How To Manage Your Expat Investment Risk
Manage Your Investment Risk
Living abroad is an enriching experience as you open yourself to new cultures, people and opportunities. However, you must also remember to balance the exciting parts of your expat life with the down-to-earth realities of managing your finances.
Investing your income smartly can sometimes become a challenging prospect when you are living far from home; it is often hard to get the right perspective and advice that work for your life spread across borders. However, with the right knowledge and guidance from professionals, you can build a robust portfolio, protect your financial interests and set aside enough for your retirement.
In this article, we give you some practical strategies and tips for managing expatriate investing risks, making sure your money works for you no matter where you live.
Understanding The Financial Landscape
Living abroad, you have to understand the legalities of your domicile and professional status in your host country. Apart from the compliance issues of your host country, you will also have to factor in the tax and other matters pertaining to your investments in your home country.
Take some time to dig into local investment regulations, taxation policies, and any restrictions on foreign investors. While researching, also get an overarching view of various investment options available to individuals in your income bracket. Consult friends and family, your accountant and google a bit to collect basic knowledge. You can also consult with a financial advisor who specialises in expat finances.
Set Your Goals and Limits
Your initial research will give you some perspective on what is available to you; now, use this information to define your financial goals. These could be your retirement plan 20 years down the line, an education fund for your children, financing a home or starting a post-retirement business. Set figures for these life ambitions and work backwards to get a feel of how much you should start putting aside.
Along with goal setting, you also need to consider your risk tolerance. If you see yourself as a conservative investor, then you might want to stick to low-risk assets. A good rule of thumb is to ask yourself, what am I comfortable losing?
If the risk is making you lose sleep, then you have probably reached your limit.
Define Your Strategy
Unless you are confident of your financial understanding, we would recommend involving experts at this stage. There are many permutations and combinations of financial products that can be used to build a financial plan that services your goals; leveraging the expertise of a financial planner will give you access to more options with a better understanding of each product.
You need to look at the strengths and weaknesses of various options and also assess your current portfolio to find areas of improvement. You might need to identify and liquify underperforming assets, or factor in existing debt or any upcoming big buys, or consider how best to diversify your investments.
Spreading your investments across different asset classes, industries, and regions can help reduce the risk of under-performing investments. As an expat, you can also consider holding investments in various currencies as a diversification tactic.
Turn Your Strategy Into An Actionable Plan
Once you have decided on the overarching strategy, it is time to sit down with a professional financial planner to convert it into a time bound plan. Before you press GO, we recommend you recheck and research every financial scheme and product you are about to invest in.
Spend some time online understanding their details, look for reviews and read the fine print. While your financial planner will guide you, it is ultimately your money and your risk.
(Pro tip: as an expat, you should definitely consider building flexibility into your plan. Look for options with no or low exit penalties.)
Keen An Eye On Your Investments
Investing is not a one-time affair; set aside time to check the progress of your portfolio and schedule meetings with your financial planner to discuss your concerns and find solutions. We also recommend that you follow global investment news and engage with the local and international investment communities to stay abreast of the marketplace and geopolitical situations that can affect your portfolio.
It is also vital to shift your investment priorities to reflect your life changes. Life as an expat is often ripe for change. For example, you might decide to live permanently in your host country; this would naturally change the life goals you built your original financial plan on. Revisiting and changing your plan to align with your shifting requirements is a critical part of the process.
(Pro tip: patience is definitely a virtue when it comes to investing. Avoid rushing into rash decisions based on short-term market fluctuations or news cycle alarms.)
Always Plan For An Emergency
Life is unpredictable, and doubly so for an expat. No matter how well your investment portfolio is performing, always keep some money aside for immediate needs.
This will ensure that in times of need, you don’t have to rush to liquidate your investments. It is also advisable to have your family, yourself and your important assets insured, including generous medical insurance.
Taking Expat Financial Advice
As an expat, investing often comes with an additional risk of uncertainty. Balance this out by expanding your own knowledge and with the advice and support of investment professionals. Remember to be diligent and thorough with your research and being with investing only the money that you can comfortably spare.
The Wealth Genesis is the first flat-fee, zero-commission International Financial Adviser. That means no sales, hidden fees, lock-ins or conflicts of interest.
To find out how we can help you, use our online form to book a consultation with our team of Expat Financial Advisors.
