Many of our readers are interested in offshore investing and offshore investment funds, and they frequently contact us for advice. The question we are most frequently asked is: Do high yield investment programs really exist?

In this article we look first at offshore investing scams and how to avoid them, then we will move on to the topic of genuine alternative offshore investment opportunities that can legitimately generate high returns for investors.

Of course,  programs referred to as HYIPs (High Yield Investment Programs) do exist, but most of them are scams – or more specifically ponzi schemes. There are internet HYIPs where you can invest $10 and get $20 back the next day. And there are more sophisticated scams, involving complicated terminology like ‘bank debentures’ or ‘standby letters of credit’. There are whole websites dedicated to scam concepts like ‘offshore fund leasing.’ People frequently lose hundreds of thousands of dollars to these more sophisticated rip-offs. Such funds, once lost, are almost impossible to recover.

One of the ironies about such deals is that the scammers often claim that they are making money with exotic named things inter-bank trading, seasoned notes, and other mysterious offshore financial instruments… some so secretive that ordinary bankers don’t know they exist!

Years ago we used to ridicule such ideas. We used to say that the bankers didn’t know about them simply because such things don’t exist. But the last few years have proven us wrong – there are indeed weird things going on behind the scenes that most bankers don’t understand or even know about! For starters, most bankers don’t seem to realize the facts about the giant Federal Reserve scam, a privately-owned company, printing money backed by nothing, that is responsible for the devaluation of the dollar. And very few bankers understand or have even heard of the mysterious forex operation CLS Bank that settles around $5 trillion worth of transactions every day. The lesson here is that all good scams have an element of truth.

But, here at Q Wealth we like to accentuate the positive. So let’s rephrase the question a bit. Are there any legitimate offshore investment funds where you can make say 10% or 15% return with little risk? The answer is yes, such opportunities do exist. But it does take some work to find them. And once you find them, you should be prepared to dedicate some time to monitoring them.

The general rule is that the higher the rate of return, the higher the risk. Some people are happier than others to accept risk. For example you might dedicate a small part of your investment portfolio to high risk ‘play money’. Younger people can generally afford to accept a higher degree of risk than persons approaching retirement. Absolutely the worst thing you can do, of course, is to put everything into one offshore investment because the worst can always happen.

So where do you find such opportunities? In Q Wealth Report of course! We are constantly on the lookout for genuine investment opportunities and funds that have the offshore advantage. What is the offshore advantage? Since there is no tax deducted at source and no automatic reporting, you can often roll over profits and reinvest them, rather than paying tax on the income. Over a period of five or ten years, the compounding effect can be huge.

The rule of thumb is that with onshore investment funds you might take three steps forward, then two steps back as the tax is deducted. With offshore investing funds, you take three steps forward, then the next year you take three steps forward again… and so on, and so on.

In our flagship Q Wealth newsletter, we frequently spotlight offshore investment funds and opportunities that we have done full due diligence on. There is always a risk, but we can help you minimize it. Since the investments we feature are generally managed offshore, you can participate as a sophisticated investor or via your offshore corporation, foundation or IBC.

Frequently Q Wealth Events also turn into incubators for great offshore investment ideas, that have a potential for high return. Getting together for a few days with like minded, free thinking individuals and simply brainstorming is a fantastic way to get these offshore income generating opportunities off the ground. Our next event will be in Ireland in September, and we will be focusing it even more than ever on offshore investments. Even if you only have a small amount to invest, consider coming along. Contact us to be put on the list and we will let you know as soon as the dates are fixed.

Finally, if you are interested in our offshore investment advice and are new to this site, don’t miss the opportunity to sign up for our free five part course Secrets of the Super Rich, delivered free and without obligation to your e-mail inbox. You will also receive a free subscription to Q Bytes newsletter, which from time to time features serious high value opportunities too.

by Peter Macfarlane, Offshore Banking Expert at The Q Wealth Report

Do you know how anyone, regardless of credit history, can borrow money offshore at only 1% interest (or even less) with no scheduled repayment date, then simultaneously reinvest it for a much higher return elsewhere?

Of course not – because the rock-solid European banks routinely making such loans are not allowed to advertise these deals in your country. Your government calls this “investor protection.” Here at The Q Wealth Report, we call it “protecting the cosy domestic banking cartel.”

Foreign currency aribitrage is one of the areas where you can make money even in a falling market. Currencies will always go up and down, and there will always be big differentials in interest rates. Trading “pips” in the forex market, where you can make or break your account in a matter of minutes, is not every investor’s idea of fun. Slower moving and less risky (though of course not risk free), the types of foreign currency arbitrage programs we are writing about here offer an attractive alternative for more conservative investors.

The arbitrage or investment loan is a fairly standard wealth creation offering from European private banks, albeit little known. The gearing of the initial deposit, together with the currency arbitrage, makes it possible to invest a larger amount in a currency with high interest rates, thereby increasing the prospects of high returns.

Typically you will have to invest about USD/EUR 250,000 in a private offshore bank to get that facility. This can then be leveraged from one to five times, depending on the risk level of the currency you are buying into. If the initial deposit is USD 250,000, a loan of up to USD 1,000,000 can be contracted and then a proportion of that can be invested in a high income Bank CD in a currency paying a much higher interest rate.

The loan will typically be taken in a low interest currency s0 at the moment, USD, EUR and GBP would be perfect… although traditionally most loans have been taken in Swiss Francs or Japanese Yen. To spread risk, you can also choose to take the loan in a combination of two or more currencies. Then, you take the loan proceeds to buy another currency, paying a higher yield in CDs – typically in a multi-currency account at the same bank.

A variation on the same theme, of course, would be investing in gold. You can certainly borrow money against CDs or electronic gold to invest in other products offered by your private bank. Whether they would allow you to borrow against physical gold? I doubt it, unfortunately. In this case you might just be better off buying Perth Mint Certificates and asking your friendly offshore banker for a loan secured by that. Alternatively, hedge your investments by borrowing against US dollar investments, in US dollars, but using the loan proceeds to buy gold. That way you get the best of both worlds.

(Note – I normally recommend only physical gold – see my article How to Buy and Hide Gold Bullion Offshore. But, if someone is lending me money at 1% interest in fiat currency, and I can buy gold with it, I might not be so fussy…)

The profit factors, to summarize, are as follows:

• Exchange rate factor: Raising a loan in one currency and investing in another can lead to exchange rate gains as wells as losses.
• Interest rate factor: Where investments are made in bank CDs, the interest rate level of the currency of CDs can affect the return on the investment.
• Gearing factor: The return on investments is improved by the gearing of the initial deposit. The gearing factor plays an important role again if there is a loss. (You lose more!)

Of course, like any investment, you should do your due diligence very carefully. The good thing is that this, when done correctly (read those last three words again!) this makes a standard, conservative bank deposit that much more exciting. In these times of low interest rates on major currencies, we could certainly all use a little more excitement like that, couldn’t we?

How do you go about getting an Invest-Loan? Not, as you’ve probably guessed, from your local high street bank. If your existing banker won’t lend you money for things like this, it’s time to think about moving your investments to a different bank. A good place to start with the Practical Offshore Banking Guide 2009, available free for download to our members. I’m happy to make personal referrals to private banks who will carry out Invest-Loan transactions, at no extra charge to all Q Wealth members as part of the free consultation that members are entitled to. Just contact me via the Q Wealth London offices. If you’re not yet a member, you can join now to gain immediate access to these privileges.