary residence will help spread the risk of being caught with your pants around your ankles.

Benefits of an Overseas Account

Opening an offshore account gives you several benefits. By not having all your assets in one nation, currency, bank, class, or account, gives you security so that you don’t lose everything should one domino fall.

A foreign banking account in a stable bank accomplishes this by way of:

• Asset diversification (through country, bank, currency)
• Higher interest rates
• Better privacy
• Financial security
• More investment possibilities

Now, why is all this needed? You may ask.

During the 2008 crisis, in the United States alone, almost 500 banks went bankrupt.

Unfortunately in the USA ] banks have policies that allow low liquidity and capital reserves, are overly exposed to risky financial investments, and offer very little privacy all existing in a system that has essentially become insolvent.

This is a recipe for disaster.

On other other hand, banks in many other parts of the world have an institutional arrangement based on sound financial policies, countries such as Singapore, Germany, and Hong Kong.

Even if you are fortunate enough to live in a country that has a stable banking system, jurisdictional diversity is still the single most important thing you can do to protect your assets.

Risk Reduction

Financial diversity is the antidote to a potentially poisonous local economy. A recession can sweep through a country at any time and erase years of gains in an instant.

Though financial diversification is often integrated within a personal financial strategy, it is not typically applied to jurisdictional diversity. Spreading your assets in a different country and account greatly reduces the risk should anything go wrong.

This is why its important to take action to safeguard your assets before there is a crisis so that you are not scrambling in the midst of it.

Takeaway

There are a huge variety of offshore jurisdictions, accounts and structures each with its own advantages. Whatever course you decide to take, financial diversity is a simple feasible solution that guarantees that whatever comes you will be well-prepared.