You’ve moved halfway around the world, set down roots, found a good job, and life is peachy. Now what? As an expat, the chances are you’ll be thinking about retirement and the future more than you would have done back home, perhaps due to a less generous pension and healthcare system in your new state. As well as setting up a private pension in your new country of residence and even considering the benefits of investing in property to serve as a future nest-egg, you might also want to think about trading to supplement your income.
Below, we’ve rounded up considerations expats should make before getting started…
If you’re new to trading, deciding on the right platform can be overwhelming. With dozens of international trading platforms and apps available to expats, we cannot go into the specifics of each one, but there are a few things that you should bear in mind. First up, keep your eyes peeled for charges, which whilst may be unavoidable, can eat into your returns. Shop around and look for a scheme that works for you - some platforms charge a flat fee for their services, whilst others take a percentage of your returns. Knowing which will be right for you is dependent on the types of investments and size of investments you’re planning to make.
What’s important to remember is that trading apps and platforms require an understanding of the market, and they don’t offer independent financial advice. Because of this, it might be worth seeking the opinion of a regulated advisor, who can suggest the right strategy for your circumstances. Alternatively, you could invest in a ready-made portfolio to avoid the hassle.
Something else that should be taken into consideration when trading is the amount you’re willing to invest, or comfortably commit to month-to-month. Financial planners typically recommend saving 10% of 15% of your annual income, but you can start with less if you’re not able to stretch. Some investors prefer to save up and then invest a lump sum once per year, whereas others invest small amounts every month. Regular investing is advisable as you’re able to smooth out your returns, and it can help you develop a good savings habit.
Most trading platforms offer a regular investing product, which allows you to set up a Direct Debit and invest a set amount every month. It’s possible to invest as little as £20 (€22/$26) per month, but you’ll need to take into account the transaction fees which will eat into your returns. Provided you’re able to invest a decent amount, regular investing allows you to sit back and relax, and smooths volatility as you’re investing in the market month in, month out.
As an expat, deciding on whether to invest in the UK or your country of residence can be tough, especially if you have long-term financial commitments back home like a mortgage. If you live abroad and earn locally, you might find that local investment opportunities offer better returns, especially if you have an interest in and understanding of the local market.
For example, if you’re an expat in South America and work for a tech startup, you might be interested in trading in the local fintech market, as there are dozens of firms disrupting the sector and delivering eye-watering returns for savvy investors. However, you’ll need both the confidence in your investment and knowledge of the local market to do this sensibly.
If you’re currently residing in a developing country, the chances are that your investments will be at more risk than they would be in a more established market such as Europe and the US. Be sensible with your money and don’t let emotions or pressure from expat friends encourage you to make silly decisions. You should always evaluate risk before trading.
Before you consider making a foreign investment, make sure you’ve decided how you’re going to handle money on a day-to-day basis. Converting revenue from investments from one currency to another will impact your returns and potentially result in losses, so decide on where you’re going to make and withdraw investments and stick to it. If you’re from the UK and have a UK bank account, you might decide to trade using that to keep all of your investments in GBP. If you’re living and working in Europe, you might choose to invest in European companies and withdraw dividends in Euros. If you’re living and working in the UAE, you might choose to invest in Middle Eastern businesses and withdraw your money in United Arab Emirates Dirham. Be smart with exchange rates and calculate fees before you make any large conversion - now might also be a good time to switch bank accounts.
As well as exchange rates when investing on platforms, you’ll also need to be mindful of the tax implications of trading. Depending on where you earn your money and where you live, you might need to pay tax on your income more than once, though most countries have a double taxation treaty to avoid this. Before you invest a single cent into trading, you should speak to an accountant or financial advisor (use a platform like Profezo, which was designed specifically for expats) to understand your liabilities. Ignoring your taxes could result in future fines or penalties, and make a $10,000 investment worth less than it was when you started.
As an expat, deciding on the best way to invest in your future can be hard, especially when you’re straddling more than one market. If you can identify the right trading platform and opportunities for your circumstances, trading can be a worthwhile investment, but you must be aware of potential drawbacks in relation to exchange fees and taxes. Depending on an independent financial advisor is the most sensible option; don’t try to play the market alone.
Wherever you are in the world, trading is rarely a bad idea, and getting started as soon as possible will help you to build a vibrant and diversified portfolio that will help you through later life. Make it a priority and start trading today; your future self will be glad that you did!
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