Dateline: Kuala Lumpur, Malaysia
In a world of historically low yields, people are increasingly coming up with more complicated strategies to beat the markets.
But what if there was an easy offshore banking play that earned 10% per year and required minimal skills to pull off?
Would you go for it?
Often, in our attempts to achieve greater results than anyone else, we overcomplicate the means of achieving an end goal. We believe that the more convoluted a plan is and the more intellect required to pull it off, the better the results will be.
But this is a fallacy, it only makes us feel smarter than everyone else without bringing us any closer to achieving our goals.
The way to measure success is by results, not by the effort expended to achieve them.
In this article, we’ll look at traditional investment strategies in comparison to one high interest bank account to highlight the multitude of possibilities you’ll find banking overseas to earn a high return without much effort.
Inconsistent Traditional Investments
Most people usually rely on equity because it’s supposed to give you the highest ROI over time. In the US, a good mutual fund will tend to give you an annualized rate of return of around 8%-10%, minus 1.5% for fees. Mind you, these are the top funds with stellar managers. This is a very select group.
Most mutual funds don’t beat their benchmark index, meaning that you’re mathematically better off just investing in a passive fund that matches the index they’re trying, and failing, to beat.
The problem with those passive funds is that, oftentimes, you’re either very concentrated in one geographic area or industry. Besides, the results are very volatile, one year you’re down a few percentage points, other years you’re up by 20% – though it averages out over time.
JP Morgan made the case once that, had an investor purchased an index fund of the S&P-500 on January 3, 1995, a decade after they would have made an annualized return of 9.85%. The catch though was that had this investor missed the ten best days within that time period, they would have only made a 6.10% return; worse still, six of the ten best days were within two weeks of the worst days.
In other words, if you had been unlucky and you had just happened to miss that stock market rally by a day before you put the money, then too bad for you.
I, for one, want more consistency in my investments. And besides, I am trusting US financial institutions less by the day. Over the last decade, the US had more bank failures than the rest of the world combined.
I don’t want to put my retirement savings somewhere with a higher than average risk of collapse with the hope the US government is feeling in a generous mood when they have to bail out the company holding my assets.
It’s far from a risk-free proposition!
And if I actually want what economists term as “risk-free”, I’d buy US Treasury bonds, which will yield less than 1% per year, unless I want to lock it in for a decade. The US dollar is the world’s strongest currency today, so the US can set its terms as they see fit. But this would mean that any “profit” I could make would get eaten away by inflation, and I would still lose money – despite the fact that percent yield is abysmal.
At some point, you have to consider the opportunity cost as well. “Risk-free” investments will not only leave you lagging behind inflation but you will also be losing the opportunity to pursue a different path that could be much more lucrative.
In this case, you lose quite a bit by going for what is traditionally deemed as “safe”.
So, rather than going for the traditional route, where every investor piles onto Treasuries looking for something safe, what if there was a way to earn money consistently, regardless of when you invested it, with minimal volatility?
Armenia’s High Interest Bank Account
I’m not advocating a particular investment with this article. It’s more important that you get a picture of how the world is far bigger than the US and that there are much better options internationally.
With that said, and with the caveat that past results are not indicative of future performance, let’s look at the story of the Armenian Dram – the stablest currency that you have probably overlooked.
But before we look at this currency in isolation, let’s examine the environment within which that currency is developing. Random numbers, devoid of any context, are not particularly useful.
At its core, foreign currency exchange rates represent the aggregate demand and trust of the economies and the nations using that currency. So, what makes the Armenian Dram so stable?
Armenian culture is quite entrepreneurial. It’s not without reason that Armenia is our number one option for finding remote workers. Regulations in the country are starting to reflect this to make it easier to do business there and taxes are going down.
Granted, it’s not happening very quickly, but there is plenty of potential in this country and it is rapidly making up for lost time with its pro-business regulations.
Partially because of this entrepreneurial zeal, you can find sizable Armenian diasporas all around the world that tend to do very well for themselves. This then ensures that the country has a constant supply of foreign capital inflow in the form of remittances, as well as real estate and business investments back home.
It is this demand from Armenian expats for access to their home economy that ensures stable foreign currency exchange rates.
Half a decade ago, the Armenian Dram was trading at 476 to 1 USD and five years later it traded at 478, so essentially a push, and completely stable in relation to the US Dollar. Because it more or less kept its exchange rate with the dollar, it’s a rather safe currency in and of itself.
But the Dram is not only stable, it also offers growth.
One of the benefits of offshore banking is that you can get a high interest bank account. In Armenia, the Dram paid out in the ballpark of 9.5% to 10.5% interest on deposits during the mentioned five year period.
This is good. However, emerging economies generally offer those interest rates precisely because their inflation rates are so wild. But you’ll be pleased to learn that Armenia’s annualized inflation hovers around 2%-3%.
And if you are the person who needs to maintain a balance of USD because of your investing parameters or business cash flow needs, then you can still hold money in Armenian banks and get paid between 4%-4.5% for holding USD.
Overall, you’ll get the stability of the Dram along with great yields from a high interest bank account. And all you have to do is deposit your money.
You Have More Choices Offshore
You have more choices available to you than what traditional investing wisdom tells you.
Armenia, along with a host of different countries, are subject to completely different environments that have not been seen in the US for decades, if ever!
I’m not telling you to go out and buy Dram. This is food for thought.
You can easily find currencies and emerging economies that can offer you a high interest bank account that will outperform virtually any investment out there. And the best thing is that you don’t need to be a financial wizard to make sense of it all.
In my personal estimation, Asia is rapidly becoming the go-to place for investments with high returns, as opposed to more developed economic areas that have already reached their economic potential within the current economic and technological realities.
That is the prime benefit of banking overseas and going where you are treated best.
If you want help creating a holistic offshore plan that involves depositing your money in a high interest bank account offshore, feel free to reach out to our team. We keep a list of over 900 banks that cater to just about every need you may have as you build a Nomad Capitalist lifestyle.