Updated! The Unbiased Guide to Expat Investing - DeadSimpleSaving (2024)

Note: If the information below looks complicated, don’t worry – once it’s set up, it is fairly quick and painless. No technical skills required. Don’t let someone take a lifetime of fees from you – believe in yourself enough to set up a couple of accounts and learn some new concepts.

Investing as an expat is mysterious. It’s not easy to find out how to do it. Everyone is either clueless or trying to sell you some terrible investment plan that isn’t even legal in your home country.

Figuring out expat DIY investing is absolutely worth it though. Let’s say you invest $1,000 monthly for 30 years. If you make an 8% average annual return from your sensible stock portfolio, minus 1% per year for all investing costs, you’ll end up with $1,227,000. More than a million dollars – nice!

Paying just 1% extra in costs reduces that total by $218,000 (and most savings plans will charge you a lot more). If you want to make the most of being an expat, you must keep currency exchange, transfer & investing fees as low as possible.

Even when you hear about low-cost options like Vanguard or learn what an ETF is (see below), you can still hit a brick wall. Contact Vanguard and they will say nope, we only deal with residents in a few countries. Anti-Money Laundering regulations make servicing expats a hassle.

Even the nationals of countries outside US, UK, Europe, Canada and Australia can struggle. This article will help them as well.

I first learned about Vanguard in 2011. I sold all the actively-managed funds and stocks in my old UK ISA (tax-free savings account) and replaced them with just one fund – the Vanguard LifeStrategy 80/20 Accumulation fund. The LifeStrategy funds are great for UK residents – literally all you need.

But, living in Dubai, nobody could tell me how to invest with Vanguard as an expat. I dug around, then life moved on and I accepted it wasn’t possible. Only in 2016 did I come across a blog post comment, buried 50 comments deep, explaining how to do it. I immediately realised what a huge find this was. Unexpectedly, I got a bit emotional, because I knew then I could finally help people invest cheaply and sensibly. Here was my mission!

So let’s get into the details – I’m going to give you the keys to the expat investing kingdom. Where you live, no financial company wants you to know how to invest by yourself cheaply, because they won’t make any significant money out of it.

This is how to invest in stocks and bonds as an expat, exactly how I do it myself. I’m going to use the UAE as an example, but the principles should work for most expats (or nationals) regardless of location and country of origin.

Wherever I name companies below, it is to show you who I respect and/or who I invest with myself. I don’t make any commission from recommending these companies – I’m mentioning them because they get the job done: large, secure, cheap, efficient & with a good reputation.

Like most expats, you probably want to invest in a mix of stock and bond Exchange-Traded Funds (ETFs). Mutual funds (such as Vanguard LifeStrategy) popular with those back home aren’t easily available to expats, so we have to use ETFs. In fact, ETFs are so awesome they could stand for Expat Total Freedom. They are similar to mutual funds, but are traded more like an individual stock, on a stock exchange. This makes them easy to buy and sell.

I appreciate this can be a little confusing. If you are scratching your head but determined to make progress, do consider joining my online Academy or live weekend workshop where we going into the detail necessary to give you confidence about all this.

Let’s say you want to invest in one stock ETF and one bond ETF, to keep things simple (which you should do). If you’re under 45, you could settle on 80% in VWRA (the Vanguard FTSE All-World UCITS ETF in USD with dividends reinvested) and 20% in IGLA (the iShares Global Government Bond UCITS ETF in USD with dividends reinvested). Congratulate yourself for your incredibly smart fund choices, as these funds are cheap and well-diversified.

I call this the Pac-Man Portfolio, as that’s what a pie chart of your portfolio looks like. 2 funds, nice and easy, literally all you need.

Unless you are a US citizen, you don’t want to invest in US-domiciled ETFs, i.e. those based in the US. for tax and regulatory purposes (separate to what they invest in). These may be liable for estate tax if you die (up to 40% on amounts over $60,000!) and a 30% withholding tax on dividends. Stick to ETFs domiciled in Europe (with ‘UCITS’ in their name), ideally Irish-domiciled, and you will be ok.

Vanguard and iShares are highly-respected fund managers, managing literally trillions of dollars. Vanguard is especially awesome, as all profits go towards reducing your management fees (helping you grow your investments faster). It was founded by all-round hero Jack Bogle, who invented passive index funds and sadly passed away in early 2019.

Fund managers create mutual funds and ETFs, packaging together hundreds or even thousands of shares to create a fund with a single price. Without them, you’d have to buy all the shares in an index individually and you probably wouldn’t bother.

You can’t buy VWRA and IGLA direct from Vanguard and iShares as an expat, just as you don’t go direct to Chiquita to buy bananas. You access them via a broker, which is like a supermarket for funds.

Most brokerages in your home country won’t allow you to open an account with them if you aren’t a resident there. Brokerages where you are resident may not have the necessary protections and abilities you’d like before investing thousands. You’re better off with an international brokerage instead.

You send money to the brokerage platform (more on that in a bit) and select which ETFs you want to invest in. They will give you a price, buy the shares and hold them for you. When you want to sell, they quote you a price, you click ‘Sell’ and should have the money within 2 days for transfer back to your bank account.

Most brokerages have a website and a mobile app that allow you to easily track your investment performance, receive dividends, buy or sell ETFs and transfer money in or out.

Brokers are required by law to keep your money and investments separate from their own money, so your assets are protected if they go bust. In the even more unlikely event that they have lost or stolen clients’ money, then you are further protected. For example, clients of US brokers are covered by the SIPC for up to $500,000 of stocks and bonds, and $250,000 of cash – this goes a lot further than you might think.

I use Interactive Brokers (IB), which is based in the US and is large, robust and cheap. They have a decent web platform and mobile phone app for investing and tracking your portfolio. You won’t be liable for US estate tax as long as you don’t invest in US-domiciled ETFs or stocks, and don’t have more than $60,000 sitting uninvested in your IB account.

Setting up an IB account requires you to fill in a few online forms and send them proof of identity and address online. After that the setup is fairly quick.

To add money to your IB account (no minimum, though transfer fees could bite into small transfers), you need to set up a Bank Wire. Enter your own bank details and the amount you want to transfer, then IB gives you an account code for the transaction.

IB is also one of the cheapest places in the world to exchange currencies. It’s very useful. They only accept major currencies though (and now AED).

Find out more about Interactive Brokers here. More expensive alternatives are Saxo Bank,Swissquote Luxembourg orSwissquote Switzerland, plus various ‘roboadvisor’ platforms. Note – these are not affiliate links.

You need to send money to your brokerage and the currency you earn in may not be the same as the currency you invest in.

Banks and many brokerages often have bad foreign exchange (FX) rates and can charge high fees as well. If you are transferring large amounts, poor exchange rates can cost you a lot. High fees will hurt you when transferring small amounts. So it pays to figure out the most efficient way to transfer your money.

Brokerages accept all major currencies, so if you have the right currency already, the transfer process is easy (beware of correspondent bank charges when sending USD though).

IB now accepts AED, which is a big step forward for UAE residents (sorry if you’ve just moved to Saudi). However, their AED account is in the UK and most banks don’t allow international AED transfers (some do at the branch). HSBC is the clear winner here, providing free AED transfers overseas if you use their mobile app.

IB is also great if you need to convert between major currencies, as their rates are so good. For other brokerages, you may want to exchange currencies first. You can use online currency brokers like CurrencyFair, Wise or Revolut (note my concerns here though) to get decent rates.

Beware, brokerages can be wary of these online companies and freeze the money for a few days before releasing it to you. IB seems to have a good relationship with Wise at least.

These online currency exchanges don’t have all the minor currencies though. You will need to convert your currency into a major currency before you send to your brokerage. You can:

• Shop around the various banks where you live to see who has the best rate
• Check the local exchange houses to see if their rates can beat the banks’ rates
• See if there are any money transfer apps specialising in your currency
  

Make sure the company you are using to transfer your money has a good reputation and is financially stable. There are plenty of horror stories. Always, always do a test transaction with a small amount before you send large sums over.

In the UAE, I have used Wall Street Exchange Priority Club, which has great service and literally the best AED to USD rate in town, excluding IB’s own rate.

Your local bank is always your starting point for your investing journey. Be prepared to set up an account with another bank if they offer better exchange rates and transfer fees. It is always good to have a second bank relationship where you are resident anyway.

To get your money to IB or to an online currency exchange, you have to be able to send your money there from your local bank. This can be surprisingly difficult. If your bank has a history of losing the bank reference code during transfers (looking at you ENBD), doesn’t allow transfer of the local currency out of the country, or charges extortionate amounts, you are much better off using another bank for your transfers.

If you want to transfer money to your broker from your bank account in your home country, similar issues apply. Major currencies are very easy to transfer, as brokerages will often have a bank account for that currency in its respective country. For minor currencies, you will face the same issues as in the country where you are resident, and the same hunt for cost-efficiency applies.

This process may sound complicated but, once you have the accounts set up and have transferred money a couple of times, it becomes fairly straightforward.

You should be aiming to invest monthly or at least quarterly – making a transfer shouldn’t take more than 15 minutes out of your day. What first seemed complicated soon becomes automatic.

Now that you know how to become an expat investor, just get started! You can practice with small amounts (e.g. $1000) to build up your confidence. Don’t leave it 6 months or more before dipping your toe in!

Not enough expats know how to invest without getting ripped off and this information is really hard to find anywhere. Please share this article with a friend, family member or colleague that might benefit from it.

Are you stuck trying to invest? Or do you have any tips that have helped you? Share your questions or thoughts in the Comments section below…

If you want to accelerate your progress, you can always use one of ourcourses or private coaching to bring you the clarity you need.

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