Ten Expat Investment Advice Tips
Investing as an expat comes with a
multitude of complications and tax considerations. A profitable investment
portfolio is certainly achievable, building capital growth over the long term
with a stable, risk-averse approach.
If you’re an expat living overseas or
planning for retirement abroad, then now is the optimal time to start strategizing
ways to leverage funds earning low interest in a conventional savings account.
While every investment method is
tailored to your aspirations, finances, and plans, let us share some tips to
avoid typical expat investment mistakes.
1.
Focus on Contingency Planning as a First
Step
The first question to ask is how much
you can afford to invest. That requires a deep dive look into your aspirations,
plans and outgoings, such as:
·
Emergency funds
you wish to retain in liquid assets.
·
A risk profile
assessment to explore the relationship between risk and reward.
·
Expected
expenses, such as property transactions or family events.
·
Planned
withdrawal dates to establish an investment timeframe.
·
Retirement plans
– when you anticipate retiring, where, and your required budget.
A contingency plan is a fundamental
building block to a successful investment portfolio since you mitigate the
potential financial hazards associated with over-investing or accepting too
high a risk exposure.
2.
Access Expat Investment Advice for Asset
Selection
Deciding on your investment assets is
the following step.
Our recommendation, generally, is to
focus on diversification, coherent with your investment goals and expected
returns, with numerous options:
·
Multi-asset funds
are popular since they offer access to all assets across the major classes
within one fund. The fund is designed to generate capital growth with
protection from market losses.
·
Equity shares in
high-growth industries can pay outstanding dividends, far above average rates, and offer the option of dividend reinvestment.
·
fixed-interest
bonds are often incorporated as a long-term retirement strategy, with stable
returns over static periods.
·
Commodities, like
gold, are a further option, but there are multiple potential assets, including
soft commodities such as agricultural produce.
·
Property –
individual property assets, collective funds, or shares related to property
businesses can all be held within a portfolio bond, often as a long-term
investment that relies on steady sector growth.
Every investment carries a risk
element, even if the exposure is minimal.
Diversification means spreading that
risk across different asset classes, sectors, funds, and even countries to
ensure that any economic downturns or changes won’t impact your entire portfolio.
Discover more about the risk
assessment process through our earlier publication, How to Risk Assess Your
Wealth Management Strategy.
3.
Be Aware of Your Ongoing Fund Management
Costs
Working with an unknown overseas
adviser can be risky, particularly if you aren’t comfortable with your
knowledge about the regulatory environment or enforcement in a new location.
Countless unethical businesses are not
appropriately qualified to offer financial advice and charge extremely steep
fees. Any ex-pat investment product sold as low-cost or fee-free tends to have a
pitfall attached, normally in the form of additional management charges.
We would advise any investor living
abroad to be mindful of the commissions payable, insurance premiums or other
charges rolled into an investment product, especially if that product is
marketed at costs that seem unusually competitive.
4.
Take Note of Underlying Currency
Exposures
If you invest in products and funds
across borders, currency exchange rates will come into play.
One of the best ways to stay on top of
the potential risks of a fluctuating currency is to avoid investing solely
based on FX performance. Stocks and bonds tend to appreciate, although the
speed of growth depends heavily on the nature of the product, the amount
invested, and the markets. Currency valuations are very difficult to predict
with any certainty, so opting for long-term stable growth is often preferable.
If you plan to retire in Europe, for
example, building an investment portfolio centered around Euro assets will stand
you in good stead. This focus incorporates an element of insulation against any
potential downturns in the currency since this will have a minimal impact on
your economic circumstances.
5.
Set Realistic Investment Return Targets
As a rough indication, the average
return rates for cash savings sit at around 0.7 percent in real terms, which
is a minimal amount to earn against your wealth. The offset is the lack of
short-term volatility, although inflation may outpace interest, reducing your
overall savings a little at a time.
Other assets can return compound
annual growth of anywhere from 3% to 12% or more, but continued gains rely on
reinvestment.
Setting your targets correctly means
evaluating how much you expect to earn and constructing a plan to achieve those
goals without tipping over your maximum exposure threshold. It’s wise to speak
with your wealth manager to set reasonable goals, before making any decisions.
6.
Review Your Investment Funds Regularly
Regular portfolio reviews are never
something you should leave to chance, even if you’ve been investing for many
years.
A lack of regular attention can mean
missed opportunities, unidentified dips, lower than expected returns, and a
loss of cohesion between your diversified assets. Consulting an accredited
wealth management adviser will ensure your funds are reviewed periodically and
swift action is taken when necessary.
If you receive portfolio performance
reports but aren’t clear on whether your returns meet your goals, please visit
our guide to Translating Your Investment Portfolio Performance.
7.
Don’t be Unnerved by Regulatory
Complications
There are, of course, many different
rules, tax regimes, and regulations to consider – but avoiding any investment to
protect your wealth is rarely a good financial strategy. As an expat, the
intricacies of establishing your domiciliary and residential status can make
the decision-making process more complex.
Still, an experienced adviser can
quickly cut through the noise to give you clear options.
Compliance can be daunting, but
retaining cash savings will typically not provide anything close to the
possible investment returns.
8.
Be Mindful of Your Expat Tax Obligations
As we’ve mentioned, taxes will impact
your investment choices. You need to adhere to rules about disclosing offshore
assets, particularly if you remain liable for HMRC returns.
Most countries partake in information
sharing agreements such as the Common Reporting Standard, so failing to declare
returns can carry severe consequences.
Like many of the investment tips
covered here, the best way to protect yourself from potentially unintentional
non-disclosures is to work with a wealth manager with an in-depth understanding
of the cross-border reporting requirements.
9.
Seek Expat Investment Advice for
Overseas Pension Plans
Pension planning, as an integral
element of your financial strategy, is a broad topic, and much depends on:
·
The type(s) of
pension you hold, and in which country.
·
Where you live or
plan to relocate.
·
Taxes payable on pension
income in your country of residence.
·
The value of your
pension assets.
·
How soon you wish
to retire, or whether you are already drawing a pension.
·
The rules around
lump-sum withdrawals from your scheme.
Keeping your pension schemes at the
forefront is important since you may find that you receive highly favorable tax
treatments, again depending on the plan you have and how much it is worth.
Conversely, aspects such as the
Overseas Transfer Charge may mean that an alternative solution is strongly preferable
to avoid losing a large proportion of your savings to taxes.
10.
Use a Respected Financial Adviser
Finally, the most reliable way to
avoid investment mistakes as an expat is to ensure you have guidance from a
trusted adviser with experience in the local rules and tax implications in your
country of residence. Even the most competent financial adviser based in your
home country may not be equipped to deal with overseas tax returns,
declarations, or property levies.
There are many considerations, depending
on your residency or citizenship status, country of origin, and place of
residence, such as:
·
Applicable income
tax treaties.
·
Possible overseas
tax credits.
·
Special reporting
requirements.
Chase Buchanan’s guide, The
Post-Brexit Financial Advice Crisis, highlights this issue, explaining how
British national residents in Europe have experienced huge disruption.
Our
consultants have years of experience supporting a broad range of expat clients
worldwide, with offices in global locations, providing on-the-ground knowledge
and up-to-date compliance guidance at every step of the way. Please get in
touch for more guidance on constructing a future-proof investment plan or
bespoke expat investment advice
from international experts.
Original Source:- https://chasebuchanan.com/expat-investment-advice/
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