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How to invest as an expat

A classic old oil painting of a man studying a globe

This thought-provoking guest post is by Andrew Henderson, the author of Nomad Capitalist.

Even when you have discovered the freedom of expat life, chances are that you will still need to process the transition.

It can feel a bit like a home-country detox.

This is more than just dealing with cultural shock. In many cases, you are learning to adopt an entirely new perspective and approach to life.

Living and traveling abroad has a way of changing the way you look at the world because you are suddenly exposed to a thousand different ways to do things that are done only one way at home.

It can be tempting to ask why something is done differently because what you know is all that you’re used to.

But when you detox yourself from the one-country, one-way-of-doing-things mindset, you will discover a world of possibilities full of better solutions, better lifestyles, and better options.

Investing is no exception to this rule.

Global potential

Learning to invest as an expat can change your entire investment strategy for the better. But only if you let it.

There are funds and companies in other countries that do things somewhat similar to what you’re used to, but as someone who has left my home country and fully given myself to investigating the entire spectrum of investment opportunities abroad, I know that there are better options.

In fact, there are so many options that it takes a bit more work to know which investments best fit into your personal strategy, especially compared to the ease of simply handing your money over to a mutual fund. If you’re not opposed to figuring that out, you can easily enjoy much higher returns.

Before deciding where and how to invest overseas, I find it helpful to ask the following four questions:

  1. How committed am I to continue investing in my home country?
  2. Where am I going?
  3. What options are available to me?
  4. How will my expat journey affect my views on investment and risk tolerance?

It is important to answer the first question because many investment options are only available to residents of certain countries.

For example, in the US you can invest in everything from mutual funds to LendingClub. These companies often have offices in Europe and accept customers from countries like the UK, Germany, Singapore, and Hong Kong.

However, they may not allow you to invest if you do not have resident status in those countries.

Because of this, your expat lifestyle may be limited if you want to continue investing in your home country.

In contrast, you will not limit your investment options if you choose to be an expat. As you ask yourself the four questions above, it becomes easier to realize that if you are able to live somewhere else, why not invest somewhere else as well?

I call this geographic diversification.

On the ground diversification

One of the basic principles of a strong investment portfolio is to avoid putting all of your eggs in the same basket.

If you wouldn’t invest all of your funds into one stock issued by a single company, why would you make all of your investments in a single country?

Not only can you spread your risk through geographic diversification, you can also increase your investment options.

In countries like the US, regulation from the SEC gets in the way of some of the best investment deals. In the UK, the market is so developed that people have to get creative to invest and find cash flow, especially in today’s low-yield environment where you can no longer make money just parking your cash in the bank.

As a result, people turn to investment deals like student housing rentals that may sound great upfront – invest £100,000 a year and get 9-11% back – but then how do you sell that? How do you sell one room in a student apartment in an area that would lose its value if there weren’t any students?

Rather than struggle to find creative options to get mediocre yields in your home country, why not simplify things and just look elsewhere… especially if you are an expat?

Living somewhere else allows you to see the flaws in how people invest where you are from – even the flaws in what you’ve been doing.

You’ll begin to see that many people invest where they do simply because they think that those are their only options. And if you are not comfortable investing anywhere but the UK, those just might be your only options.

Fear of doing anything beyond what is right in front of you can leave you choosing between an HSBC bank term deposit or a student housing development.

Fear keeps you from seeing the possibilities.

But those who have embraced the expat life have already shown that they are comfortable outside of their comfort zone.

So let’s look at the possibilities that open up when you look beyond your home country.

Georgia on my mind

To begin, I recently opened a US dollar bank deposit account in the country of Georgia and I am making 4.5% just by parking my cash there.

In countries like Cambodia, you can make 6% doing the same thing. And in other places, you can make even higher returns.

For instance, bank deposits in Armenia are currently about 10%. I ran a recent comparison over the last four-year period on the Armenian dram and the currency fluctuation was less than 1% against the US dollar.

Imagine that you were to put your money in at 10% interest in a foreign currency. Suppose you lost less than 1% converting to the new currency and less than 1% converting it back and you lost less than 1% against your base currency. You would be down roughly 2.5%.

However, after four years, you would get 40% interest (10% x 4 years) by simply putting your money in a foreign bank account.

If you want to invest in real estate, things get even better.

If you were to stay home in the UK, you would easily pay £15,000 or more per square meter for a property in the city center with a yield of 4.5% max.

In cities like Tbilisi, Georgia or Phnom Penh, Cambodia, you can buy property in the city center for $1,000 or less per meter and make much higher returns.

These properties may not be perfectly renovated, but they are in great locations and are as much as 1/25th the price you would pay in London, 1/20th of what you would pay in Singapore, and 1/15th the prices in New York.

That is dirt cheap when it comes to international real estate.

You can find these low prices and higher returns in numerous places around the world. Even Colombia has deals like this; you won’t find them in the capital city of Bogota, but because Colombia is a much bigger market, it is still a great investment.

Market timing

In many instances, timing is key.

For example, you won’t find these prices now, but in the summer of 2018 you could find properties for $1,400 per meter in Istanbul. At the time, the Turkish lira was crumbling and many people were just walking away. Properties that were normally $3,000 per meter went down to $1500 per meter and people started panic selling.

That was the time to jump in.

Turkey has strong fundamentals – including a large population that reproduces – which means that even if some of your rental income is in lira for a couple of years and the lira gets battered, you will eventually come out on top.

Some might see an investment like this as a risk, but my personal expat journey has shown me the difference between perceived risk and actual risk. People often question my wisdom for even recommending real estate investments in a place like Cambodia, but my investments there made over 20% ROI in the last year.

Don’t take this as personal financial advice, but try getting that in the US!

There are some properties in Australia and the UK that have had their total yield go down because they made 2% yield and their property price went down 5%.

I made 20% in Cambodia. I have had deals in Georgia that were in the double digits.

How much lower can these prices go for countries that are experiencing huge booms of tourists? Their markets are just starting to take off while developed countries like the UK leave investors scrambling for creative ways to make even a small return.

See the bigger picture

As an expat, if you can get over the fact that you’re investing in markets that you’re unfamiliar with, you can go back to the basics and buy core properties in amazing locations for low prices and wait while collecting some income.

Most people won’t do it because they are afraid. They think that the UK and the US are the only safe places in the world.

That is obviously not true.

Most people just don’t know how many possibilities are waiting for them out here in the rest of the world. Where I come from, many people have never left the United States. Almost 60% of Americans don’t even have a US passport, disqualifying themselves from international travel.

But as an expat you are already out in the world. You are different.

If you’ve been enjoying the expat life for a while now, you may have begun to notice the opportunities already. If you haven’t, just switch on your investment mindset wherever you go.

Good investments do not exist in a vacuum back home. For the globally-minded citizen, the best investments are just waiting to be found.

Portrait of Ander Henderson, Nomad CapitalistAndrew Henderson lives by five magic words: “go where you’re treated best”.  The founder of Nomad Capitalist helps people to find the best places to live, bank, invest, incorporate, start a business, hire, date, and more. You can also read his book.

{ 90 comments… add one }
  • 1 mucgoo August 20, 2019, 11:04 pm

    Investing internationally and avoiding home bias. Great! Nearly everyone here is doing that with world trackers. Starting a job as an international real estate mogul is a different ball game.

    Currency carry trades and buying real estate in distressed and emerging markets are both legitimate investment strategies. They also carry big tail risks. Carry trades tend to whipsaw back in your face during a crisis as everyone flees to hard currencies. Property in emerging markets is vulnerable to anything from punitive taxes and legal malaise through to confiscation. Without any discussion of risk or downside this advice comes across as smarmy.

  • 2 The Investor August 21, 2019, 12:45 am

    @mucgoo — I see it as a provocative discussion/opinion piece, not an in-depth How To… guide. There’s a limit to what can be said in 1,500 words.

    I agree that the second thing everyone should think about after reading it is risk though. 🙂

  • 3 WhiteSheep August 21, 2019, 7:56 am

    I would have thought that the first piece of advice if you wanted to invest or become resident in far-flung corners of the world would be to brush up on your international tax law, and probably hire a few accountants?

    I can’t decide if parts of this article are satire or for real? Out of curiosity, I looked up the Georgian Lari (GEL; did everyone know that one?) exchange rate, which has depreciated by more than 20% against the pound sterling over the last 10 years. There goes half of my 4.5%. If anyone is worried whether their money is safe, you will be pleased to know that according to my internet search Georgia has recently introduced a deposit protection scheme which will cover you up to 5000 GEL, or about £1,400.

    I also could do with some practical advice on how exactly I purchase and manage my Cambodian real estate.

    Given the headline, the article could have been very interesting and informative.

  • 4 Simon August 21, 2019, 9:00 am

    Bizarre post
    “why not invest somewhere else as well?, I call this geographic diversification”
    “Turkey has strong fundamentals – including a large population that reproduces”
    On another note..
    If he is going to post this, he might as well post about risk and tax regimes as well.
    (in my mind the poster wants to be on a TED program with a polo neck and hands free mic)

  • 5 The Rhino August 21, 2019, 10:15 am

    Yep – this is an odd one. Out of kilter with the usual stuff. Hope standards aren’t slipping at MV HQ!
    But I take your point, maybe your just stimulating debate?

  • 6 J.D. August 21, 2019, 10:20 am

    Generally, higher interest rates lead to currency depreciation.

    It is called Covered Interest Parity.

    If you have an investment of “comparable risk” (e.g. government guaranteed bonds in developed country, same level of credit and duration risk), then the expected return after inflation should be the same.

    For instance, if you get 1% more in currency A than in currency B, with all else being equal in the quality of the investment, then at maturity when you convert the currencies back, they should have the same value, so you aren’t actually getting a higher return just because it’s a different number.

    Of course, there is the Uncovered Interest Parity anomaly where currencies with higher interest rates don’t decline and there are extended periods when the exchange rates have moved in the wrong direction, but as it can move away from the expected amount either way, your expected return has not changed, just the range of possible returns, which is the definition of risk. So, you are taking an uncompensated risk – a risk without an associated increase in expected return.

    This is for comparable risk.

    Adding in credit risk is the next explanation for the higher interest rates.

    In emerging countries there is a higher chance of default, and this is factored into the yield. If US bonds returned the same as Cambodian bonds, of course nobody would buy the Cambodian bonds. So they offer more for the risk of you never getting your money back. There is no free lunch here. You are paying for the higher return with higher risk.

    So lets sum up what is really happening with the 10% returns in Armenia.
    1. Higher inflation, and if not, then it is explained by Uncovered Interest Parity anomaly and there is no reason to think this will continue;
    2. You now face currency risks;
    3. Higher credit risk of just never seeing your money again.

    I am lucky enough to have had the opportunity to learn about this, but your readers will read this thinking there is some benefit without an associated range of risks here – there is not.

  • 7 Scott August 21, 2019, 10:20 am

    “Expat” sounds like such a respectable term, doesn’t it? Much nicer than describing ourselves as immigrants.

    Was flicking through the Metro recently and saw two stories next to each other, one referred to an Asian “immigrant” living in France, the other to a British “expat” living in Italy.

    I’m sure there was no malice intended by this article’s author, but choice of words matters, particularly in the current political climate.

  • 8 The Investor August 21, 2019, 10:33 am

    @all — Morning! 🙂 I’d guesstimate “How should I invest as an expat” is a top three question I get over email. We get such emails every couple of weeks. It’s really difficult if not impossible to answer as it always turns on both your country of origin, the country where you’re living, and your targeted investment.

    E.g. A US citizen living in Malaysia who’s wife is in the UK and wants to move back here some time. Yes, I get questions like that! 🙂

    We can’t answer personal stuff over email, but even if we did we’re not qualified nor knowledgeable enough — I doubt anyone is given all the permutations.

    In the past we’ve tried pointing people to other resources.

    E.g. https://monevator.com/expat-investing-and-tax-us-and-uk/

    But that barely scratches the surface.

    Given it’s his specialist subject, I asked Andrew if he’d like to write an article on investing as an expat, which may not appeal to those who come here for the regular world tracker with which SIPP content, but which as I say is a frequent subject of query.

    It’s also something I’m interested in, given the non-zero chance that the UK could be about to become a true international basket case. (I’d guess 1% to 3% chance, but you only live once so if it happens…!)

    In the end the article was more aspirational and opinionated than I’d perhaps foolishly expected, given the clear difficulties with the breadth of the subject matter.

    E.g. You say the article should have something on tax specifics. But these are different everywhere, etc.

    However in my open-minded investor way I read the article and decided it was thought provoking to me, and so could well be for some other adventurous readers, too. I accept this sort of thing is Marmite-y.

    I also thought we might get an interesting pillar of feedback and discussion — preferably in the vein of J.D.’s excellent comment/feedback above, which has already added a lot to this post.

    Appreciate it’s not everyone’s cup of tea but if those with an interest (and better yet knowledge!) can shed more (constructive) light on the practicalities/pitfalls in the comments then that’s great. Cheers!

  • 9 Simon August 21, 2019, 10:35 am

    In addition to my comments above
    Very US centric – if it were the UK then number top topics would be
    1. ISAs (no you can’t contribute)
    2. QROPS (on average don’t touch with a bargepole)
    3. Pensions (get a NT tax code)
    4. 25% tax Free Pension Lump Sum (please be careful you might get hammered)
    5. Tax efficient regimes (I wrote about this for some European countries in a reply to a post on MSE the other day)
    6. Premium Bond winnings (careful you might get hammered)
    etc

  • 10 The Investor August 21, 2019, 10:37 am

    @Simon — If you know a lot about this stuff and you have the time and interest in writing a follow-up UK specific post, I’d be very interested. (Seriously! It’s a legit problem for some readers. 🙂 Please let me know if so and I’ll drop you an email.)

  • 11 Simon August 21, 2019, 10:39 am

    @investor
    I am extremely flattered – but I know enough not to know enough
    The level of my knowledge is in the post (and even then I got a little bit wrong about France)
    https://forums.moneysavingexpert.com/showthread.php?p=76158132

  • 12 The Investor August 21, 2019, 10:44 am

    @Simon — Fair enough, and I’m not surprised. 🙂 It’s a nightmare of a subject, it’s not even easy to suggest/tell people where to get professional advice. If I listed all the variations of the question we get over email…

  • 13 Simon August 21, 2019, 10:58 am

    The big killer at the moment is the lifestyle push of C4 documentaries of living a tapas and wine early retirement in Spain and using house equity to boost income
    As mentioned in the MSE post above – you do this in the first year of selling up – you get caught in a Spanish CGT trap even though you were not in the Spanish tax system at the time of sale.
    The fragrant Jasmine, Scarlett and Jonnie don’t mention that when they sell the lifestyle (yeah hate me! I watch weekend daytime lifestyle programs when it’s not the Rugby season)

  • 14 ZXSpectrum48k August 21, 2019, 1:11 pm

    “Go where you are treated best”. Isn’t this just a cover for what his website is really selling which is tax avoidance. Quote “You’re living wherever you want. You know your assets are safe. Your privacy is intact. And your tax obligations? Zero.”

    Is that really good for society? Or is this more US-style libertarianism where “tax is theft”. I’m all for globalism but that doesn’t mean participating in a race to the bottom by avoiding tax. It’s correct that the burden of supporting state infrastructure falls more heavily on people, such as myself who earn far more than the average, even when we may not always derive direct benefit from those taxes. We all derive considerable indirect benefits from the taxes we pay.

  • 15 The Rhino August 21, 2019, 1:28 pm

    I did briefly skim the “About” and “Team” sections of the website.

    Set off just about every alarm bell I have.

    Did anyone else notice a theme with the composition of the team?

    Or am I just a dirty old man?

  • 16 Hague August 21, 2019, 1:32 pm

    Strange article I think. Especially the limited focus on buying developing world real estate.
    In my view, the investment choices facing an ex-pat should not be too different from that of an ‘ordinary investor’ risk and asset classes are largely the same. Everybody should be internationally diversified to a lesser or greater extent. I suppose there is a question of how much ‘home-bias’ you should have if there is less likelihood of you living (spending) in that home country.
    There are things to watch out for — pensions, tax, currency —which Simon (#9) covers well. Of course, everybody’s tax situation will be different depending on their home country and current residence.
    I understand that these factors being different country by country make writing a ‘generic’ article more difficult but perhaps developing these themes from a UK perspective (given Monevator readers, I assume, are mostly Brits) would have been a better approach.
    (I don’t want to be too critical because I love the blog. But this post isn’t really adding value.)

  • 17 Mr Optimistic August 21, 2019, 1:41 pm

    Interesting article. Owning property abroad seems to be a trap for the naive non- language speaker ( even I know someone who was comprehensively ripped off buying Turkish property – turns out she hadn’t bought it). Curious about premium bonds though, will look that up just out of interest. Since all my investments except cash are in a SIPP or ISA, even moving to the IoM would present issues ( and my pensions are all UK sourced). Would be nice to stuff them on IHT though, but I realise others have a strange philosophical regard for IHT. Still, armed robbers have loving wives too so you have to respect diversity.

  • 18 SeekingFire August 21, 2019, 2:06 pm

    We shouldn’t forget this is a free blog and the moderator has the right to publish what he pleases. The fact that the moderator receive some comments effectively suggesting this blog should aim for better than these articles, is I think, a huge compliment to what you have achieved.

    I have to agree with the comments. For the vast majority of people reading, this article has little useful application albeit it has voyeuristic interest value and could potentially set somebody off down the wrong course. One wonders if people are so successful why they bother with all the infomercials on the website. A globally diversified equity, bond or commercial property index tracker is generally what you need to de-risk yourself as the majority of people know.

    Although if you have oodles of spare cash and are keen to protect yourself from varius political risks then elements could be of interest. I say this as a person who (and all the family) has more than one passport and citizenship. Taking advantage of the current ability to extract your DC pension tax free in Portugal entirely within the law should be of interest to some wealthier pensioners who are keen to live in another country for a period of time before returning to the UK. Note Portugal is a pretty nice place to live.

    Perhaps such policies will become more prevalent in the UK post October 31st.

  • 19 Simon August 21, 2019, 2:30 pm

    @MrOptimistic. In Spain premium bonds are classified as gambling and as such are taxable at, I think, income tax rates

  • 20 Chris Foulkes August 21, 2019, 2:40 pm

    Sorry, I know it’s August (silly season as we hacks used to call it) but this contribution is not up to your usual high standard.

    I downloaded and read the “guide” and swiftly deleted it. It is like winding back 20 years to when ‘how-to’ publishing got started. Fact-free and bulls**t-rich. It’s almost a caricature of the genre.

    Hope no-one who reads your blog takes this guy seriously.

    Chris

  • 21 The Investor August 21, 2019, 3:06 pm

    @all — Clearly not a popular article. Fair enough. As I say it wasn’t exactly what I was looking for, but I wouldn’t have published it if I thought it had no value. 🙂

    I found it thought provoking. With the best will in the world, if an investing obsessive like me finds something thought provoking then I think some readers might manage to be a bit more open-minded. 🙂

    I accept we’ve cultivated an audience of people who believe there’s no point making any active investing decisions, usually rightly. So the idea of getting on a plane or buying an overseas asset of some sort is clearly a leap. However this isn’t the same as picking stocks actively in a zero-sum game. There is the potential to add value by venturing into different sorts of assets and geographies.

    Yes, you face currency risk, but you do in global trackers too. (I am eagerly awaiting the comments slagging us off for recommending global trackers if/when Brexit is resolved and the £1 is back at say $1.40. I *guarantee* I will get them). Also, barring true basket cases, currency risk is a two-way street. Your overseas property might appreciate with its native currency, too.

    An example. In 2010/11 I was in discussion with a US friend (a former ex-pat I’d met in London) about us jointly buying some beaten-up properties in places like Florida and Vegas in the US. I saw screaming value, but was too timid to get on a plane and risk my much-savaged net worth to what seemed a far-flung venture in another country. At the least I wanted a partner on the ground.

    My friend, on the other hand, believed property was done for as an asset in the US and that millennials would rent forever etc. Obviously things might not have turned out quite as well as they did over the past decade, but I thought that was incredibly pessimistic and anti-historical.

    Given we’d have been using mortgages, I think we’d very likely have made a five times return and very possibly more if we’d (I’d) had the gumption to do this. Add in the collapse in the value of the pound and I might have made 10x.

    Obviously just an anecdote that doesn’t prove anything, except to me that I should keep open-minded and keep looking.

    Regarding more exotic countries, I have been banging on to friends for 15 years (while I was renting and feeling London property crazily priced) that the opportunity for our generation was probably in emerging country capitals such as Eastern Europe, South East Asia, and India. Again I’ve not done anything about it because I’m a stock market junkie, but if I had the money spare I would have.

    Again, people will reply “my Aunt Nora bought a timeshare in Beirut and look where it got her” but I suspect once you get away from the packaged deals and look at smart people who put some research in there’s more winners than losers. Indeed the only thing that puts me off is the anti-globalization trend we’re seeing in the world at the moment (most especially here in the UK).

    Anyway I appreciate the feedback, even if I do think it’s a tad overdone. Don’t worry, we’re not going to have lots of articles like this (though there’s another world where we hadn’t decided to make the (suicidal from a business perspective) decision to focus on passive investing where I personally would have been writing much more articles like this.)

    I suppose it’s like when an underground band finds a mainstream audience and then gets frustrated that they just want the same album again and again. 😉

  • 22 Mr Optimistic August 21, 2019, 3:21 pm

    I would want to check out the local money laundering checks and regulations, plus specifics as to who is allowed to own property in a given country. I can’t believe it is easy to open a US bank account without a solid US address and social security number. I did it in the 70s when I lived there and even then it was a bind. Owning any sought of business is also risky, especially if there are local laws about foreign ownership. Again know someone who was diddled in Guinea-Bissau ( mind you he should have known better: given the genders, diddled captures in nicely 🙂 )
    It would be nice to put some assets under a different jurisdiction but the powers that be don’t make it easy it seems.

  • 23 The Investor August 21, 2019, 3:30 pm

    p.s. I just thought I’d add I did buy US mortgages even if I didn’t buy properties themselves.

    From September 2008:

    https://monevator.com/how-i-bought-the-mortgages-the-banks-dont-want-via-prodesse-prd/

    I can imagine the response that article would get nowadays. 😉

  • 24 The Rhino August 21, 2019, 3:39 pm

    The ideas are interesting for sure, its just the source isn’t in any way credible.

    If you had someone more serious/heavyweight presenting similar stuff you’d be on to a winner.

    But maybe the two don’t go hand-in-hand?

    (You must have another Lars type mate who invests in global real estate though, right?)

  • 25 The Investor August 21, 2019, 4:12 pm

    @The Rhino — As written above it’s incredibly difficult to find anyone who can address this stuff, especially at a level pitched at the typical Monevator reader. (What people really want to know is how to best juggle ISA/SIPPs and UK residential or otherwise status with similar in other countries, as different forms of resident and expat. It’s a case by case question).

    The globe-trotting investing elite tend not to write about this stuff on spec for free websites. 😉 I suppose I could interview someone. But anyway, it’d just be the same story.

    The people I know / have met who’ve invested actively outside of juristication have tended to see an opportunity and gone for it, as far as I can tell. It wasn’t a project like “I am going to invest 33% of my net worth in illiquid emerging market real estate”. It’s opportunistic. That’s what I take as the point of this piece.

    Re: Nomad Capitalist’s team, what I saw was someone who has seemingly put together a group of smart young people in a cheaper country and used them to leverage his brand, likely at a far lower cost than employing the same in London.

    It genuinely made me wonder what might have happened if we’d taken the same approach with Monevator years ago.

    See, open-minded! 😉

    Though as ever leveraging the pennies we pick up from preaching passive investing to educated cheapskates (that’s a compliment incidentally) isn’t ever going to be the greatest ROI in anyone’s book. 😉

  • 26 Money Mountaineer August 21, 2019, 4:20 pm

    Just to say ‘kudos’ to TI and TA; this article (and the feedback comments) proves that you’ve taught me a lot!

    If I’d read this a couple of years back, before I became a regular reader of your blog, I would have lapped it up, dreaming of real estate holidays to the balkans… but, in fact, all my internal alarms started ringing, and a whole load of questions around risk sprang to mind, that were ultimately reflected in the more constructive of the comments below.

    Not saying the poster doesn’t have some good points to make, but most of all this provided a great exercise for me in critically assessing investment ‘advice’, and as a solid ‘passive’ devotee, I feel like I passed.

    So it’s holidays to Devon for me!

    Thanks TI, thanks TA, thanks commentators.

  • 27 Fremantle August 21, 2019, 5:09 pm

    If be interested in hearing about anyone who is required with superannuation in Australia. Australian superannuation is a nightmare given the complicated tax structure, tax on the way in, taxed during accumulation, tax free (for Australian residents) on the way out. Can it be treated as return of capital if the account is closed in one hit? Or is it all income?

  • 28 Moneydog August 21, 2019, 5:57 pm

    The main issue here seems to be the misleading title. The article is less about how to invest as an expat than how to seek high income, higher risk active investments in developing markets. You can use those investments (or not) regardless of your residency.

    If I were to write an article under this title, I’d propose the following three point plan:

    1. Establish what tax residency applies: UK, other country, both, or neither
    – Check whether you will remain UK tax resident using HMRC’s guidance: https://www.gov.uk/tax-foreign-income/residence
    – Check whether you will be considered tax resident in your new country. Normally, this depends on the number of days you’re physically present in the country. Search for ” tax residency test” as a starting point.
    – Typically, if you move to another country full time, you’ll be tax resident in the new country, and non-resident in the UK. In that case, you’ll pay UK tax only on UK-origin income (like UK property, savings in the UK, ISAs etc.). You’ll have to check the implications of your new country’s tax residence, but for many countries you’ll be taxed on income from anywhere in the world. Establish what types of taxes will apply (income, capital gains, property etc.) and roughly what their rates are (higher or lower than UK).

    2. Make a plan for existing investments – can they stay put, or not? Things to note:
    – Capital gains tax may apply in the new country when selling a house or investments, including those in the UK. Figure out if it’s best to do this before or after the new tax residency applies.
    – What’s tax free in the UK may not be in the new country, with the exception of workplace pensions which are often covered by a tax treaty (search ” UK tax treaty” to see what’s covered). Things like ISAs, premium bonds, NS&I savings certificates are probably all taxable in the new country. Personal, non-workplace pensions like SIPPs with personal contributions are often a grey area.
    – If you’ll only be in the new country for a short time, it may be best to keep your UK investments (like ISAs) and just pay the tax for the time you’re there, to avoid losing your existing ISA allowance. Note that you don’t get additional years’ allowance unless you’re tax resident in the UK, but you can keep any existing ISA open. In some countries, if you don’t sell anything and use non-distributing funds in your ISA during the time you’re there, there are no gains and there’ll be nothing to pay. A notable exception is the USA, which treats any non-US domiciled funds as “passive foreign investment companies”. Steer cleer to avoid filling out a fairly complicated form every year (search “PFIC” and “Form 8621”).
    – US only: the US requires its tax residents to submit a list of all non-US accounts every year, if the total balance is over $10k (search “FBAR”). You’ll even have to do this *twice* if you have over $50k (this amount varies depending on status, search “Form 8938″, which has to be done in addition to FBAR).

    3. Make a plan for new investments
    – If you’re only in the country for a short amount of time, you might want to stick with cash savings accounts to avoid hassle. Obviously such accounts are usually taxable, so not ideal in the long term.
    – If you’ll be in the new country for a reasonable amount of time, identify what tax planning options are available, like pensions/retirement plans. These are usually a good option, since they’ll often enjoy tax advantaged status if you return to the UK (again, consult the country specific tax treaty with the UK). This area varies a lot depending on the country. Search ” retirement accounts” as a starting point. If your new country has few options, you could search “expat brokerage” for example to use an account in the UK or a third country. But be careful of the tax and accounting implications of “foreign” investment accounts from the perspective of the new country. Many places (again, the US, in my experience) are quite tax hostile to these accounts.

    Obviously option 3 could be expanded a lot, but hopefully this gives anyone interested in moving abroad a starting point.

  • 29 The Investor August 21, 2019, 6:13 pm

    @Moneydog — Excellent comment, thank you. You seem to know your onions here. Could I persuade *you* to write that elusive article? 🙂 If so I’ll drop you an email!

  • 30 mucgoo August 21, 2019, 6:19 pm

    Completely understand it is your blog and a non passive perspectives can be thought provoking. I’m sure there are good opportunities outside public capital markets, some where being a nimble private investor may even be an advantage. Posts in that vein would be a welcome addition.

    However this was far to light on the detail. A case study of Cambodian or Turkish property deal and all the ins and out would be fascinating. Unfortunately credibility was lost with the Armenian carry trade.

  • 31 TahiPanasDua August 21, 2019, 6:29 pm

    I spent 42 years as an expat and of necessity had to teach myself how to invest as I had no employers pension. Over time, the process became fascinating.
    This article strikes me as guff and potentially dangerous guff to boot.
    First time I have had such thoughts about a Monevator article.
    TP2.

  • 32 The Rhino August 21, 2019, 7:15 pm

    Haha, you’ve skewered me very accurately TI.

    Reminds me of a mate of mine who flits between Guernsey, Hawaii and Switzerland surfing and skiing predominantly. I need to have a chat with him.

    Private chats with these types maybe the way to get educated..

  • 33 Haphazard August 21, 2019, 7:33 pm

    I’d actually be interested in more coverage of emigrant stuff (avoiding the word expat for a change!). With Brexit closing down job options in the UK, and having lived in various countries before, I have been wondering about all this. But it’s not an exotic new adventure thing, just a needs must.
    It raises all sorts of problems and I thought Moneydog’s contribution above was a really good starting point. Even the basics are a problem. Can you stick with your existing UK investment platform? Lots seem to have clauses about this. If you have to report dividend/income tax on funds in ISAs/SIPP, how on earth do you find out what it is given that it won’t be on the tax certificate? Most places I might end up working have tax regimes that seem quite vague and opaque (even if you speak the language). Sometimes even the residence status rules seem a bit woolly. The thought of dealing with two sets of tax law is not exactly fun.
    My findings so far are that if you look at countries where people might move to work (not specifically for a tax haven), the tax regimes are often quite tough to negotiate.
    It would be great to hear from anyone else with practical experience in this area.

  • 34 Haphazard August 21, 2019, 7:41 pm

    Just after the last post it sprung to mind that some readers on the move might find this link to the OECD useful – it provides information on tax residency rules for different countries:
    http://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/tax-residency/

  • 35 Dr FIRE August 21, 2019, 9:33 pm

    Interesting article, and some excellent comments.

    I would like to echo the comments above; I think a series along the lines of “how to invest as a British person living abroad,” would be very interesting/useful. Could initially cover living in the most popular destinations for British expats/emigrants, e.g. Australia, the US, Canada, Europe (although, with Brexit, that may have a short shelf life!), etc. I appreciate that you’ve already said that it’s not an easy article to write, but it looks like you’ve found an expert in Moneydog, above!

  • 36 faithless August 21, 2019, 10:38 pm

    Erm… No. There seems to be very little consideration of political risks, etc in the piece above. Monevator is a trusted source for a lot of people and I’d suggest putting a health warning at the top of the article as this is quite far out there compared to your usual sensible content. Your active investing posts usually come with a warning not to try this at home as passive is best!

    I’m sure some of these are massive opportunities, and the UK and US are not the only safe markets, but blithely suggesting putting cash in Georgian/Columbian/Armenian bank accounts that yield higher interest and suggesting you’ll still be up in 4 years even if you lose a bit on the exchange rate, without mentioning any risk of losing some or all of the capital because of instability of the financial institutions/reliability of any FSCS type guarantees offered/the political stability of the country, is irresponsible.

  • 37 The Investor August 21, 2019, 11:13 pm

    @faithless — I understand the sentiment and appreciate the point you’re making, but I’m not sure a wealth warning is appropriate here. There’s nothing actionable in the article, it is illustrative of the benefits of a different way of seeing global investing opportunities. This seems to have both annoyed people (because they see it as empty posturing I think, versus the detailed nuts-and-bolts we’ve all agreed we’d love to see) and also concerned people who think an example reference to an opportunity the author has alighted upon is “irresponsible”, when the fact it’s just mentioned in a line or two says to me it’s clearly just an example.

    If the article was “How to make 10% in Armenian cash deposits” I’d understand, but it is more “there are opportunities around the world, here’s a call to look for them.” Comment like this isn’t rare in magazines or newspapers. I suppose the difference is they have a wide range of content all the time, whereas this is a one-shot.

    I take the point it’s very different to our usual fare and I’m really trying not to throw my toys out of the pram, but I must admit the general response reminds me why I find it so hard to write for this site nowadays. 🙁

  • 38 The Investor August 21, 2019, 11:28 pm

    @Dr FIRE — Hi. I’ve learned over time that what you’re asking for is incredibly difficult to find anyone to write up, and is beyond the scope of this site. As discussed in my comments above, the permutations are endless. (A big chunk of the emails we get also are “I am from country X/Y/Z, I will be in the UK for so and so years, how should I invest?” This is equally complicated.)

    Basically anyone who wants to go down this route needs to learn to dig and research for themselves as there’s at best a framework (as @Moneydog suggested above) but no easy to follow steps. I am certain caveats and exceptions abound in every case, too. :-\.

    I suspect any people who know about this enough to write a truly detailed article are selling their services professionally on a country by country basis for individuals or companies.

  • 39 J.D. August 22, 2019, 2:55 am

    @The Investor

    “Appreciate it’s not everyone’s cup of tea”

    It certainly is my cup of tea and I would be interested in an article for expats. The problem is that this specific article does not give both sides of the arguments and instead makes it sound like it is all roses, so I see more as a problem article than a useful one. If it was more objectively and factually written, I can see a lot of value in the idea of an article for expats. I bet you there are a ton of UK-born expats who read your forum, not to mention myself as an expat who has never been to the UK who enjoys your site very much.

  • 40 Richard August 22, 2019, 7:21 am

    When I read the title, my view of an expat is someone who is living semi-permanently in a foreign country. So was expecting the article to provide detail about what to invest in for this scenario. In this guise, buying property in say Cambodia if you live and work there probably makes sense. I expected the article to be of little interest therefore. Reading it, this was not really the case, as the different scenarios described give the impression it was aimed at UK based investors looking for better returns elsewhere.

    Now I have often been in foreign countries and looked at the rates on deposit accounts or the price of property and felt like it would make sense to invest for the better return. So in this sense the article aligns with those views. I have not done it though. Two reasons. Firstly complexity. Life is full enough without having to spend time worrying about tax intricacies, long distance maintenance of property and another domestic market to keep an eye on. Sure i can hire people to take care of this, but that eats into the returns and won’t remove everything I have to. Then there is Risk. I mean unless I can take a month or two or three off and go around looking for property and understanding local market (I can’t), the risk of being scammed or just getting it wrong feels very high. Maybe if I use leverage the bank will help look after me here, but now I have debt so the risk of getting the numbers wrong is higher. Then political risk etc esp for emerging markets rather than, say Switzerland.

    So until I am Scrooge McDuck, I move abroad or the uk becomes a basket case (move abroad?) I think I will steer clear of expat investing.

  • 41 JimJim August 22, 2019, 7:25 am

    @JD. comment 6
    Sounds reasonable in a reasonable world. Having traveled in Cambodia, where the only currency you seem to be able to spend is the U.S. dollar, the only currency in the cash machines is the U.S. dollar and business appears done in the U.S dollar- how does this work with a developing nation?
    @ The investor… Way out of my comfort zone and present needs but a great thought exercise. I have hated property from the second I got invested in it, hassle all the way but that is my take. My return needs to be more predictable than stellar so exotics are out. Still you got me thinking (Kudos)… Where would be the best Brexit bolthole??? Portugal is trying hard, good healthcare, cheap accommodation and favorable tax laws. The language is not too impossible. Anyone found anywhere to run better? Anyone pulled off the “perpetual traveler” gig?
    Jim

  • 42 Simon August 22, 2019, 7:58 am

    (seem to have lost my last post)
    @MrInvestor – I find the blog fascinating and the comments enlightening
    I am actually invested via an IFA who has a set of diverse active and a small amount of passive in their portfolios
    On another note I just found this..
    “if a customer doesn’t have relevant UK earnings on moving abroad (i.e. they’re being paid and taxed overseas), then they will only be able to receive tax relief on personal contributions of up to £3,600 gross pa for five full tax years following the tax year in which the person moves abroad. and only so long as their registered pension scheme operates the ‘relief at source’ mechanism”
    https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm114000
    Did I just read that right?
    If so – happy days

  • 43 Ste August 22, 2019, 8:55 am

    @Simon:
    That’s correct. You’ll get basic rate tax relief for 5 years after moving abroad on up to £2,880 net pa paid into a UK pension. Set up a SIPP before you move if you don’t have one already (you’ll have trouble finding one that’s willing to open an account once you are not UK resident anymore), and pay in your 240/month. Just consider that this money will still be subject to UK pension age changes, even if you don’t plan to return to the UK.

  • 44 Ric August 22, 2019, 10:21 am

    Thanks TI for this article, it has at least produced some quality comments here.

    In case it benefits readers, here are some cautionary tales from my late father, as he tried to fulfill his dream of a holiday retreat in the sun.

    Apartment in Tenerife.

    The property developer went bust after the purchase but before the Escritura (the deeds document) was issued. The issues at this development impacted a large number of apartment owners and were even featured on UK TV. After many years campaigning and lots of legal fees, the result was 100% loss as the properties were taken over by the banks. Once the legal fees and other expenses were included he was significantly out of pocket.

    First property is Spain.

    Success! At least so it seemed at first. This was a nearly new but previously owned property and by now my father understood the local laws a little better, so the Escritura was not a problem this time. However it was a bit too small so he decided to upgrade to a second property in Spain. Unfortunately he could not find a buyer for this property, so let it out. After a few years the property developed large cracks. It turned out to have a major subsidence problem, it seems the Spanish building regulations are either not as good or not enforced. After his death I eventually sold it for my mother but at a huge loss.

    Second property is Spain.

    This time the property developer went bust during the build. Initially it was only a 100% loss of the hefty deposit, but some years after my farther passed away my mother received a summons from a Spanish court about the unpaid balance. By now local property prices for this type of house had fallen to below the deposit already paid, and in any case he’d already replaced the purchase (see next example). As a result we had to employ a Spanish solicitor and face further expense. The main impact however was the worry for my poor mother.

    Third property is Spain.

    This was another a nearly new but previously owned property and was initially a success too. However by now the area had been over developed. It seems Spanish planning permission either does not exist or more likely is not enforced, leading to uncontrolled flooding of the local property market until the market collapses. At this point the glut of empty property makes the resale market very difficult. As a result when I sold this property for my mother we only got a fraction of the initial purchase cost back.

    Shares in America.

    Finally, if dealing with directly held shares in the USA, research the Medallion guarantee scheme. It delayed the sale of some American shares during probate, and I had to employ a specialist Notary to provide one.

    Conclusion:

    For brevity I’ve skipped a lot of the details, including tax issues, legal and probate issues, etc. However the lesson I’ve taken away from this is to stick to investing in areas you fully understand – no surprise there. For foreign investments this needs to include in depth understanding the local laws, tax, banking arrangements, the levels of corruption, the financial integrity of your counter parties, the language, the culture and the local market forces. Also have deep pockets and be prepared to loose.

  • 45 Andrew August 22, 2019, 10:47 am

    This is a very in monevator type article.

    I wouldn’t advocate parking my money in a bank in Cambodia or Georgia. What about currency risk. Do they have a deposit protection scheme. Seems most unwise.

    I understand the advantages of property but do you really know what you are getting into. What is there is a political upheaval. There is often corruption in these countries and very different ways of managing property.

    Will stick with my 2 investments. Which is a low cost global tracker and UK Gilts.

  • 46 Vanguardfan August 22, 2019, 11:50 am

    TI don’t throw your toys out the pram, while I also felt the article was light on detail (usually the Monevator strength!) it has prompted very interesting and useful comments which surely made it a worthwhile experience !

    I’m a true homebody, but given how many people live and work in countries other than where they were born, it is interesting how bloody difficult and complex the financial side can be.
    I agree there must be many readers who have first hand experience to share, as demonstrated by the comments. @Ric’s experience also makes salutary reading – but again, not an uncommon experience I suspect. I do hope his dad enjoyed the time he spent in Spain!

  • 47 Dartmouth123 August 22, 2019, 12:11 pm

    Don’t forget to sign up to make voluntary Class 2 NIC payments!

  • 48 Dartmouth123 August 22, 2019, 12:22 pm

    For anyone interested, there is good FB going on expat finances https://www.facebook.com/groups/445218675653782/

    Please delete if posting the link not appropriate

  • 49 J.D. August 22, 2019, 4:56 pm

    @JimJim

    “”””
    Sounds reasonable in a reasonable world. Having traveled in Cambodia, where the only currency you seem to be able to spend is the U.S. dollar, the only currency in the cash machines is the U.S. dollar and business appears done in the U.S dollar- how does this work with a developing nation?
    “”””

    I am guessing that you are not getting the 10% return on US dollars there?
    Or if you are, then they somehow have credit risk of leaving it in the bank leading to the higher rates.
    The point is that there is no free lunch, and this is especially true with money in banks where the price is more easy to set correctly based on risk.

  • 50 brod August 22, 2019, 5:45 pm

    @J.D. – Ecuador uses the US $ and my wife has the proceeds of a house sale earning 4.5% in a bank in Ecuador. So it’s not unheard of. I think maybe higher interest rates primarily compensate for higher local inflation rather than any other type of risk? In developing countries, you can’t set interest rates based on geographical arbitrage edge cases.

    As you say, the biggest risk is the bank going bust. Not sure if deposit protection exists in Ecuador, but the bank is alledgedly one the the most stable.

    Ho-hum.

  • 51 The Investor August 22, 2019, 5:46 pm

    @Vanguardfan — Thanks for those thoughts, and also I agree that the comments have (as hoped) been excellent and added a lot of detail to what we all agree wasn’t a perfect fit Monevator article. 🙂

    I’ve been thinking about my despondent response to much of the feedback on this piece, and I think it goes something like this…

    When I first came to investing around 20 years ago, I started my research on forums, mostly The Motley Fool, where I learned a lot about all sorts of active, passive, hands-on, dubious, scammy, spivvy, wonderful, short-lived and various other strategies, as well as the basics of analyzing companies from several of the excellent posters who frequented that site in those days.

    So for instance I was investing in small cap value shares with net cash on their books, whilst using 0% credit cards to conduit free cash into high interest bank accounts and so on.

    In almost no cases were we handed a solution that said “do this exactly”. You had to learn and piece together. I swam about in these waters of learning, made some mistakes (had a share go to zero, for example), but overall caught the investing bug big time.

    Admittedly over time I also observed (together with reading mounting evidence and studies) that many people were pretty bad investors, let alone stock pickers, which led me to the conclusion quite soon after starting Monevator that most people are best off investing automatically and passively into index funds (unless they have a passion for stock picking like I discovered I had.)

    Hence my decision to tilt this site very heavily in that direction. I brought on board @TA as a devoted passive purist (who incidentally has urged me to keep posting active stuff here for the interest and colour) and dialed back my own active articles.

    I know this specific article wasn’t one of mine, but also knowing the sort of response my articles will get has seen me self-censor most of that off the site for years now, or else when I do write something I get bogged down in writer’s block because articles have to have dozens of caveats and wealth warnings to be armoured against the commentators below.

    Will stick with my 2 investments. Which is a low cost global tracker and UK Gilts.

    This sums it up really. It’s perfectly fine as a strategy but it’s almost a meme you could wield against many of the sort of articles I personally would like to read/write.

    It’s all a long way from the sort of vibrant community where I myself learned to invest. I guess that makes me a tad sad. We’ve cultivated here mostly a community of diehard Bogleheads.

    I’m proud of the difference it’s made and is making in lots of people’s lives (the emails people kindly write tell me that!) but I often feel I don’t really belong here anymore. :-\

    I suppose it’s like when the elves save Middle-Earth in Lord of the Rings but then realize it’s not their home anymore and have to leave. Ho hum.

  • 52 The Borderer August 22, 2019, 6:16 pm

    @TI(51) “what we all agree wasn’t a perfect fit Monevator article”

    On the contrary – with the greatest respect – what makes this site so interesting and informative is that it isn’t just a forum for Boggleheads. And articles like this one, whilst evidentially not meeting everyones ‘approval’, is the reason that this site so worth reading twice a week.

    I personally would not touch an annuity with a bargepole, or so I thought until reading Mark Meldon’s excellent guest authorship.

    Or perhaps we want to think about Investment Trusts – read Greybeard.

    Keep up with the variety and diversity of these posts, and keep up the good work.

  • 53 Richard August 22, 2019, 6:23 pm

    @TI I think that as we head to middle age we tend to become more cautious / focused on wealth preservation / having no free time (for those with kids). I cut my investing teeth on penny stocks. I mean what a ridiculous idea. The first company I bought took about 3 years to go from big loss to small profit (£100). I bailed. Couple of months later I would have been sitting on something like 20k profit. I was learning a lesson on market timing. Tried again, still have the stock 10 years later but at something like a 90% loss. Learnt about risk. And about luck. And about ‘get rich quick’ schemes. Eyed up spread betting but never went through with anything. Someone was trying to get me into bitcoin related investments even after the drop in value. I was somewhat interested but never went through with it. Since then I have taken the slow and steady root – though house and family and all take up so much time boring is by far the best way right now.

    Maybe once I have the base I need I will venture out into more active investments. Well, perhaps once the kids leave home…. hope you are still doing what you do then.

  • 54 Ric August 22, 2019, 6:57 pm

    @Vanguardfan

    Thanks for your comments. Yes my father did enjoy the time he spent in Spain, thanks. Also, even after those losses in Spain he’d made sufficient provision for my mother’s old age (so another lesson for us all there; to make sure you have sufficient provision in safe investments before risking capital to more risky ventures such as foreign property).

    @TI

    “… but also knowing the sort of response my articles will get has seen me self-censor most of that off the site for years now.”

    I’ve been a reader since those glorious days of your active investing posts (I’ve been subscribed through three screen names / email addresses over the years). Yours is the only blog to which I’ve been subscribed for that long. Whilst I appreciate the diversity of Monevator posts nowadays, the truth is I particularly miss those active investing posts and wish very much you could feel comfortable to resurrect them, even if they were only occasional posts. Surely the sort of response you get to your active investing articles are nothing to those of your occasional brexit posts 🙂 ?

    (Disclosure: I’m probably about one third active, two thirds passive, and living 100% off the proceeds. This is partly down to you, partly the early days of sites such as the Motley Fool, and more partly Stockopedia).

  • 55 Rosie August 22, 2019, 8:20 pm

    I appreciate the insight into a different world. I am okay that my payment for that is my time reading a thinly veiled sales pitch. Also it’s good that Mr Monevator has regular guest posters as it’s a lot of work and some money running a blog. This blog in particular having more worth than a lot of the country’s financial advisors.

  • 56 ZXSpectrum48k August 22, 2019, 9:11 pm

    With regard to investing in high yielding EM currencies using local bank deposit accounts. Sorry it’s just a very poor way to manifest a carry trade in risk management terms.

    Take the example he talks about on his site of using a deposit account at a Turkish bank like Garanti to earn the “high yield” of 10%. Now, we’ll ignore that USD/TRY has gone from less than 1.50 in 2009 to 5.77 today, a depreciation of almost 13%/annum. We’ll also ignore that central bank independence is sham, that they are lying about their currency reserves, the massive US$ liabilities of the Turkish corporate sector and the huge NPLs of the banks. It’s possible that this is already priced into USD/TRY.

    Even then depositing money at Garanti would still be a bad idea. First, you have onshore risk: if they impose capital controls or taxes on these deposits you’re stuffed. Second, you have counterparty risk to a set of local banks with poor credit quality. Third, it’s just bad value. Onshore deposit rates are artificially suppressed by the government who is trying to encourage bank lending.

    You can invest and earn the yield in many EM currencies without ever needing a bank account there. The key is never to take delivery of the local EM currency, since if you never have a settled balance in that currency, you never need a local bank to deposit that money into. So, for example, if I want to earn the yield in Turkey, I deposit my US dollars in an account at say JPMorgan (rather better credit risk than Garanti). I then use this as margin collateral to sell USD/TRY 1-month forward, locking in an implied yield of 17.80% (rather higher than those onshore deposit rates). If something bad happens, say they impose punitive taxes or capital controls, then this is an offshore position and not subject to Turkey’s legal framework. It’s just a much safer way to earn the carry. As the 1-month forward matures eventually it will become short USD/TRY spot fx position. At this point, I simply roll the into a new short USD/TRY 1-month forward contract. I never ever take delivery of any Turkish lira. Note I still have the spot USD/TRY fx risk.

    Alternatively, just buy a EM local markets government bond fund that follows an index like the GBI-EM Diversified. Turkey has a market cap of 7.68% in that index, with a yield of 15.74% and a duration of 3.03. Plus you get all the other EM countries at the same time. You probably want that diversification. Remember the Turkish lira did devalue almost 50% peak to trough last year, including a 25% move weaker in 36 hours.

  • 57 Sparschwein August 23, 2019, 1:29 am

    @ZXS – would love to read more about the method of currency investment with forward contracts. Can you recommend a starting point?

  • 58 Brod August 23, 2019, 7:52 am

    @TI – see? Posts like @ZXSpectrum48k’s above on err… USD/TRY 1-month forward are very educational and informative.

    They’ve educated me that I don’t have a clue what ZXSpectrum48k is talking about and informs my decision that I don’t need to expend any effort trying to understand. I’ve spiced up my portfolio with 10% each Momentum, Value and Small Caps long only funds, cos I think they’re uncorrelated factors, and maybe I’ll eek out an extra 0.5% p.a., and that’ll do for me. I reckon that decision makes me about 30% active 😉 Investor – know thyself! I know I’m not awfully bright and, more importantly, lazy and unambitious.

    And if you want to write e.g. a monthly post on active investing because it’s your blog and you want to, who am I to complain? I’ve learnt so much from this blog and continue to do so. If I read and file under “too difficult”, that’s my loss (or probably gain!) At the very least, it always makes the comments sections interesting.

  • 59 The Investor August 23, 2019, 8:57 am

    @Brod — Cheers for the followups (and everyone else’s above). I agree 100% about @ZX Spectrum’s comment; I’m always very pleased when he chips in. It’s fully in the spirit of what I was discussing in my reply to @Vanguardfan above. There are many comments on this thread that are the sort of discussion I was hoping we’d see from this article, so it’s a mixed picture. 🙂

    Also, I’d stress again it’s not that I think people *should* be doing any of this, let alone *need* to, at any point in their investing journeys (assuming the UK stays the same essentially politically over time.)

    And I don’t think people become more sophisticated/richer, and then *need* to do more complicated stuff.

    i.e. There’s a lot to recommend in that simple two-asset solution cited earlier and highlighted in my comment, and this website will recommend it again in future many times no doubt.

    My complaint/lament is about the assumed exclusivity of it being the proper subject for discussion around here.

    I don’t even say *that* point of view is wrong. It just leaves me as mentioned with the issue that the sort of stuff *I* most like to read and write isn’t in that case appropriate for my own website. 😉

    But perhaps on reflection it is *this* article that’s been too much for many. I was heartened that @Greybeard’s recent update on investment trusts was allowed to stand on its own non-passive merits, so perhaps I need to stand down a tad. 😉

  • 60 britinkiwi August 23, 2019, 9:03 am

    I’m not sure whether this piece is aimed at me as an ex-pat (UK)/immigrant(NZ) but it’s always interesting to read something a little different. As a (recent) NZ citizen and resident I’m aware of some of the tax implications of having investments in 2 countries (2 sets of income tax forms to fill in for starters!) plus some of the currency risks associated with overseas investments. Of course, the UK is now an overseas investment with currency risk attached although I may differ with @TI’s view around the medium to long term prospects a la Brexit – hence my still holding UK Inv Trusts as part of my diversification.

    And, having cut my teeth on Motley Fool, like others many years ago, I’m still learning and this post helps that learning – although in my case it’s outside my comfort zone to invest like this due to being close to retirement and not willing to wear the risk- thanks, but I’ll stick with a 62/38 growth portfolio. But thanks for the alternate perspective.

    @TI said “I suppose it’s like when the elves save Middle-Earth in Lord of the Rings but then realize it’s not their home anymore and have to leave. Ho hum.”

    Middle Earth for me is just a few Km away. Feel free to drop by if you ever depart the Grey Havens!

  • 61 The Rhino August 23, 2019, 9:27 am

    @ZX – I wish I could write comments like that 😉 In my minds eye you are Ben Hockett sitting in that English boozer on the phone to Cornwall Capital! You can’t really find your work totally dull can you? I imagine our Nomad Capitalist will be giving you a call any moment now? Maybe there’s a new career out their for you jet-setting around and rattling Armenians?

  • 62 Brod August 23, 2019, 9:39 am

    Now, for something really useful, off to find Monevator’s Broker table for ISAs.

  • 63 The Rhino August 23, 2019, 10:40 am
  • 64 Hague August 23, 2019, 11:26 am

    @TI
    ‘But perhaps on reflection it is *this* article that’s been too much for many.’

    I think it was the way it was packaged as being a ‘how to’ for ‘expats’ which has made (some) readers grumpy. This article touched on two different topics one being developing world real estate the other being currency trading. Both are legitimate topics but aren’t necessarily particularly relevant for the ‘expat’ situation. Perhaps, two different articles without the focus on ‘expats’ would have been differently received.

    I’m interested in your ‘active’ content, for example, the piece about venture capital that was a few weeks/months ago. Perhaps, two different articles: one discussing currency and the other on overseas real estate would be better.

  • 65 Richard August 23, 2019, 12:59 pm

    @Brod has reminded me of my dirty little secret. I too have a small cap active fund to spice up my portfolio. Similar, around 10% but it may have been inspired by some of the early articles on here for using small caps for that purpose. I certainly felt trackers overweighted me in large caps which at the time felt so boring.

    That said, it is the biggest drag on my return at the moment. I can think of a few reasons for that (not just small cap active is bad). So perhaps I should stick to what I preached before about being all passive.

  • 66 Richard August 23, 2019, 1:02 pm

    Can’t edit I meant it doesn’t mean small cap active investing is bad. Just I didn’t do a good job of it 🙂

  • 67 Mr Optimistic August 23, 2019, 3:52 pm

    Was it also Mark Melton who did an interesting piece on structured products ( as well as one on annuities). The best articles are those which make you think again about your assumptions.
    Now, about that book…….

  • 68 The Investor August 23, 2019, 3:58 pm

    @MrO — One of my favourite old school articles was one I wrote in 2010 on a DIY structured alternative: https://monevator.com/guaranteed-equity-bond/

    Follow-up: https://monevator.com/pimping-your-diy-geb/

    (I appreciate @ZXS might say it would be better to just use the derivatives directly to create this DIY solution but (a) I didn’t know how and (b) the point was to replace complexity with transparent simplicity. 🙂 )

  • 69 Mr Optimistic August 23, 2019, 6:12 pm

    Ah, OK, before my time. I’ll have a read, thanks.

  • 70 E&G August 23, 2019, 7:45 pm

    I thought it was thought provoking, yes but in the same way any puff marketing piece might be. Agree with those who say it’s not suited to ex-pats particularly but to the more adventurous among us. I’d really like to read more on any opportunities that are available to directly invest in property on your developing world capitals (presumably there must be some vehicles, an investment trust here or there etc) in a way that is relatable to all bar the millionaires several times over on here who could conceivably drop £50-100,000+ into a single property investment in a far-flung part of the world and disregard all the risks that come with it, even if they could legally purchase said property. Likewise, I find the passive stuff a bit boring – I know it’s probably where I should put my cash but I’m happy taking a bit more risk and would love to see some more content that you appear to want to write TI so more quality risk v reward type writing to broaden minds (and less puff pieces like this) would be great.

    p.s. Reading about fairly ordinary English couples who’d sunk a but if cash into property in Florida in the aftermath of the crash is one of the things that interested me in taking some investment risk (my bank balance just needs to allow it…). Some gig if you could have managed it.

  • 71 The Rhino August 23, 2019, 8:04 pm

    It’s dead simple, just invent another pseudonym, The Activator, then fill your boots. Write anything you fancy! Anyone complains, just say it’s the Activators fault and shrug and whistle a bit?

    Is Henderson a mate of yours or did he just cold call you?

  • 72 Sparschwein August 23, 2019, 11:29 pm

    @TI – seems to me that you’re underestimating the audience here…
    My gripes with this “expats” piece are (alongside most here) about quality not subject matter. It reads like self-promoting fluff and it’s potentially dangerous to novices.

    Great if you’d like to write about adventures in speculating with obscure microcaps, or Armenian tulip bulbs – I’d enjoy the latter for entertainment, and the former to improve my occasional speculation with said obscure microcaps…

    To The Activator.

  • 73 faithless August 24, 2019, 8:53 am

    I’m sorry for being quite so negative in my initial reaction, and for contributing to making you feel there’s no place for you on your own site.

    I’m usually quite happy to read more ‘out there’ stuff from a different perspective, however, from my previous experience Monevator is the safe place to refer friends who start to express a desire to save for the future, where they can learn about investing without getting caught up in any dodgy crypto/forex trading/day trading/get rich quick scheme. That is partly based on how cautious you are about warning about active investing (all your active posts basically have the health warning ‘Follow TA, do as I say, not as I do’), it was a surprise to see this sort of post without any such warning.

    I do note your point that there’s nothing in there immediately actionable, e.g. a link to savings at Bank of x. My knee jerk reaction upon reading it sans warning, was to recoil in horror at the thought of the quite naive friend I’d recently referred to Monevator reading this thinking this was the sort of thing that’s a good idea.

    It’s your site to write whatever takes your interest, and I’d hate to think you don’t feel like you can post stuff because it won’t go down well. Not everyone will like every post, and
    My issue with this post is based on my own use of the site as a ‘safe’ place to direct newbies to, and because of that I’d prefer to see a health/wealth warning around anything a bit ‘out there’, even if there’s no room for a discussion of the risks. But that’s only my personal preference!

  • 74 ZXSpectrum48k August 24, 2019, 9:49 am

    @Sparschwein. The fundamental idea is covered interest parity which you can easily find out about on the web. When you see quotes of GBP/USD spot at 1.228 and GBP/USD 3m forward at 1.2324, that difference in rates (42 pips is the terminology) is bound by a no-arbitrage relationship. Selling GBP/USD 3m forward can by decomposed into a synthetic borrow of GBP for 3m, selling GBP/USD spot at 1.228 and synthetic lend of USD for 3m. Because you are borrowing in a lower yielding currency, GBP, and lending in a higher yielding currency USD, then there is a positive pip difference between the spot and forward prices to compensate for that gain. The harder bit is to build a spreadsheet that allows you to back out the implied yields that you are synthetically lending/borrowing at. I don’t know where you can get that on the web.

    In terms of how you do this then brokers like Interactive Brokers and CMC offer most forms of currency trading including forwards. Doing FX forward trading in something like Turkish lira (TRY) or Argie Peso (ARS) is going to be very hard for retail. The sheer FX and rate volatility makes prices wide and margins high. I definitely couldn’t recommend it. Hence why I ended just by telling people to think about buying an EM local markets bond fund!

    For G10 currencies and some lower volatility EM currencies, doing FX forward trading is perfectly doable on platforms like IB or CMC. I still wouldn’t recommend it, but you could play around in things like EUR/USD in small size just to understand the idea which should be sublethal! In pairs like EUR/USD, GBP/USD or AUD/USD, the spot fx volatility will totally dominate since the interest rate volatility will be fairly small.

  • 75 The Investor August 24, 2019, 10:04 am

    @faithless — Thanks very much for your long comment and detailed reasoning. As I’ve said a few times above, I really do understand I think why this was a contentious piece. I understand what you’re saying (and by the same token you can’t be responsible for my complicated feelings about this website — outside of my family it’s by far the longest commitment I’ve made to anything in my life, so they’re complicated! 😉 )

    Hopefully this won’t happen again for a good while and you’ll continue to feel safe recommending the site to others. (For that, much thanks. 🙂 ) Have a good weekend!

  • 76 Far_wide August 24, 2019, 11:06 am

    Sorry TI, I have to join the anti brigade here. Whilst not directly actionable, it’s still rhetoric seeding the idea that I might want to investigate buying property in Cambodia or put my savings in a Georgian bank, and also implicitly to use the services of a small roving (unregulated?) firm to avoid tax in doing so. Having spent a little time in both countries, I shudder at the thought of various aspects of trying to do this.
    Yes, it’s your train set, but like it or not you’ve built an invaluable brand of simple, transparent investing advice for UK citizens, so when people see something like this then it feels like ‘the brand’ is being tarnished by something opaque, highly risky, and ultimately unsuitable for almost everyone. The fact that we speak out about it should be taken as a roundabout compliment – we care!
    It feels like you’re lacking an outlet to try more interesting things – perhaps more work than it’s worth, but maybe setting up a complementary ‘active investing’ blog would fulfil that need whilst keeping ‘Monevator’ uncomplicated by ventures such as these? I just think riding both horses really doesn’t work in this case and you have a very valuable brand to protect (even if it can be frustrating at times!)

  • 77 cb1nz August 24, 2019, 3:17 pm

    Ok – I loved some of the ideas covered in this article, many of which are relevant to me and my family, who have become ‘nomad capitalists’ ourselves. Only one of us still lives in our initial country of origin, I’m about to become a triple citizen, and both of my parents will be drawing on pensions accumulated in multiple countries (the Australian superannuation bit being the most complicated).

    ‘Go where you’re treated best’ is a feasible option for myself and quite a few of my peers, and a frank discussion about the opportunities and pitfalls of global living and citizenship would be fascinating to see and have on Monevator. As an outsider, I’d argue that people have far more of a ‘home bias’ than they’re aware – but I’d also argue that if you’re not planning to complicate your life with global living, there’s probably not a huge downside to following the best practical advice for your own situation, which includes where you live, earn, own assets, and plan to retire.

    That said, I think this particular guest author would be an extremely poor choice of guide to such a discussion. My biggest issue with this piece is that I don’t trust the author, even if I do think he’s hit upon some good ideas and great talking points. I’m not as alarmed as other commentors by some of the crazier ideas suggested, though I’d agree with earlier comments that they’re simply unnecessary risks for the non globally-based investor. I’m more alarmed by the moral void the author seems to display both here and on his website, and I do agree with others that he poses reputational risk to what the Monevator blog has built.

    Honestly, this many comments in, I’d be rather curious for a follow-up post from TI on the state of the blog/what conversation you had hoped this article would spark, as it seems clear that the comments discussion has perhaps gone a bit sideways from what was initially imagined.

  • 78 The Rhino August 24, 2019, 3:34 pm

    @cb1nz – also found this which adds further weight to the trust/moral void issue -> https://www.sitejabber.com/reviews/nomadcapitalist.com

  • 79 cb1nz August 24, 2019, 4:43 pm

    @The Rhino – yikes

  • 80 The Investor August 24, 2019, 11:54 pm

    @Far_Wide and others — At some point you have to put your hands up and say you got it wrong. That’s where I am with this article. You make good points, as others have. I appreciate the high standards applied to our website, and hope we can mostly continue to meet them in the future!

    Thanks for thoughts all.

  • 81 Lord August 25, 2019, 3:04 am

    It’s good that the issue of investment for expats is considered, but I agree with many of the comments related to this article. Some of the ideas appear extremely risky, and seem to require quite a bit of research. For me, as a long term UK expat in Japan, there have been a number of major challenges I have faced.

    The major one has been access to platforms. It’s impossible to set up accounts with many of the main UK brokerages (or crowdfunding sites) and for a number of years I was flailing around looking for somewhere to park my funds. In the end I was lucky that a friend put me onto interactive brokers. I also established another account in Luxembourg, but which has high administrative fees. This is the second peril you face as an expat – costs. I pay these high fees simply because I don’t want to be only using one brokerage and I really have very limited options. With OECD and other activities against international tax evasion and reporting I see things as probably getting even more restrictive and difficult in the medium to longer term.

    For many years I was reluctant to keep too much invested in my new home country. If things went belly up I wanted to be able to get out quickly. With political changes over recent years things have now changed. With Brexit, I will no longer be able to go and live in Europe, and I will certainly never return to the UK. Overall, you’re more exposed to a variety of political risks as an expat I think. It’s only since 2016 that I started to build a portfolio in a Japanese brokerage.

    Currency risk is a related factor, at one stage I had around a 50% of my dividend yield coming from GBP denominated funds. I was happy with this because I saw the UK environment as politically stable and sound. Then along came Boris Johnson and his lies. I’m now no longer buying GBP funds and am now building more non-GBP paying funds. The GBP portion will I hope naturally (rather through more depreciation) shrink to less than 20% as I build greater currency diversity in my dividends.

    I think there’s a need for good guidance and information for expats along the lines of that typically provided by Monevator. There’s a niche, and that niche is not really being filled.

  • 82 Mark August 25, 2019, 6:30 am

    Small point to add to the topic, as an Expat there is an entire subset of the ‘wealth management’ industry targeted at expatriates offering investment / tax optimisation strategies. Will not mention names here but DYOR. Having seen some of the documents detailing the fees and charges, lock-ins and redemption penalties, the only thing I could say is ‘ouch’.

    British expat in Switzerland (last 8 years).

  • 83 Sparschwein August 25, 2019, 2:06 pm

    @ZXS – this is very interesting as I’m looking for fx diversification, no TRY etc. shenanigans.
    Would you say this is a suitable method for the longer term (years, potentially)?
    How do you think about tail risks (e.g. counterparty) vs. buying gov bonds outright?

    Many thanks.

  • 84 Sparschwein August 25, 2019, 2:26 pm

    @Lord – I’ve had the same experience.
    Even within Europe there are surprisingly many differences in admin, investing and tax matters. (Settling down in Japan is surely much more complicated.)
    Took me a while to get into ISAs and a few more years to understand personal pensions. Thankfully pension allowances can be carried forward.

    I also find that fx risks is rarely discussed from the “expat” perspective, i.e. anyone who is likely to retire in a different country from their main residence and source of earnings. The Brexit shambles is the prime example of what can happen ignoring this… caught me unprepared too.

  • 85 Max August 26, 2019, 1:56 am

    Lots of criticism of this article but surely very worthwhile as it has stimulated some great informed comments. One of the greatest challenges facing expats is deciding whether to 100% commit to their new country. This determines so much – do you burn your boats totally, including selling your UK house, getting a different nationality and maybe working towards trying to change domicile so as not to have IHT liability or do you back two horses and keep your options open and try and keep open an escape route back to the UK. This really determines your investment strategy as keeping all your assets in a country with high inflation and a devaluing currency will wipe out any chance of being able to return to the UK with finances in tact. Then there is tax – all a nightmare if you’re not prepared to spend mega bucks on legal and financial advice – worth looking at https://ace-your-retirement.blogspot.com/2019/08/retiiring-abroad-tax-nightmare.html for a perspective on some of the issues.

  • 86 The Rhino August 26, 2019, 8:55 am

    +1 on the required restraint and composure to not throw any toys from any prams. Its that which keeps the comments good. We’ve seen first hand over at the blog that cannot be named that if you go down the other route and lose your shit you kill the comments stone dead, and once they’re gone they don’t come back.

  • 87 The Investor August 26, 2019, 10:16 am

    @The Rhino — “Losing your shit” is inadvisable, but otherwise I disagree. My (light) deleting of comments and policing of trolls has created a constructive atmosphere which is one reason why people find the Monevator comments a decent place for discussion IMHO.

    Everyone thinks they like ultra-uncensored comments but in practice they’re a PITA.

  • 88 The Rhino August 26, 2019, 2:47 pm

    I don’t think we’re disagreeing. I make no mention of ultra-uncensored comments. I just mention restrained and composed behaviour, which is clearly entirely compatible with light-touch moderation. You’re getting the balance right for sure.

  • 89 Felice Pazzo August 26, 2019, 9:26 pm

    If nothing else TI, I would console yourself with the fact that “there’s no such thing as bad publicity”:)
    We’re all grown-ups here, and it should go without saying that the caveat Do Your Own Research applies.
    I was rather disappointed that many of the review comments couldn’t see the bigger picture for criticising the specific cases. The crux of Henderson’s philosophy is to “go where you’re treated best”, and not about the specifics of deposits in foreign countries.
    Given this blog is a hive of Remainers, I would have thought at least one of the reviewers would have thought about applying the philosophy to Post Brexit – are FIRE still treated best in the UK (no points for guessing the answer No) – and what are they going to do about it … either moan, or move to a more “enlightened” climate (Europe?) – again this is a central theme to the Nomad Capitalist philosophy.
    Please keep-up the thought-provoking articles.

  • 90 Mark August 27, 2019, 11:24 am

    Having FIREd, I spend a fair proportion of my time helping the victims of financial services frauds, and campaigning for the UK’s financial regulator, the FCA, to be made fit for purpose. I’m therefore unusually attuned to the potential to lose money to fraud or hubris even when dealing with investments in the UK. Throw in developing nations and currency risk and frankly you’d need your head examined.

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