This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, it is subject to change and we are not responsible for any errors or omissions.
Are you looking to build financial security and momentum towards your long-term financial goals?
Living outside the UK can present unique opportunities and constraints when it comes to investing. Fortunately, with the help of a financial adviser, you can maximise more of the former whilst confidently navigating the obstacles posed to expats.
In this short guide to expat investing, we’ll be sharing how to get started with wealth building during your time overseas, including:
- Why investing is important
- Why goals matter so deeply
- Common investment options for expats
- How to minimise issues like currency movements, fees and high taxes
- How to choose the right adviser to help you build your portfolio.
Why investing matters for expats
Financial planners often recommend having a 3-6 month “emergency fund” ready to tide you over if financial difficulties arise (e.g., a major home repair).
Expats, however, often need a bigger safety net due to the uncertainties of living abroad. What if you need to fly home for a family emergency? What if tax treaties (e.g. DTAs, “double taxation agreements”) change and affect your returns?
Building wealth by investing helps you to account for many of life’s unpredictable scenarios. More positively, living abroad can also present unique investing opportunities (e.g. in high-growth markets) and earning potential.
For some expats, this can be the perfect time to accelerate towards their long-term financial goals, such as achieving “financial freedom” or early retirement.
Defining your goals and timeline
Where do you see yourself in 5, 10 or 20 years? How will you get there?
It helps to separate your investment goals into different timeframes. Short-term goals, for instance, might include saving for travel, relocation, or educational expenses. These might need a separate investment strategy (and account) focusing on liquidity and stability.
Longer-term investment goals often include retirement, buying property or building a legacy. Depending on your timeframe(s) and attitude to risk, your strategy here might involve focusing more on investments with higher potential returns, such as equities or diversified funds.
By distinguishing between short- and long-term goals, British expats can create a balanced investment portfolio that optimally manages risk, maximises growth potential and provides financial security across all stages of their expat journey.
Common investment options for expats
British expats may have a wide range of choice depending on their goals, risk tolerance and where they reside. Here are some common options to explore with a financial adviser:
Stocks – Here, an expat might buy a share of a company listed on a stock exchange (e.g. Spanish companies on an EU investment platform).
The firm might pay the investor a share of its profits as a dividend. Its stock price may also rise, allowing the investor to sell it at a profit (“capital gain”).
Bonds – Here, the investor lends money to a company or government by purchasing a “bond” that they’ve issued. This is essentially like a bank loan. You (the investor) are promised eventual repayment by the borrower at a specified date, with interest paid to you along the way.
ETFs – Exchange-traded funds (ETFs) are like stocks, trading on a recognised exchange. The difference is that it holds a collection of assets, such as stocks and bonds, which they invest in on behalf of their own investors. You then get a share of the returns the ETF makes.
Property – As an expat, you might purchase a local property, wait for it to rise in value and sell it at a profit. You could use it to gain tenants who generate a rental income.
How to minimise issues when investing
Investing can be a complex, intimidating process when done alone. Whilst the potential benefits can be great, plenty of mistakes can be made – especially without professional guidance.
One issue is meeting your tax obligations as an expat. For most UK residents, things are more straightforward – i.e. paying to the UK government. When you live overseas, it may not be clear which jurisdiction(s) you are supposed to file to.
Here, an expat-specialist financial adviser can be indispensable. They can provide clear guidance about DTAs, local tax rules and what you are expected to do.
A professional can also highlight common investor mistakes and help you avoid them (e.g. “panic selling” during a volatile market).
They can also assist with issues, such as currency fluctuations, which can have a hidden “erosion” or “amplification” effect on your returns (e.g. helping you to invest using multiple currencies or using currency-hedged funds).
Choosing the right financial adviser
Of course, many expats will want to invest by themselves. That is absolutely fine.
Yet our clients at Scottsdale attest to the benefit of working with an experienced financial adviser – especially one who understands the unique opportunities and challenges they face.
Often, it helps just to have a knowledgeable, friendly advocate who can give you a trusted second opinion – acting as a sounding board to your financial ideas, questions and worries.
An adviser can also help you look beyond your “immediate” financial concerns (as important as they are) and draw your attention to the bigger picture – your long-term goals – and build a plan with you to achieve them.
Naturally, British expats will benefit most from a financial adviser who is registered and qualified in reputable jurisdictions. They should look for rapport, solid reviews from current expat clients, and a transparent fee structure so you know exactly what you will pay and what you will pay for.
If you’d like to make sure you’re taking the right steps to safeguard your financial future, please get in touch.
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