William Frisby
Top 10 mistakes expats make with their money
ONE
25-Year savings plans
The cardinal sin that most expats make is investing in long term savings plans that have restrictive 18-24 month commitment periods. These investment accounts are layered with hefty charges and it’s extremely difficult to make a return on your investment.
Advice: Close your account, take the hit and move your money to something that grows.
TWO
Exotic investments
Life settlements, litigation financing, plantations, storage units, waste disposal, student property, antiques and wine is a short but not exhaustive list of examples. All of these funds look like they have a sound, ethical, successful business model beneath them, which some of them do. But when they are structured into an investment fund, it all goes wrong when investors need liquidity.
Advice: Stay well away and look to diversify if you already hold these assets.
THREE
Underperforming mutual funds
Mutual funds are where you want to be; good managers beat the market and there will never be a day your money disappears. The problem is most mutual funds do not perform very well. Heavy charges or poor management often lead to below-average returns.
Advice: Focus on buying quality managers with proven long-term track records
Heavy charges or poor management often lead to below-average returns
FOUR
Big bad banks
Often people feel and see safety in the big banks of the world and there is truth to that, but safety is all you get. Big banks fill their client’s investment accounts full of their mutual funds. No bank has the best-in-class fund in every asset, so you are often left with underperforming funds and over-exposed to one fund family.
Advice: Being unbiased is key; work with someone who is independent and has no vested interest in choosing certain funds when they build a portfolio.
FIVE
Cheap is best, or is it?
A lot of people invest in Exchange Traded Funds because they carry such low charges and many ETFs are excellent. But remember, an ETF only tracks the market, they don’t try and beat it. So you may only pay 0.5% in charges, where a mutual fund might charge you 1.5%. But if the mutual fund beats the market by 5% and the ETF only tracks it, where would you prefer your money to be?
Advice: Diversification is a key component of any investment strategy. ETFs have an important place in a portfolio, but they shouldn’t be seen as the only solution.
How do you know what will happen to the company you're investing in?
SIX
Stock trading
Which stock to invest in and why? That is the question and one that I can’t answer. Investing in individual stocks is about as risky as going to the casino. How do you know what will happen to the company you’re investing in? How much research have you done into the company’s management, it’s industry, financial statements and business forecasts?
Advice: Leave this to the professionals and let them select the right stocks as part of a well managed fund.
SEVEN
The streets are paved with gold
Gold is like cash; it is a means of exchange and store of value. It doesn’t bear interest and has no business underneath that creates profit. Investors move to gold in times of uncertainty and this causes jumps in value. But it is very risky and over the long-term struggles to beat inflation.
Advice: Invest in a great business not a lump of metal.
EIGHT
QROPS
This is a pension arrangement for British expats, which is an excellent way to take your pension overseas and benefit from tax relief, wider investment choice and control. The problem is that many offshore advisors invest in the type of funds that I’ve talked about above and lifelong pensions often disappear.
Advice: Again independence is key. Make sure your advisor is giving you advice based on the benefits to you, not them.
NINE
US taxpayers using offshore accounts
There is no offshore investment plan that is good for an American taxpayer. Period. Americans should always keep their money in the US and use a regulated US qualified advisor. Every American knows this and every advisor knows this, but far too often we see the rules not being followed.
Advice: Find yourself a US regulated advisor with cross-border financial planning experience.
TEN
Off-plan real estate
Real estate can be an excellent investment, it can also be a terrible one. Off-plan properties are often the most popular for expatriate investors, but they also come with a lot of risks. Delays in construction, overpricing, rental guarantees that don’t work out are just a few of the common problems I see.
Advice: The safety of property is its tangibility, focus on things that are already built. Or, find developers with long successful track records.
Can I help?
Over my many years of experience, I have continually met people who have the discipline to plan and save for their future, but they have been let down by the advice they received.
If you have had any experience with any of my top ten then we can help you. Contact me today so that we can arrange a time to meet, talk on the phone or video conference!
