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Go Offshore to Escape the Biggest Threats to Your Wealth

|Includes: AABA, BBD, BIDU, CHL, GOOG, HDB, Petrobras - Petroleo Brasileiro S.A. (PBR), PBR.A, PTR, SOHU, TTM, VALE, VALEP, WIT

Go Offshore to Escape the Biggest Threats to Your Wealth

We often hear people talk about diversifying their portfolios only to discover that what they mean is just diversification among shares of American companies or among real estate investments within the U.S.

The time has come for financially astute Americans to go offshore to escape the biggest threats to your wealth.

Many Americans has already seen their nest eggs shrink, the value of their homes fall and their investment portfolios lose half their worth or more.

The really bad news is that there’s more hardship to come.  An ever-mounting deficit, dysfunctional government and presidential election politics will almost certainly lead to new tax legislation – higher taxes.

It’s not just your finances that are at risk.  Under the Democratic Congress a few years ago, crazy new laws were passed below the radar to restrict and control the foreign investment activities of U.S. citizens.  This means that the more assets you have in the U.S. the less control you will have over them.

So, if you really want to protect your wealth in the future, you need to consider a financial strategy of going offshore for at least part of your assets.  This is an approach whose time has come.

You Don’t Have to Be a Millionaire to Benefit from Going Offshore

Diversifying your portfolio into foreign investments, foreign real estate and foreign currency is probably the most common approach for most American investors.  However, going offshore can also involve moving assets, your business, your banking – or even yourself – to a safe haven . . . to a place where it’s harder for anyone to lay claim to what you’ve got.

Going offshore isn’t anything as cloak-and-dagger or glamorous as it may sound.  It’s simply about legally defending what’s yours in a way that makes it more difficult for creditors to attack.  Offshore strategies include trusts, foundations, international life insurance and owning a foreign bank account, to name a few.  These are all legal ways to build a wall around your assets.

You don’t need to be a multi-millionaire to benefit from going offshore.  You can start by simply opening a bank account in a haven that offers true banking secrecy.

Your wealth is affected by all sorts of things that often you feel you have no control over.  However, by going offshore, you get to hold on to more of your assets, to protect them so they grow safely, even tax-free.

I think a great place to put your money is to invest in an array of stocks specifically emerging market plays. Below are a list of our favorite emerging market plays in Brazil, China, and India.

Brazil ADR picks: Petrobras (NYSE: PBR): Brazil’s largest oil and gas company. Vale (NYSE: VALE): Brazilian metals & mining company, also a producer of iron ore.

India is Asia’s 3rd largest economy and has maintained strong economic growth through the global financial meltdown, managing to post an impressive growth of 6.7% in 2008-2009. The IMF projects 2009-2010 growth at 6.75-7.5%%. This is a fall from the 10% growth rates India enjoyed before the global financial meltdown, but India remains one of the fastest-growing economies in Asia. Just compare this with estimates of 2010 U.S. GDP growth of only 1.5%. The best way to capitalize on growth in India is by investing in Indian banks. Although its economy doesn’t grow as fast as China’s, the banking system operates independently of the government so the loans are higher quality and there’s no forced lending.

India ADR picks: Tata Motors (NYSE: TTM): India’s biggest car manufacturer, maker of the Tata Nano, the cheapest car in the world. HDFC Bank (NYSE: HDB): One of India’s better-managed banks, this stock’s enjoyed a tenfold gain since 2002. Wipro (NYSE: WIT): Leading tech services group with strong earnings surprise history, recently opened in Brazil.

I continue to be positive on China in spite of increasing talk of a jittery China bubble. Many portfolios are now underweight on China. China’s mid-to-long-term outlook is bright and it will enjoy higher growth than India. But expect more volatility, so you need to be very selective and/or perhaps more speculative with your picks.

China ADR picks: PetroChina (NYSE: PTR): China’s largest listed oil company, up 35% over past 12 months but growth to continue, benefiting from higher crude prices & rising energy demand. Tencent Holding (HKSE:0700.HK): Biggest Internet company most people outside China have never heard of, hundreds of millions users for its IM service, market cap of $38 billion bigger than Yahoo (YHOO) & twice the size of Baidu (BIDU). Likely to benefit from Google’s China departure. But beware, this is a volatile speculative play.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.