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The search for diversification and financial security of investments comes naturally being hunt for security a part of a human nature.
One of the most common strategies that help an investor reduce risk, protect capital and ensure its growth is covering a greater number of countries and currencies in which he will invest. One of the best phrases with which we could describe the reason to diversify investments would be Adam Smith's: "Never keep all your money in the country where you live, because something can happen. And generally, it happens. "
Diversification of investments is one of the essential characteristics of the portfolios of large companies that more than anyone has all the resources available to save their taxes and get the most benefit. Because tax havens can offer large companies very favorable tax benefits, each time a greater number of multinationals divide subsidiaries locating each of them in a different country. Almost no one is already working from one country and less from high tax countries. Having the financial services center in the United Kingdom, coordination center in the Netherlands, production plants in Spain and the online sales center in Belize has come to be a common scheme for the majority of companies seeking diversification of investments, tax saving and security.
Another reason why many of us have started looking for other countries to invest and secure investments is the weakness and instability of the local currency of our countries. Despite the emergence of Euro that has equaled in this sense the difference between the value and strength of many currencies, there are still many countries whose local currency is very weak compared to the rest of the world. India, Turkey, Russia are one of the examples of emerging markets where the flow of capital has grown dramatically for the last 10 years. What can the citizens of these countries that do not trust their government do, people who lose millions of dollars in the exchange of the currency when they work with other countries? In this situation they only have one solution: to diversify investments, move funds abroad and thus ensure their capital.
Seeking new options for the diversification of investments, many clients come together in the European Union, the territory that for many years conveyed the image of security and prosperity. It is true, as we have already said the appearance of the Euro has equaled and simplified the monetary system of many European countries. However, investing only in the territories of the European Union where a single currency reigns greatly limits the diversification of investments and does not guarantee complete security. Due to several factors that we are going to talk about in more detail, it makes the currency that seems so strong to many of us actually more vulnerable than we think.
The first factor that affects the monetary stability of Euro countries is a decline in economic innovation and lack of efficiency throughout the European Union. The United Nations talks a lot about the lack of local investments that citizens could make in their own countries. But who would like to put all the eggs in the same basket? From the point of view of a European diversification of investments means not only investing in another country, but a country that is outside the European Union. Until all the governments of this Union follow the same pattern promoted by the United Nations, it will be impossible to create an appropriate territory for diversified investments that attract the interest of European citizens. A well-known example of a country that has joined the European Union but still has its own fiscal and monetary regime is Switzerland. Mainly thanks to this factor this jurisdiction continues to attract diverse investments from all over the world.
Another factor for which it is difficult to trust in the security of investments in the European Union is the public deficit suffered by the belonging countries to the last few years. While Germany, France and Italy, the countries that make up 70% of the Eurozone GDP do not begin to comply with the conditions and adjustments of budget policy, Euro will continue to be subjected to strong swings and instability. This factor causes the outflow of capital and the diversification of investments in other currencies such as the pound sterling, the dollar, the yen or the Swiss franc.
Another threat to economic stability and, as a consequence, the reason why the volume of various investments has decreased in the territory of the European Union is the public pension system, such as the aging of the population, the consequent greater number of pensioners and beneficiaries, together with the still high level of unemployment. In the world there are many countries that do not have the public pension system. However, the great leaders of the world do bet on maintaining it even if it costs them a cut in the savings of their citizens. What happens in these situations is that the government resorts to the issuance of the public debt that in turn causes uncontrolled inflation, weakening the local currency and causing local investments to be lower.
As we can see there are many factors that force us to diversify investments and seek security in other countries. The one who looks not only at the side, but also looks away always wins. An example of this rule can be the telecommunications and energy sector, which, as we already know, in all countries always manages to obtain the highest and most profitable benefits. The reason for this success is to carry out the business worldwide, in several markets and countries, which in other words would be to diversify the investment to obtain the maximum security to which also the tax savings are added.
Subsequently you would ask me: If it is so easy and necessary to diversify investments, why have not the majority of people in my country still done so? The answer is in the regulations of each country on the regime of investments abroad. Although many of us think that we live in a free world in which there is freedom of movement of capital and any person or entity can send money abroad and receive funds from another country, in reality it is not so. Theoretically, this freedom does exist, however, public and governmental opinion manifests against the globalization of the economy and demands controls on the movement of capital. Do not you think that these restrictions limit our right to diversify investments in the pursuit of security? What our governments do not understand is the fact that their citizens are not looking for the opportunity to deceive them, but to protect what they have and secure their investments via diversification.
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