How Does an Expatriate Invest?

5

This year, I’ve been happily earning a bit of an online income. The more I earn, the more I find myself Googling phrases such as:

what exactly is an expatriate

digital nomad

location independence

cheapest country for cost of living

why do American renounce their citizenship when going abroad?

How does an expatriate invest?

etc.

Should I move overseas for any period of time, how might my portfolio change? Investing is so easy in the US: Heck, my lazy portfolio consists of approximately 50% domestic index funds and 50% international. Well, jeeze, life is dandy in America but I sure wouldn’t want my domestic fund entirely invested in a common country for expatriates like Thailand! Sorry, Thailand. You’re a beautiful country.

So how does an ex-patriot invest? Well, if you’re in a hurry to finish this article and get right to your answer, here it is: an expatriate invests the same as you and me. If I were to go live overseas right now, my portfolio would look exactly the same: with Vanguard, 50% US funds, 50% international. You can simply wire money from foreign bank accounts into your Vanguard accounts. However, you must still be a US resident with a US address listed. Often people use their family members home addresses. This is hardly a hassle since everything is paperless. So if you still have a US address but want to live abroad, keep doing what you’re doing. It’s easy.

I believe the Vanguard low-cost index fund approach is best and quite frankly, even if you would like to support investment firms based in your new land, it will be challenging to find foreign firms who have the same investment strategy. Vanguard is finding it hard to convert other countries to their low-cost, low-risk way of thinking.

But if I would ever want to cut ties with the US, things would get more complicated.

Until this year, you were just held to your honor to report all money you have in foreign accounts. Now, the US makes countries give up your account information.

About a month ago, the US created something called the Foreign Tax Compliance Act. It requires all financial institutions from around the world to report all the assets and income of US citizens with at least $50,000 in an account.

A lot of expatriates are now going to the extreme and renouncing their US citizenship. This means they will not have access to the Vanguard we all know and love.

Well, good news is Vanguard does have a watered-down version of their US offerings. That or you can instead look to local investment options. Each country still has great trading platforms if that is something you enjoy doing. The trading game is still very much available all over the world to anyone.

At the end of the day, unless I renounce my citizenship (extremely unlikely!), I will continue investing with Vanguard. Should I renounce my citizenship, I would look into the Vanguard global offerings.

Living abroad suddenly doesn’t seem as scary as I had thought. Would you like to see more posts like these in the future? It’s all very interesting to me, at least.

 

Will from First Quarter Finance

_____

Image over Thailand courtesy of Eustaaquio Santimano

 

 

Previous articleAn Unusual Way to Get Rich
Next articleThree Alterations You Can Make to a House to Increase its Value
Hey, Im Joshua, the founder of CNA Finance. I enjoy following the trends in the market and finding the catalysts that are making the moves. If you want to get in contact with me, leave a comment below or email me at CNAFinanceHelp@gmail.com Please keep in mind that I am not an investment advisor and nor is CNA Finance. This is a news and information gathering outlet. We may work directly with some of the companies that we write about. If we have a business relationship with an issuer, we will mention that in the articles. We also have various affiliate relationships with advertisers and may be paid if you sign up for a service that you were referred to through our website.

5 COMMENTS

  1. Hi Will,
    I currently live and work in Mexico and have never had any temptation to move my investments there from the USA. The bigger question has been what to do with the money I make here. One nice thing is that savings accounts pay a reasonable interest rate. But ultimately when the exchange rate is favorable I move savings back to the USA for investing.
    It is certainly confusing have to deal with taxes and reporting requirements for two countries and I have no desire to deal with making real investments outside of the USA-unless you are wealthy enough for tax lawyers etc. it hardly seems worth it!
    Aaron

  2. I recently just read an article about how the Australian government encourages its citizens to invest their money and so they make a loss for the year, it will make the loss deductible or something like that (I didn’t read it carefully, sorry!) But my point is, I think it depends on your new country and your situation. If you think you don’t want to go back to the US anymore, I see no point in still keeping the investment in the US, and vice versa.

    • I think you’re talking about negative gearing on property portfolios: it’s when the property doesn’t generate enough income to cover its costs and it’s a dangerous game to play, particularly when you consider the average cost of property in a city like Sydney is somewhere north of 7 (yes, seven!) times the average earnings.

  3. I would never live in another country (it may change later on). I’d love it here in US and maybe what I would do, if I have more money, is just do some investments in the country first before doing it outside, and get some financial advisers. Gotta search how Vanguard works.

LEAVE A REPLY

Please enter your comment!
Please enter your name here