A quick guide to investing
Investing as an expat
Offshore investment offers a range of equities, funds, commodities and currencies to expats which often come with attractive tax incentives. The investment opportunities available will depend on the place where an expat lives, as local laws and tax rules will make some investments more worthwhile than others. The vast array of products includes the Qualifying Recognised Overseas Pension Scheme (QROPS), investment bonds and direct investment into equities.
Investment starts with benchmarking where you are and factors that might influence financial decisions, like a change of job, moving home, getting married or having a child. Expats also need to consider their attitude to risk. That means thinking about how much money is available to invest and if they can afford to gamble losing the stake against seeking a higher investment return. Another part of benchmarking is looking at what savings and investments have already been made and how they are performing.
The impact of changing currency exchange rates should also be part of the plan. Once benchmarking is complete, discuss how your investment objectives with a professional regulated adviser. They will recommend a strategy and build in regular performance reviews to make sure you are on-track.
Expats and currency volatility
How currencies rise and fall against each other is a vital aspect of investing for expats. The low Pound is boosting the UK stock market as most large British companies earn their money from sales abroad.
Investing in a currency other than the one you spend is speculation and a high-risk strategy, as monitoring exchange rates and costs of switching into a currency you can spend is a major undertaking.
Financial adviser v DIY investing
Cost is the main reason DIY investors turn to online platforms, according to recent research. But cost is only part of the equation for investors. Of course, the amount of money a financial adviser charges must be considered in working out a return on investment.
Financial advisers offer a lot of value-added benefits to investing. The management team should include researchers and analysts to keep an eye on markets, risks and opportunities. With markets open around the world 24/7, this is a major task and one that a sole investor will find almost impossible to complete.
A large fund will also have millions of pounds invested, which gives the manager access to discount deals and exclusive offers from big brand financial firms that are simply unavailable to the DIY investor.
If DIY investment returns cannot exceed the money made by a financial adviser, it is difficult to see why a sole investor would want to spend the time and effort required to manage their own money.
Watch out for scams!
Expats are top targets for investment scams, which can range from freeing up pension cash to buying into dream holiday resorts. The general rule is non-regulated advisers selling investments with yields that seem too good to be true are probably fraudsters. Do not part with any cash or sign any contracts until you have run the proposition past a professional adviser.
Typical scams have warning words to watch out for, such as carbon credits, hotels and resort development, ethical investments, coloured diamonds and fine wines.
Fraudsters are good talkers but ask yourself why they have approached you, because it is likely to have been a chance meeting in a bar or a cold-call. Then ask why they are offering you the opportunity, because if it is so good they would keep the details private and take the profits.