The difference between gambling and investing is having a good plan. Even then it has its risks that make good financial planning necessary. Being an expat adds an additional layer of complexity to our financial planning. So how should an expat look to invest? In the end, expat investing is not that different then if you were back home in the states minus many tax-advantaged retirement accounts. These tips are drawn from my own experiences so take them with a grain of salt, you don’t know me from Jack (see disclosure at the bottom). Just remember the PG version of the golden rule: Don’t Be Stupid
Expatriation and Money
Congrats you have a great, or at least interesting job in another country. If you have debits it’s a great time to pay them off. If you don’t have debts it’s a great time to start saving and investing money. Living and working outside the USA makes things different from your peers. Money earned overseas cannot be put into a 401K or IRA so we need to do it differently. Fortunately, you also get to avoid a lot of taxes.
This article and advice is aimed at American expats as A) I know the most about us B) we have some different issues. For example, we are taxed on global earnings so we still technically have to file taxes if we are outside the USA. Most expats will not pay taxes on money earned outside the USA but its still a pain in the rear.
Usually, the best plan is boring and a little safe. First, have an emergency fund in case something happens and you need money fast. I suggest one where you are living and a smaller one in the USA. I know that you want to get rich quick. How about you invest most of the money more traditionally and take a thousand or so to “play” with, be it stocks, cryptocurrencies, art, precious metals or anything else that gets you excited.
Stocks and Bonds
The majority of your investment should be put into board based ETFs. These ETF’s can either follow the entire market or just specific sectors. I generally use Vanguard ones but that is because I have a Vanguard account. (VXUS) non-US stocks (VTI) US stock market (BNDX) International Bonds (BND) US bonds (VNQ) REITs basically estate make up my portfolio. The other nice thing about a Vanguard account is that the money sitting in cash is treated as being in a money market account and earns interest. As a money market account and for holding Vanguard ETF’s opening a Vanguard account is the best option.
Robinhood is also a useful broker (you get a stock, I get a stock type link). They do not charge a commission on trades and have most stocks and ETF’s that are on major US exchanges. If you want to be more active trading then Robinhood is the best of the three choices. I use it to hold stocks or ETF’s that I plan to just use for a swing trade. Robinhood has no minimums so if you only have a little money and only will have one, pick robinhood.
Motif lets you buy stocks in bundles built around a theme or investment strategy. In turn, this counts as just one trade so it saves you money on commissions. There are a lot already created and you can also create your own. I made the aptly named “I’m Bad at coming up with Names” to hit some of the weak parts of my other positions. Motif also lets you participate in IPO’s (when a stock first goes on sale)
The downside of all these is that you can lose the money invested, and if you need cash it will take time to sell your positions and transfer the cash to your bank account.
If you want to learn more about swing trading, Real Life Trading offers lots of free classes. These are great classes and I personally found them very useful. As neither of the above platforms have good charting software I suggest Trading View. Trading View has both free and paid versions. If you looking to track your investments in one place Personal Capital will let you link and follow most of your accounts on their site.
Aditional Investing Option
Peer to Peer Lending has been around for a few years. The basic idea is that someone takes out a loan and a group of investors buy a small chunk of it. When the borrower pays back their debts the holders get a small bit of the money. I personally use Lending Club and have used them for a few years. I like them but generally find the returns to be below the projected returns. However, I did seem to have a run of bad luck with the number of defaults.
The downside is that your money is tied up in loans, it takes months for them to be paid off and there is the danger of someone not paying (defaulting) on their loan.
Personally, I am highly invested in Real Estate through REIT’s. These REITs are basically a pooled investment where a company buys and manages the properties for a group of investors. In return, they take a cut before passing the earnings on to investors. I use Fundrise to invest in what is basically a crowd-funded REIT that is open to nonaccredited (everyday investors). It does have a minimum investment of 1,000 dollars so it is a higher buy-in than many of the investments I have mentioned.
The downsides are a little more numerous here. As always you can lose money and your money is locked up for years in this investment. There is also the danger of the company going under or the investments that the company runs failing.
What about Cryptocurrency? Well yes, they are hot and can make you a lot of money. Personally, Coinbase (one of those sign up and we both get some free deals) is probably the easiest to use and they also own the GDAX cryptocurrency platform.
The downside is Cryptocurrencies are very volatile and this should be speculative money. There is also the danger of something happening to the exchange.
Expat investing does not need to be scary. Keep it simple and diversify across the stock market. Unlike some complainers, you do not need tones of money. Robinhood, Motif, and Vanguard do not have high minimums and you can start with just a few hundred dollars.
Disclosure and Disclaimer: [ You know the drill]
Just assume that for every recommendation, link, or product that I mention on my blog I will receive or have received some sort of compensation (either financially or non-financially). For every investment or company that I mention, assume that I hold shares or some other financial instrument (for profit), or that I have a financial interest in it. For example preferred shares, common stock, warrants, or corporate debt of XYZ Corp. I’m not going to go into detail about my relationship with each company. Many of the links are affiliate links and I receive some compensation for directing them business. Considering many of the links on my site are affiliate links this should be no surprise.
I’m not licensed as a financial advisor in the USA, Taiwan or anywhere else. What is post is my own opinion and experiences and should not be viewed as professional investment advice. I make no representations as to the accuracy, completeness, suitability, or validity, of any information. I will not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. All information is provided AS IS with no warranties and confers no rights. All investing comes with risks.