Smart Strategies for Investing While Living Abroad: An Extensive Guide

Investing While Living Abroad

For the great number of people who move abroad, either to work, study or for pleasure, saving and investing can be a great challenge. You're embracing a new employment system, grappling with a brand new tax regime and often dealing with complicated bureaucratic or local government systems, all in a foreign language.

Despite the challenges, however, it's vitally important to continue to cultivate the good financial habits that you've cultivated at home, even after moving. Give yourself both a short amount of time and budget as a grace period to settle in, but beyond that, you should be sticking to the same principles that have yielded you so much success so far.

Why Invest While Living Abroad?

Exploring the Benefits of International Investment

Living abroad can be a great opportunity to gain exposure to international investments. You should take the opportunity while living in a new country to both immerse yourself in the culture, and the financial landscape of that country. How can you do so? Well, by participating in the country's economic growth.

Of course, this is generic advice - it's impossible to be specific without considering both the country and one's personal circumstances, but the notion is the same.

Securing Your Financial Future While Enjoying a Global Lifestyle

Many people move abroad in order to maintain their salary while living in a much lower cost of living area. Which is completely fine and within your rights - but you should be aware of both being respectful of the new country's norms and customs, and help stimulate its growth by spending and investing there.

Understanding International Investment Options

What to do with your Cash

The first thing to note is that you should make sure you stick to your 3-6 month emergency fund, exactly as you did before. It is very important to note that this should be kept in a regulated bank account. Which sounds obvious, but a number of the multi-currency bank accounts you see, particularly those from challenger banks, are not actually regulated banking authorities. Which means you may not have the same level of recourse if your money were to go missing, or something were to happen to your account.

The implications of this are potentially incredibly serious - you don't want to be stuck in a foreign country far away from home with no money and no ability to get access to emergency supplies.

So choose a regulated bank - perhaps a traditional old brick & mortar bank to have your salary paid into and a savings account with, and a faster and easier to use digital bank for money transfers, day to day spending and budgeting.

One way of improving your habits here is to also remember to set up automatic transfers between these accounts each month, which will allow you to continue your good habits from home with minimal stress and friction.

Stocks, Bonds, and Mutual Funds: What’s Best for Expats?

The advantage of these instruments is that they are available globally, and not restricted to the market in which you reside. That means that you can continue to invest in the same mix of stocks, bonds and funds that you were choosing before the move.

Your broker shouldn't be geographically limited either, which means that you will be able to continue putting money into the same account.

There are a few exceptions to this, but in most cases, the asset will be held in the base currency of its country anyway, so what currency you put in won't really matter. For example, US stocks are denominated in US dollars, so whether you're paying in British pounds or Euros, the asset will be held in dollars.

Real Estate Investment Opportunities in Foreign Markets

Now property is a little bit more complicated - obviously it is geographically restricted, which means that it will be locked to the area that you buy. You can gain exposure to a country's property market either directly by buying a residential, rental or commercial holding there, or by investing in an REIT (real estate investment trust) based in that country.

The former is better for specific investments where you either want to hold a property to live in, can manage it yourself of have some level of business exposure to the country.

The latter is better if you are looking to build up a diversified portfolio of investments in that country, and real estate makes up a portion of these. Many people like the reliable and cash-flowing nature of real estate investments, and their brick and mortar nature makes them a comforting place to put money.

Diversifying Your Portfolio with International ETFs

It goes without saying that you will want to keep a diverse portfolio of assets, as you would in your home country. Now the thing is, you probably have a reasonably good global allocation of investments already, so moving country simply changes the input currency, rather than the actual holdings inside.

If that isn't the case, now is a great time to start thinking about your geographic allocation, which is something that can be managed on the Strabo dashboard.

Navigating Tax Implications for Expats

Key Tax Considerations for Overseas Investors

It is vitally important to do the requisite tax planning for your jurisdiction. There may, in fact, be tax advantages to working away from your home country. Some countries have far reaching requirements for resident non-domiciled workers, whereas some simply leave you to file taxes in the new area.

Regardless, you will want to compare the tax rates before moving and use this to weight your relative salary and purchasing power in each place.

Managing Currency Exchange Risks

What about Currencies

Currency fluctuations can have a big impact on your savings and investments. Depending on which country you're in and whether it has a stable currency, large swings in short periods of time can devalue your salary and living expenses significantly. For this reason, we advise that you save and invest directly in the currency linked to your long-term plans.

For example, if you're buying a property overseas, to save for it in that currency to avoid uncertainties around that currency.

The Strabo Dashboard

We've specifically built the Strabo dashboard to have a currency switcher with live updates of every currency in the world, in order to make managing your finances across different countries as seamless as possible. You can choose a base currency for your dashboard and then switch between others at the click of a button, as shown below.

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Many of the most popular and major countries also have linked account coverage, which means that you can sync your bank accounts seamlessly in their base currency, and have them either on your accounts page or in a custom page in a new currency of your choice. Check it out!

Strategies for Minimising Currency Fluctuation Impact

We would avoid trying to time currency changes - it is an endeavour that is challenging even for the most sophisticated investors, and trying to time moves never really tends to end well. That being said, you can certainly choose periods of less volatility between currency pairs, usually dictated by calm macroeconomic conditions.

In essence, try and make any big money transfers in times of peace and quiet - much better to repair the roof when it's dry than when it's raining!

Choosing the Right Financial Advisors and Brokers

Finding Reputable Financial Advisors with International Expertise

As with your home country, it can be difficult to find trustworthy financial advisers. With that in mind, our advice would be to take professional advice for taxes and accounting, and beyond that try and continue your strategy from home - it is unlikely that this will be much different at all, and you can easily fall into the pitfall of taking unecessary advice from expensive wealth managers who are only interested in taking a cut.

Leveraging Technology to Manage Your Investments Abroad

Make the most of resources like Reddit, use your Strabo dashboard and as always just try and do your research before jumping into any decisions. It has never been easier to understand how things work in other countries than it is today.

You can also join forums specifically for internationals - many have sections dedicated to that country, and are welcoming to inquisitive new members interested in learning about the laws and customs of their new home.

Conclusion: Tips for Successful International Investing

Building a Diversified International Investment Portfolio

We've said it loads of times before, but the principles of investing remain the same wherever you are in the world. Most problems come from people trying to do things that are too elaborate.

Save a solid proportion of your income, keep an emergency fund, maximise your pension contributions and invest what's left into tax advantaged accounts, split between diversified blue chip assets. Makes it sound so easy!

All jokes aside, you should try as hard as possible to keep simple, automated financial systems that act as guard rails, and this is even more important in a new place where you have new currencies and laws to deal with on top of the added personal stress.

Common Mistakes to Avoid When Investing as an Expat

The one exception to this is US expats - they have much more onerous requirements when it comes to reporting and filing taxes. Even expats not earning money in the US are required to file US tax returns, and we would suggest taking professional advice before moving from the US, or at least when you land.

Beyond that, give Strabo a try! It can be incredibly confusing managing money across different countries, and we've spent a long time both suffering from this problem and thinking deeply about a solution. Make the most of it! As always, you can let us know what you think directly by email, on socials, on our community forum or even using the in-platform chat.

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