# Financial Advice on Savings and Investments for Expats



## johnjones111 (Nov 8, 2015)

I would like to start a thread that discusses savings and investment strategies and products for expatriates.

Everyone is welcome to contribute, both buyers and sellers of financial products and services, however I do suggest that every contributor should say if they are a consumer or a financial adviser.

So, I am a consumer, I do not sell financial products or financial advice, but I do work in the wider financial services industry.

My first contribution is to quote the financial advice of Dilbert:

"Everything you need to know about financial planning:
Make a will.
Pay off your credit cards.
Get term life insurance if you have a family to support.
Make additional contributions to any existing pension funds if you can.
Buy a house if you want to live in a house and you can afford it.
Put six months’ expenses in a money market fund.
Take whatever money is left over and invest 70% in a low cost stock index fund and 30% in a low cost bond fund through any discount broker and never touch it until retirement."


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## twowheelsgood (Feb 21, 2013)

Never take advice on investments from anyone on a public forum.

And if someone called John Jones, who claims to be French and lives in Qatar, posts on a Dubai forum, be assured that their attention to detail and accuracy isn't what it should be.


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## Stevesolar (Dec 21, 2012)

Hi,
I am a consumer.
When it comes to financial advisors I have two simple rules.
Rule 1 - trust no one
Rule 2 - re-read Rule 1

Cheers
Steve


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## ReefPony (Jun 22, 2015)

Asking for a friend... as a "financial professional", do you think it is appropriate to make blanket investment recommendations (a 70-30 allocation between equities and fixed income securities) on a public forum where you know nothing about the investment goals, risk tolerances, etc of the people who may read your "advice"? According to the CFA Institute's Standards of Practice, doing so seems to go against Standard III.C.a - 

"Make a reasonable inquiry into a client’s or prospective client’s investment experience, risk and return objectives, and financial constraints prior to making any investment recommendation "

About me... Master of Science in Finance with dual specializations in corporate finance and investment analysis. Candidate Member of the Chartered Financial Analyst Institute (not yet a Charterholder). Licensed securities broker-dealer and investment advisor representative in the US (Series 7 and 66).


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## The Rascal (Aug 6, 2014)

ReefPony said:


> About me... Master of Science in Finance with dual specializations in corporate finance and investment analysis. Candidate Member of the Chartered Financial Analyst Institute (not yet a Charterholder). Licensed securities broker-dealer and investment advisor representative in the US (Series 7 and 66).


I read that as put 50% of your money on red, the rest on black, you can't lose.


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## ReefPony (Jun 22, 2015)

The Rascal said:


> I read that as put 50% of your money on red, the rest on black, you can't lose.


Ha. You can _always_ lose money when you invest. Run far, far, far away from anyone that tries to guarantee that you'll never lose money. Of course, the big caveat to that is that you actually haven't lost money until you actually _sell_ an asset for less than you purchased it for. Until you sell, you haven't made _or_ lost money.


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## The Rascal (Aug 6, 2014)

ReefPony said:


> Ha. You can _always_ lose money when you invest. Run far, far, far away from anyone that tries to guarantee that you'll never lose money. Of course, the big caveat to that is that you actually haven't lost money until you actually _sell_ an asset for less than you purchased it for. Until you sell, you haven't made _or_ lost money.


Such a salesman. "Yes I know your investment went down initially (thanks for the commission), but ultimately it will increase".

Bottom feeding pond life.


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## ReefPony (Jun 22, 2015)

The Rascal said:


> Such a salesman. "Yes I know your investment went down initially (thanks for the commission), but ultimately it will increase".
> 
> Bottom feeding pond life.


I've never been paid a commission for a securities sale in my career... but thanks for playing, *******. When I was on that end of the business, I worked on a fee only basis and primarily managed assets for trusts and estates.


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## The Rascal (Aug 6, 2014)

ReefPony said:


> I've never been paid a commission for a securities sale in my career... but thanks for playing, *******. When I was on that end of the business, I worked on a fee only basis and primarily managed assets for trusts and estates.


So you scammed people for a"Fee"...

You'll do well in Dubai, there really are people who will believe you....


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## notdave (Jul 11, 2015)

The Rascal said:


> I read that as put 50% of your money on red, the rest on black, you can't lose.


0 is to the house... Depending where your wheel spins...

You can *always* lose.


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## johnjones111 (Nov 8, 2015)

Nice to see that this has kicked off some debate, although already I see that some posters are not declaring whether or not they earn their crust from financial advice.

I do suggest (perhaps naively) that posters try to stick to the topic of what strategies and products are suitable for expats, rather that point-scoring.

Someone picked up on my suggestion that a blanket 70/30 split stock/bond portfiolio is not suitable for everyone. I sorta agree, insofar as there are some financially sophisticated retail investors out there, but for the other 99%, and I include myself among them, passively managed low-cost mutual funds are the best long term savings products. 

There is no other factor as certain to affect the final value of your savings/investment portfolio as the amount of money taken out of it by others (advisers, brokers, investment managers, custodians etc.). 

I quoted Dilbert in my first post, this time I'll quote Warren Buffet. I think most people agree that old Warren knows a thing or two about investments. His advice to the trustees of his estate, after his gone, is as follows:
“My advice to the trustee [of my wife’s assets] could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers.”

Vanguard's funds are a very good example of low-cost, good value, mutual funds. They don't pay commissions to salesmen. They are however difficult for non-Americans to access. I have found one or two options that would probably be of more interest to Europeans than Americans, but I'm wondering if others have ideas.

I would also like to hear from anyone who has bought the more usual products sold to expats, e.g. Zurich Life, Generali, Friends Provident, Royal London etc. What did you buy, and what do you know about how much it cost you?


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## The Rascal (Aug 6, 2014)

Not involved in finance whatsoever - apart from paying my Centurion Card off each month.

Anyway, my only advice is buy houses, UK and Germany, rent them out (the law is more on the landlords side in Germany), and make a killing.

Also, with all the so called refugees heading to Germany, the state will pay the rent, so no risk at all.


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## johnjones111 (Nov 8, 2015)

The Rascal said:


> Not involved in finance whatsoever - apart from paying my Centurion Card off each month.
> 
> Anyway, my only advice is buy houses, UK and Germany, rent them out (the law is more on the landlords side in Germany), and make a killing.
> 
> Also, with all the so called refugees heading to Germany, the state will pay the rent, so no risk at all.


I think this is probably good advice, but I would make one qualification and one comment about property investment.

My qualification is that you should only buy in the country that you come from, where you have a good understanding of the law, and more importantly, of the neighborhood where you are buying. I know the good and bad districts in my home town, but not anywhere else.

My comment is that owning property in Europe, when you live in the Middle East, can be challenging. If you manage it yourself you have to deal with the phone calls about the leaking guttering or broken washing machine, and if you use a property agent they will soak up much of your profit.

That said, I hope to make a property investment myself sometime over the next twelve months. Property is always attractive.


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## The Rascal (Aug 6, 2014)

And only ever gamble what you can afford to lose....

Pay cash only - it's not worth getting in debt.


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## johnjones111 (Nov 8, 2015)

The Rascal said:


> And only ever gamble what you can afford to lose....
> 
> Pay cash only - it's not worth getting in debt.


I agree somewhat with this statement. The retail investor should never borrow to invest in anything other than property. I do however think that there is a place for borrowing in the financing of investment properties, particularly where investment income may not be required for some years (for example, where a property is bought as part of the buyers retirement plan. I would however suggest that investors should have a good chunk of the cash upfront (reputable lenders will probably insist on this anyway), and should have enough cash in hand to service the debt for up to six months. 

Regarding other investments, I have seen some structured products out there that include borrowing (or in industry parlance, leverage) within the product, and I am concerned that retail investors may not realize this. The effect of leverage is to amplify the investment result, which is great if profits are made, but can be devastating if losses are incurred.


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## The Rascal (Aug 6, 2014)

johnjones111 said:


> I agree somewhat with this statement. The retail investor should never borrow to invest in anything other than property. I do however think that there is a place for borrowing in the financing of investment properties, particularly where investment income may not be required for some years (for example, where a property is bought as part of the buyers retirement plan. I would however suggest that investors should have a good chunk of the cash upfront (reputable lenders will probably insist on this anyway), and should have enough cash in hand to service the debt for up to six months.
> 
> Regarding other investments, I have seen some structured products out there that include borrowing (or in industry parlance, leverage) within the product, and I am concerned that retail investors may not realize this. The effect of leverage is to amplify the investment result, which is great if profits are made, but can be devastating if losses are incurred.


So you're suggesting people should borrow money from banks etc. to buy a place that will be leveraged up to the hilt and the bank has first charge over it?

Sounds like top advice....


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## Stevesolar (Dec 21, 2012)

johnjones111 said:


> I agree somewhat with this statement. The retail investor should never borrow to invest in anything other than property. I do however think that there is a place for borrowing in the financing of investment properties, particularly where investment income may not be required for some years (for example, where a property is bought as part of the buyers retirement plan. I would however suggest that investors should have a good chunk of the cash upfront (reputable lenders will probably insist on this anyway), and should have enough cash in hand to service the debt for up to six months.
> 
> Regarding other investments, I have seen some structured products out there that include borrowing (or in industry parlance, leverage) within the product, and I am concerned that retail investors may not realize this. The effect of leverage is to amplify the investment result, which is great if profits are made, but can be devastating if losses are incurred.


Hi,
Leverage is great in a rising market - especially when buying properties with mortgages.
As stated, not great when the market turns.
Cheers
Steve


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## johnjones111 (Nov 8, 2015)

The Rascal said:


> So you're suggesting people should borrow money from banks etc. to buy a place that will be leveraged up to the hilt and the bank has first charge over it?
> 
> Sounds like top advice....


No, I'm much more cautious than you might think. I think it is a good idea to have all of the purchase price if you can, and if it suits you.

But I also think that borrowing can be part of the financing of an investment property. For myself I hope to have 50% of the cost of my investment property saved, and to borrow the rest. I am 10-15 years away from retirement. I hope to borrow the 50% I need from the bank over 10 years, using all of the rental income (and anything else I may need to put to it) to pay off the debt. In 10 years or so I will (I hope) own a property worth twice what I could afford today, and paying me twice the rent I would get. My strategy is not without risk, borrowings bring risk (though a 50% mortgage is hardly borrowing "up to the hilt") but it is a level of risk that I am comfortable with. 

I think this is key for all investors, understanding costs, risks and benefits, and being comfortable with your investments.


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## The Rascal (Aug 6, 2014)

johnjones111 said:


> No, I'm much more cautious than you might think. I think it is a good idea to have all of the purchase price if you can, and if it suits you.
> 
> But I also think that borrowing can be part of the financing of an investment property. For myself I hope to have 50% of the cost of my investment property saved, and to borrow the rest. I am 10-15 years away from retirement. I hope to borrow the 50% I need from the bank over 10 years, using all of the rental income (and anything else I may need to put to it) to pay off the debt. In 10 years or so I will (I hope) own a property worth twice what I could afford today, and paying me twice the rent I would get. My strategy is not without risk, borrowings bring risk (though a 50% mortgage is hardly borrowing "up to the hilt") but it is a level of risk that I am comfortable with.
> 
> I think this is key for all investors, understanding costs, risks and benefits, and being comfortable with your investments.


Well I must be weird, cos i only pay cash for any/everything.

Apart from the Centurion obviously - but that is paid off every month.


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## johnjones111 (Nov 8, 2015)

The Rascal said:


> Well I must be weird, cos i only pay cash for any/everything.
> 
> Apart from the Centurion obviously - but that is paid off every month.


I wouldn't have thought that there's anything weird about that, but by the same token I suspect that most property investments do have some element of borrowing associated with them.

There's a British website that I like operated by "the Money Advice Service' a "free and impartial money advice set up by Government". They have a good page on buy to let, including the risks of borrowing:
https://www.moneyadviceservice.org.uk/en/articles/buy-to-let-property-investments


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## The Rascal (Aug 6, 2014)

johnjones111 said:


> I Money Advice Service' a "free and impartial money advice set up by Government". They have a good page on buy to let, including the risks of borrowing:
> https://www.moneyadviceservice.org.uk/en/articles/buy-to-let-property-investments


How naive, and you think I should plough £500,000 on a website sponsored by a government with their paws inside the pies of the banks?


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## notdave (Jul 11, 2015)

The Rascal said:


> How naive, and you think I should plough £500,000 on a website sponsored by a government with their paws inside the pies of the banks?


Only your spare £500k, keep the rest back... just in case.
There was a place in MOE a while ago guaranteeing 30%+ in carbon credits... risk free...
That or pork bellies, I hear...


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## johnjones111 (Nov 8, 2015)

The Rascal said:


> How naive, and you think I should plough £500,000 on a website sponsored by a government with their paws inside the pies of the banks?


Well, you are right to be skeptical, its a quality I generally admire, but there are a number of countries that have government websites that give impartial information to financial consumers.


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## johnjones111 (Nov 8, 2015)

notdave said:


> Only your spare £500k, keep the rest back... just in case.
> There was a place in MOE a while ago guaranteeing 30%+ in carbon credits... risk free...
> That or pork bellies, I hear...


A Dubai-based operation called The ONE Group is currently promoting an investment in a product created by some genius using "a black box algorithm' that promised 12% return per month.

The minimum investment is $20,000. Now I calculate that if I invest $20,000 for five years and reinvest my profits my $20,000 should grow to $18m. What could possibly go wrong!


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## jgw99 (May 26, 2014)

*always about risk and risk tolerance*

as someone who trades/invests for a living, all I can say for those looking to generate higher returns (vs depositing in certificate of deposit or cash flow from rental properties) via the market (equity, fixed income, currencies, commodities, etc):

-if you're not someone who knows a lot about the securities or not willing to learn about them, assume all your risk capital will go to zero. yes, even if you put all your money into buying shares of Apple or any other seemingly safest companies in the world to invest in. 

it's all about *risk tolerance* with regards to this and if you accept this, work backwards on the amount of capital you are willing to risk. i've worked with individuals who can't get a grasp with the idea of risk and reward. most of the time, they only want the reward. investing/trading shouldn't be for those folks.

-*understand leverage and margin*. as @stevesolar said, leverage is great when you're levered up and in the correct direction. if on the wrong side, it's a b^*ch. why? because you can lose more than your original risk capital. if you don't believe me, just read stories about traders/prop firms/ and even brokers that got smacked when the Swiss National Bank suddenly changed their policy on the Euro peg back in January. if that isn't enough, just do a quick Google search "blowing up a trading account". 

big banks can lose money taking on the riskiest of assets and they will just get bailed out. if you lose a lot money, it's "how can you be so irresponsible?" and tough luck.


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## johnjones111 (Nov 8, 2015)

Thanks jgw99.

To my mind there is a difference between a trader and an investor.

You appear to be someone who is both highly financially literate and aware of the risks. Only people with this level of understanding should engage in trading in my opinion.

The vast majority of expatriates do not have this particular expertise, they are experts in other fields, be they teachers, engineers, oil executives, whatever. What they do have in common is that they are probably earning a good tax-free income (relative to what their take-home was in their home jurisdiction) and they have an ability to save and invest while they are expats. 

These expats do have investment needs, but they will never (or at least should never) be traders. They need low cost investment vehicles promoted by reputable firms. I see very little on offer that matches these criteria. Instead I see a lot of shockingly bad value unit linked funds being sold by "consultants" with no expertise.


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## jgw99 (May 26, 2014)

johnjones111 said:


> Thanks jgw99.
> 
> To my mind there is a difference between a trader and an investor.
> 
> ...


You are correct in there is a difference between a being a trader and an investor. Being both, I can tell you that probably the most important difference is "timeframe". Outside of that, the dynamics of risk and reward are the same. If you want a higher return (reward) be ready for accepting higher tolerance for risk. 

Yes, most mutual funds or closed end funds happen to be covered with some type of Investor Protection laws (at least in the US) in the event that the financial firm responsible for the management of the fund goes belly up. 

If one wanted a low cost vehicle to invest in the market as a whole without having to pay fees to advisors, I suggest looking into Exchange Traded Funds (ETFs) that track a specific sector or the general market. It avoids one to have purchase specific company stocks. I just did a quick search and there are ETFs that track the FTSE 100 (for my British friends here in the forum). It will probably generate less of a return(versus professionally managed mutual funds) during booming bull markets but should outperform during bear and sideways market.


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## johnjones111 (Nov 8, 2015)

I am a big fan of Exchange Traded Funds myself. I have set up an account with a discount broker based in Luxembourg and I use that account for ETFs and the occasional punt on company shares. I am fairly comfortable with this arrangement, I understand how stockbroking accounts work, and how an ETF is constructed (and what to look out for). Setting up the account was not difficult really, just the usual Anti-Moneylaundering stuff. 

When I recommend this type of arrangement to friends who do not work in financial services I find that they either don't understand it or are not interested or whatever. 

I do think that most people can understand the basic concept of pooling your investment with others in a mutual fund. Low charges are the key here. I have found passive funds that charge 0.6% per annum in management fees (with a 0.5% exit charge).


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