As an expat it can be hard to plan for your future, particularly when it comes to planning your finances. There are so many investment options available to you, all of which come with their own pros and cons which are largely based on your personal circumstances. The complexities of living abroad can also make investments seem like a daunting prospect, although we would argue that this doesn’t have to be the case. In fact, many expats find living abroad opens up a number of investment options and opportunities that may otherwise not have been available.
Here we look at four of the most popular types of investment options that are worth considering as an expat, with the aim of helping you to decide whether any of them could help you plan for and invest in your future.
Stocks and shares
Also known as equities, stocks and shares are a popular method of investing in a company by purchasing a stake in that firm. Stocks and shares are purchased on the stock exchange where they can rise or fall based on what is happening in the market at any given time. You can purchase stocks and shares from anywhere in the world, making them popular expat investments for those willing to sit out the short-term undulations and earmark them as a long-term investment.
There are many investment platforms available online that provide easy investment in stocks and shares for expats. By opening an account, you can purchase stocks and shares in international businesses at your leisure while also monitoring your current investments to ensure you are happy with their progress. However, there are often fees associated with such accounts, as well as fees applied when you buy or sell your assets, so these extra costs should be taken into account when considering this approach as an investment option.
There are two ways you can see a return from stocks and shares: dividends and capital growth. The former is a term that refers to payments made around twice a year based on the profits made by the company. Capital growth is the profit you will make if you sell your shares for a higher price than you paid for them, ultimately providing you with a lump sum capital return.
Offshore investment bonds
An offshore investment bond is a form of investing for expats that acts as a tax wrapper for a number of investment funds. Expats have access to many offshore bonds based on islands such as Guernsey, Jersey and the Isle of Man, which are usually difficult for onshore UK residents to access.
Offshore bonds are a tax efficient form of investment, offering expats the opportunity to invest money without paying any capital gains tax. Income tax is also deferred until the money is withdrawn, so you do not have to pay anything as your money grows. In addition, it is possible to keep your money growing tax free even if you return to the UK, so you will see a significant long-term return on investment regardless of your plans for the future. When you choose to withdraw your money, the lump sum will be subject to the local income tax laws in your current country of residence, so keep this in mind when calculating your investment earnings.
While this is a popular investment option for those seeking long-term returns, offering minimal risk when compared to stocks and shares, it is possible that you will be subject to numerous fees upon withdrawal from your account. In addition, the provider you choose can have a significant impact on the amount of control you have over your money and the risk you take with your investments, with some allowing greater levels of diversification and control than others. As a result, it’s important to seek the advice of an independent expert before making your choice.
Commodities and currencies
Commodities investments usually offer low, long-term returns. However, this also means they are a low-risk option for those starting out in investments or wishing to balance their investments in high-risk alternatives. There is a plethora of commodities investment opportunities available, many of which are prone to short-term fluctuation and require a steady hand on the rudder if you are to see significant returns. Gold and agricultural products, for example, are both popular options for commodities investors. Commodities are often affected by political or economic changes, so prices can fluctuate significantly based on demand and fear across the market.
Another type of investment that’s prone to fluctuation is cryptocurrency, which has become a very popular option for investors in recent years. Cryptocurrencies are unregulated digital currencies that are bought and sold on their own dedicated sites. Bitcoin is the best-known cryptocurrency, but it still remains an unknown entity due to the potential influence of government regulation in the future. In spite of this, the rapid rise of Bitcoin and its counterparts make them an investment to watch, although dramatic fluctuations mean they aren’t an option for the faint hearted.
Real estate investment is a popular form of investing for expats, providing long-term returns via both rental and sales income. Many expat investments in property are also used as a means of security, providing a potential home either in the UK or overseas should circumstances change.
There are many ways to make money from property, but the most common is to make a buy-to-let property investment. Unlike simply purchasing a home, a buy-to-let investment is a means of earning an income that can be used to either pay off the property’s mortgage or to save for future investments. Once you become a landlord, you will have legal responsibilities associated with that property and must meet your obligations to ensure you do not risk your assets. These include covering your mortgage with insurance so it can be paid even if your tenants fail to deliver their rent. However, in spite of these concerns many expats go on to invest successfully and earn a steady income from real estate.
Another means of making money from property is to sell it on for a profit. This may be your plan once you are ready to retire, or it could be that you wish to sell it on once it has been improved in order to achieve greater returns. Regardless of your plans, the sale of a property can bring a large cash gain if timed right. However, be prepared to wait out the market if fluctuations reduce the predicted worth of your property or you risk losing money.
Making the right choice
At ExpatRoute, we specialise in providing expats with information that can help guide future research. However, it is important to seek independent financial advice before making any investment decisions. While the four options listed above are some of the most popular investment options among expat investors, they may not be right for you, your finances or your future, so take the time to do your research before making your final decision. Remember, investments can require long-term commitment before you see positive returns, but these opportunities are often the safest. Avoid seeking out high-risk, short-term opportunities that may result in you losing your hard-earned savings or damaging your chances to achieve your retirement goals.