Proven Benefits of Foreign Portfolio Investment
Contents
- Benefits of an International Portfolio in Terms of Risk Avoidance
- An International Portfolio Helps Offset These Specific Risks…
- Benefits to this Approach
- #1. Jurisdictional Diversification → Counters Policy Risk
- #2. Offshore Custody → Counters Currency and Capital Controls
- #3. Legal Separation → Counters Litigation and Enforcement Risk
- #4. Multi-Market Access → Counters Systemic Risk
- Getting Started: Practical Considerations of Foreign Investments
- If You’re a US Resident Living in the US… Look to Switzerland.
- If You Live Outside the US…
- Investing Through Offshore Private Partnerships
- If You Can’t Go Offshore: How to Build a Domestic Structure
- Comparing Offshore and Domestic Asset Management Options
- Putting It All Together
Someone was recently referred to us by an existing client. He didn’t know us very well but was concerned about the decline of the US dollar and wanted to understand how building a foreign portfolio would help with that.
It’s a fair question. Most investors assume a foreign portfolio is just about chasing returns abroad. But the real reason rarely has to do with performance alone.
More often, it’s about control — the ability to leverage more than one system to protect their wealth.
To most Americans, this concept feels unnecessary because the US market offers everything: high liquidity, lots of choice, and it’s both cheap and convenient. But no matter how diversified a domestic portfolio looks, it’s still subject to one set of rules in one currency. And that’s a problem in chaotic times.
This is especially true given the state of the dollar. More trade is being settled in other currencies, and several countries are deliberately reducing reliance on the old greenback.
This trend doesn’t yet spell collapse, but it does signal the gradual erosion of the dollar’s dominance and thus value. For investors who hold all their assets in dollar-based systems, that shift means more risk.
Benefits of an International Portfolio in Terms of Risk Avoidance
When most investors think about risk, they tend to think about mitigating investment related risk — often the risk that stocks will fall. More advanced investors also factor in political issues, interest rates, and economic cycles.
And no doubt — these are all important.
But in trying to address these risks, they miss a key point. Their solution completely misses the fact that all their planning is still around a single system and a single currency.
A domestic portfolio — even one that’s globally diversified on paper through ETFs or funds — is still anchored to one system. The brokerage account is domestic. The custodian is domestic. The reporting rules, tax enforcement, and regulatory reach all come from one government.
That concentration risk is invisible until something goes wrong — a change in tax policy, capital controls, banking restrictions, or a lawsuit that freezes assets.
An international portfolio spreads that jurisdictional exposure. It doesn’t eliminate investment risk — markets abroad can still drop — but it offsets systemic risk.
If Uncle Sam ever restricts money movement or limits transfers abroad, investors with only domestic accounts are stuck. Assets held outside the US aren’t controlled by the same rules, so they’re harder to freeze or block. That doesn’t make them immune, but it adds protection against capital controls or government seizure. A foreign portfolio gives you options when domestic systems lock up.
In short, a domestic portfolio manages financial risk; an international portfolio manages sovereign risk. The first deals with markets. The second deals with governments. Most investors only plan for the former — and that’s why building an international portfolio matters.
An International Portfolio Helps Offset These Specific Risks…
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Policy and Tax Changes: If all your assets are in the US, you’re stuck with whatever tax or reporting rules Uncle Sam imposes. Holding some assets abroad gives you choices under different laws.
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Capital Controls: If the US ever limits how money moves in or out of the country, domestic investors can’t do much. Offshore accounts keep part of your capital accessible outside those limits.
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Legal Exposure: Assets in the US are easier for US courts or creditors to reach. Assets held overseas, through proper structures, are harder to seize and give you added protection.
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Banking Risk: Relying on one system means one point of failure. If US markets or banks freeze, assets in another jurisdiction stay available.
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Political Risk: Governments change rules to suit themselves. A foreign portfolio won’t stop that, but it gives you time and options to respond if things shift against your interests.
Benefits to this Approach
#1. Jurisdictional Diversification → Counters Policy Risk
#2. Offshore Custody → Counters Currency and Capital Controls
If a government limits how money moves across borders, domestic investors can’t do much. Keeping part of your assets offshore keeps that capital accessible, even when local systems tighten.
#3. Legal Separation → Counters Litigation and Enforcement Risk
Assets held abroad through proper structures aren’t automatically within reach of US courts. That separation doesn’t make them immune, but it adds protection and gives you time to respond if there’s a claim or judgment.
#4. Multi-Market Access → Counters Systemic Risk
Relying on one market creates a single point of failure. By holding assets in different markets, you stay protected if one goes down or freezes.
Understanding these benefits is one thing. Putting them into practice is another. Here’s what that actually looks like for US investors who want to act on it.
Getting Started: Practical Considerations of Foreign Investments
After the Foreign Account Tax Compliance Act (FATCA) took effect in 2014, most foreign banks stopped accepting US clients. FATCA requires any foreign financial institution that interacts with the US system to report American account holders to the IRS. If they don’t, they face a crippling 30% withholding penalty on US-related transactions.
For most banks, the risk and paperwork aren’t worth it. As a result, very few still open accounts for Americans — and those that do have strict requirements: high minimums (typically $500,000–$1 million), full tax documentation, and detailed due diligence.
In short, opening a foreign account as a US citizen is still possible — just limited to a small number of institutions that specialize in compliance-heavy private banking.
So what are your realistic options?
If You’re a US Resident Living in the US… Look to Switzerland.
For Americans who live in the US but want an offshore banking relationship, Switzerland remains the most practical and stable choice.
Here’s why:
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Experience with US clients: Swiss banks dealt with FATCA and US enforcement early. There are multiple options with systems built specifically for Americans. They know how to properly onboard US clients and help them stay compliant with US reporting.
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Regulatory stability: Switzerland’s banking system is predictable, conservative, and serious about privacy (in private matters, not to the IRS). It’s not exciting — and that’s the point. The rules are consistent, and institutions understand complex cross-border structures.
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Professional standards: Swiss private banks routinely coordinate with offshore service providers and US tax professionals. They understand how to handle trusts, LLCs, and international structures properly.
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Minimums: Expect to start around $1 million.
Recommended Reading
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Swiss Asset Management for US Investors
If You Live Outside the US…
Americans living abroad have more flexibility. Local residency makes it easier to open accounts in your country of residence — and sometimes in nearby financial centers as well. Banks see resident clients as lower risk than Americans trying to open accounts from the US.
If you live abroad, it’s usually best to:
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Open locally first. Start with an account where you live. It builds a local financial record and can make future efforts easier.
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Use nearby financial hubs. US expats may find it easier to use banks in nearby financial centers — like Luxembourg or the UK in Europe, Hong Kong in Asia, or Panama in Latin America — where services are often geared toward international clients.
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Stay compliant. Even when living overseas, US citizens must report all foreign accounts on FBAR and Form 8938. The IRS doesn’t care where you live — only where your assets are.
Investing Through Offshore Private Partnerships
For US investors who can’t — or don’t want to — maintain personal offshore accounts, another option is to invest through private partnerships or funds based outside the US.
These are usually limited partnerships or investment companies registered in places like the Cayman Islands, British Virgin Islands, Luxembourg, or Guernsey. They pool money from global investors and are managed by professional fund managers. For accredited US investors, they offer a way to access non-US markets without opening accounts directly.
Advantages
Easier Access: The partnership or fund already holds the offshore accounts and handles compliance. You invest in an existing structure that meets FATCA requirements, avoiding the difficulty of setting up your own account.
Simplified Reporting: Many offshore funds designed for US investors provide consolidated tax reporting, so you receive a single K-1 or similar statement instead of more cumbersome offshore reporting.
Diversification and Scale: These funds typically invest across multiple countries, sectors, and currencies — and in some cases, include real estate portfolios. Certain real estate partnerships even allow limited personal use of villas, condos, or resort properties held within the fund, offering both income and lifestyle benefits.
Added Separation: Because the assets sit inside a foreign structure, they’re less exposed to US system risk or domestic policy changes.
Drawbacks
Less Control: You’re not the decision-maker. The fund controls investment timing, liquidity, and management. Redemption periods may apply.
Due Diligence Needed: Offshore funds and real estate partnerships vary widely in quality. Confirm regulation, audited reporting, and that the structure is suitable for US investors.
Tax Complexity: Some options trigger PFIC or other specialized reporting. Always review structure before investing.
Higher Minimums: Most reputable offshore partnerships or funds start around $250,000–$1 million. Anything advertised below that level might not be a true offshore vehicle.
If You Can’t Go Offshore: How to Build a Domestic Structure
Not everyone can justify the cost or complexity of building a foreign portfolio. But you can still build a domestic structure that might make future international planning easier. Here are a few tips:
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Separate ownership and control. Use an LLC, limited partnership, or trust to hold your investment accounts instead of keeping them in your name.
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Use multiple custodians. Don’t keep everything under one brokerage or bank. Spreading relationships reduces your exposure to any single institution.
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Add foreign exposure domestically. You can buy foreign securities through US brokers that trade directly on foreign exchanges or offer foreign-denominated funds. (In general, we recommend against ADRs for liquidity reasons.) It’s not full jurisdictional diversification, but at least you get some exposure to foreign markets.
To be clear, starting with a domestic structure doesn’t provide the same protection as a true offshore plan. But it gives you a foundation to build on — and when your situation changes, you’ll be ready to expand without having to unwind everything.
Comparing Offshore and Domestic Asset Management Options
| Approach | Description | Main Advantages | Primary Drawbacks | Typical Minimums / Practical Thresholds |
| Direct Offshore Account | A personal or entity-held bank or investment account in a foreign jurisdiction (e.g., Switzerland, Austria, Cook Islands). | - Full control over assets. | - Difficult onboarding due to FATCA. | $250,000–$1,000,000+ |
| Offshore Private Partnership / Fund | A pooled investment vehicle domiciled outside the US. (Cayman, BVI, Luxembourg, etc.) that accepts qualified US investors. | - Easiest entry to offshore exposure. | - No direct asset control. | ~$250,000–$1,000,000. depending on the fund. |
| Domestic Structure (Trust, LLC, LP) | A US-based legal structure holding assets domestically. | - Simple setup and compliance. | - No jurisdictional diversification | As low as a few thousand dollars for the simplest cases. |
Putting It All Together
Building an international portfolio isn’t always just about chasing higher returns. It’s about using different jurisdictions to build a more stable wealth protection plan.
For US investors, the right path depends on your goals and what you have to work with:
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Significant assets: Open accounts in stable jurisdictions like Switzerland. You’ll meet higher minimums and paperwork, but you gain real banking independence.
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Moderate assets: Use offshore partnerships or funds that already handle compliance. You’ll get global exposure and professional management without direct account setup.
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Starting small: There aren’t many true offshore options available to smaller investors. It’s better to focus on strong domestic positions first — diversify assets across institutions and maintain liquidity. Once your capital base grows, you can revisit offshore opportunities.
Again, the real benefit of an international portfolio isn’t just yield — it’s control. It’s having options when domestic systems tighten or fail.
Most clients we work with aren’t trying to abandon the US. They just want a portion of their wealth positioned safely elsewhere. A foreign portfolio is how you do that — a simple form of financial insurance that gives you room to move when it matters most.
We help clients build these structures every day. If you want to explore what’s realistic for your situation, get in touch.
About The Author
We have 40+ years experience helping Americans move, live and invest internationally…
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We have 40+ years experience helping Americans move, live and invest internationally…
