The Offshore Library       The Offshore Entrepreneur       Swiss Investing
The Investor's Library       The Tax Library       Retirement Havens
 



SWITZERLAND: GATEWAY TO GLOBAL INVESTMENT

by

Adam Starchild


Over the past 20 years world capital markets have grown rapidly in size and importance. In 1970 total world stock market capitalization was $935 billion, but by 1992, world stock market capitalization was $9,320 billion. Markets in a number of countries have delivered high-return performances recently.

International diversification provides more investment choices than investing solely in any one country. If you invest exclusively in one market, you miss the opportunity to share in the potential growth of some of the leading companies in the world.

A principal advantage of investing overseas is diversification. A diversified portfolio gives you the opportunity to enhance your overall return while reducing risk. Trends in foreign stock markets generally do not always correlate highly with bull or bear market cycles in the U.S. stock market. While one or more foreign stock markets may at any time be moving in the same direction as its U.S. counterpart, longer-term correlations are low. This means that diversifying beyond a single market should reduce the overall volatility of your stock portfolio over time.

Taken as a group, foreign stocks will generate higher returns than U.S. stocks in some years, but not in others. The important point is that U.S. and foreign markets do not often mirror each other. Therefore, combining U.S. with foreign stocks cushions the investor's overall stock portfolio against the full impact of potential down markets in one country or another.

Switzerland has long served as a magnet for the money of wealthy foreigners who perceive the world as buffeted by over-taxation, over-regulation and political turmoil. They are attracted, of course, by the confidentiality and discretion that have been a hallmark of Swiss bankers since the French Revolution, when they offered financial refuge to French aristocrats.

The principle of neutrality in Switzerland protects all wealth, equally. This principle of neutrality is important toward understanding why the Swiss excel at the preservation of individual wealth. Your wealth simply cannot, and will not, be held hostage in Switzerland. By staying out of international conflicts and maintaining strict neutrality, Switzerland has become a refuge for capital from all over the world.

Switzerland combines political stability with political neutrality. This in turn has led to economic neutrality. Switzerland has never imposed exchange controls on capital outflows. No one who has invested in Switzerland has ever been prevented by government measures from taking it out again.

The strong Swiss franc is another reason for Swiss financial stability. The Swiss franc is more than a paper currency -- it is backed by gold. Swiss law requires a minimum 40% gold reserve for every franc in circulation. Actual gold reserves amount to more than that, and at today's gold prices are actually many times the value of the currency in circulation. There is no other currency in this position.

In the 1930s, many other nations were creating a distinction between deposit banks and investment banks, and the Swiss legislature refused to follow that trend. The Swiss opted to retain "universal" banking, or full-service type banking, which means that your Swiss bank can be a deposit bank, a checking account bank, a stock broker, a commercial lender, an investment bank -- everything you need.

SwissGold is a gold purchase program, allowing investors to purchase and store gold through a Swiss bank, obtaining the bank's best wholesale prices. Such accounts may be used either for large one-time purchases, or for monthly purchase programs which provide the investor with the advantages of cost averaging. Gold accumulation programs allow the investor to enjoy all the benefits of investing in gold without the responsibilities and costs of handling and storage.

An accumulation plan is an organized method of buying gold purely for the investment and inflation insurance aspects of gold, and does not involve gambling on coin collecting values, or other gimmicks. It is designed to be more efficient and more economical than buying gold coins for their bullion value.

Insurance companies belong to one of the most important sectors of the economy in Switzerland. They are also extremely conservative and safe. In 130 years none have failed, a record that even Swiss banks cannot match. Unique tax advantages combined with conservative money management cause Swiss insurance products to perform much better than one might expect.

Swiss annuity products bring together the benefits of Swiss bank accounts and Swiss deferred annuities, without the drawbacks -- presenting the best Swiss investment advantages for non-Swiss investors. Swiss annuities are exempt from Swiss withholding taxes.

Swiss annuities offer instant liquidity, a rarity in annuities. All capital, plus all accumulated interest and dividends, can be freely accessible after the first year. During the first year 100% of the principal is freely accessible, less a SFr 500 fee, and loss of the interest.

Upon maturity of the account, the investor can choose between a lump sum payout (paying capital gains tax on accumulated earnings only), rolling the funds into an income annuity (paying capital gains taxes only as future income payments are received, and then only on the portion representing accumulated earnings), or extend the scheduled term by giving notice in advance of the originally scheduled date (and continue to defer tax on accumulated earnings).

Although called annuities, Swiss annuities act more like a savings account than a deferred annuity. But they are operated under an insurance company's umbrella, so that they conform to the legal definition of an annuity, and as such, compound tax-free until they are liquidated or converted into an income annuity later on. That annuity income is tax-free in Switzerland, and in the U.S. it is taxed in the same way as any U.S. annuity would be, which defers all taxes during the accumulation period.

U.S. purchasers of Swiss annuities are not required to report them as foreign accounts on their U.S. tax returns.

More information on Switzerland as an investment center can be obtained at Fortress Switzerland. And an excellent firm of independent Swiss asset managers can be found at Weber, Hartmann, Vrijhof, & Partners.

About the Author
Adam Starchild is the author of over a dozen books, and hundreds of magazine articles, primarily on international business and finance.
Copyright © 1995-2004 by Adam Starchild
The Investor's Library has reprinted this copyrighted article with the permission of the author.


 
 
The Offshore Library       The Offshore Entrepreneur       Swiss Investing
The Investor's Library       The Tax Library       Retirement Havens