6 Ways to Effectively Invest Your Time and Money When Living Abroad
“Price is what you pay. Value is what you get.”- Warren Buffet
Investment is looked at as a critical arrangement where you would look at ways of multiplying it rather than losing it through unfair means or practices. Investing money can be tricky and there are innumerable factors that one needs to give attention to followed by immeasurable risks along the way.
Living overseas is one of the most thrilling endeavors of your life, but if you consider investing while living as an emigrant, you may find it very challenging. Investment in the international market can be complicated as there are language barriers, issues of currency conversion and to top it up the rules and regulations vary from one country to another.
To successfully plow in your finances and magnify your income, here are SIX strategies you MUST follow,
Consider Stay- in Period:
Before you choose an investment plan you need to reflect upon your long-term goals. The strategy would be different for those who reside in foreign countries for a short tenure than those who are settled permanently in the overseas.
The key factor to take into consideration is how to manage the currency risk. The risk of losing money on an investment due to the fluctuation in the rate of the currency exchange is a major concern. The best action plan is to invest the currency in the country you live in. So, if you plan to retire in the U.S, invest in bonds, mutual funds or stocks of US companies.
Look for an Emigrant Friendly Advisor:
Since the implications of the 2010 Foreign Account Tax Compliance Act most of the foreign institutions are denying to allow U.S citizens to open overseas investment accounts. In addition, even the American brokerages are reluctant to work with emigrants or expats.
If you are in a similar situation you may consider doing a thorough research. You can look for a professional advisor who has good knowledge and extensive experience of suggesting appropriate investment plans for you.
Getting associated with a well-known investment advisory firm will make it easier for you to understand the terms of investment and will keep at bay all complicated tax penalties.
Study Tax Laws:
Investment Agencies can make your investments boil down to tax penalties. When you make an investment overseas extensive record keeping is required according to the implication of the Foreign Account Tax Compliance Act. These rules are applicable to all kinds of mutual funds, cash management products, foreign pension plans housed in foreign countries.
The tax rate associated with long-term capital gains is much more reasonable as compared to the investments that fall under the Passive Foreign Investment Corporation.
When we talk about the term ‘housed’ we need to understand what does it mean. Basically, the term can be understood from the below illustration: One has the option to choose their investments which means you can decide to invest in European stocks either by purchasing them through a U.S based investment agency or can purchase it through an investment agency based at Europe.
The investments might appear same but those housed in the U.S through a U.S. based investment agency would be subject to lower tax rate while those housed outside the U.S. might be subject to higher tax rate depending upon the total sum of your investments.
Build a Worldwide and Diversified Portfolio:
If you are an emigrant wanting to invest in international market it is recommended to develop a diversified portfolio of investments across the globe.
If you find it difficult to choose the right medium to invest your funds in, you can approach an investment agent who can help you develop your portfolio based on multiple currencies thereby avoiding unnecessary penalties.
Invest in Property:
If you are planning to settle down overseas, you can invest in foreign property irrespective of wherever you are. The returns of such investments can be significant especially when you sell the property.
One should keep in mind the laws and customs about buying and selling the property in overseas markets. Tie up with a reputable real estate agent to avoid any kind of confusions.
Property can even be given on rent while you are overseas provided you have a reliable property manager who can handle the rental issues in your absence. Real estate is a best long-term investment strategy.
Invest in Mutual Funds:
Purchasing of mutual funds is the simplest and the most common way to invest in overseas markets. The reason for this is because they hold a hamper of international bond, stocks, and funds. There are different types of mutual funds such as:
- International Funds: This option is used to invest in many different countries outside the U.S
- Regional Funds: This option is used when it comes to investing in specific regions like Asia, Europe or even in the Middle East.
- Country Funds: As the name suggests it’s an option to invest in specific countries such as Spain, Russia etc.
- Sector Funds: This area refers to the investment made in certain sectors across multiple countries like energy, gold etc.
Investment in such mutual funds will open up options for you to build a quick and highly diversified foreign portfolio.
The next quest for you is to find the best fund for your portfolio:
A may question pop-up into your mind as to what type of fund would be best for you? Well, the answer is it varies from one individual to another as it depends on the investment objectives and the appetite for risk.
In most of the cases, mutual fund investments are managed by professional investors as they guide you to choose the type of funds that are suitable for you. As a professional investor, their main task is to look for low cost, high return funds that meet their client’s investment objectives and risk appetite.
To build an international exposure into any portfolio the best approach is to invest in international funds. Look for a professional investment consultant that is emigrant-friendly, and is well acquainted with the overseas laws and regulations in terms of investment.
About the Author
Joseph Payne is the marketing manager at CouponsMonk.com, deals, and discounts provider company. He is passionate about money savings, investment, and finance industry. In addition, Joseph also supports non-profit agencies that provide healthcare solutions to handicapped and disabled people.