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6 myths that foreign investors should not believe


What are the 6 myths that foreign investors should not believe? While some of these myths are not just related to foreign investors, some are very specific to people living abroad.

1. Invest risky.

The first myth is not an expat problem. People all over the world believe that investing is risky.
It shouldn’t be. Some types of investing are really risky. Investing in just one stock or even ten can be dangerous, as can a short-term investor.

Investing in a diversified portfolio is not risky, at least if you hold positions for a long time.
Below is an example of the US S&P500 – the five hundred largest US stocks.

Source: Forbes

Even markets that haven’t performed as well as America’s recently, such as Britain’s FTSE100, which tracks the UK’s 100 largest companies, have adapted well to dividend reinvestment.

Source: It’s money

2. Investing for the rich, or at least having an advisor

Long gone are the days when you had to be rich to invest. Now you can invest minimum amounts of money.

Advisors are indeed often used by wealthy people, and many advisors (myself included) specialize in helping wealthy people.

However, the minimum investment is generally reasonable for those who require advice or guidance. ​​​​​​While I have continually increased my minimums over the years, it is possible to access your team from $500 per month and yourself from $2,000 per month or $100,000 as a lump sum.

Other advisors have lower or higher minimums, depending on their niche. Either way, you don’t have to be a millionaire to have an advisor.

3. It is important how the platform is regulated.

There are investment platforms, banking platforms and offshore bond/life insurance platforms for foreign investors. The difference between the three is negligible if the investment choices and fees are similar.

For example, if you invest in the Vanguard S&P500 with a bank that charges 1% per year, your return will be identical to if you invested in the same fund, with the same fees, with an insurance company.

In reality, the difference between these options is mostly regulation. Indeed, there are sometimes tax advantages to choosing a particular option.

For British, South African and Australian expats, offshore bonds have potential tax benefits when you return home. However, this will not affect the gross profit.

Perhaps the confusion is caused by the fact that a traditional insurance product gives the beneficiary of the life insured a large payout in the event of his death.

Therefore, some investors have the misconception that when they invest in an insurance platform, this money must go to paying the insurance – in other words, they are not fully invested on the first day – which is usually not the case with modern offers.

4. Some jurisdictions are “tricky”.

Here we move to the expat-oriented part of the discussion. Most locals invest domestically because it’s more familiar and “feels” safer when they don’t live in an unstable country.

Most expats are on the move and need mobility. This is why most expats invest offshore. The offshore financial world was created in part to serve the needs of British expatriates living abroad when the British Empire was in its heyday.

However, there are many false media reports, such as the Panama Papers, which were largely non-fiction, and popular culture, illustrated by films such as The Wolf of Wall Street, which featured a protagonist with with cash tied to it to get money into the “tax haven” of Switzerland perpetuates some long-standing myths.

The media and movies like The Wolf of Wall Street perpetuate the myths of “tax havens.”

These days, most money in offshore jurisdictions is not used for illegal tax evasion, and you have financial transparency around the world following OECD rules like the CRS.

As a result, we have also found that some foreign investors are comfortable with certain offshore jurisdictions, such as Switzerland or Luxembourg, but uncomfortable with others such as Mauritius or Bermuda.

In reality, all major offshore jurisdictions now have adequate investor protection. Often this misconception is related to familiarity.

I noticed that Brits are less likely to think of the Isle of Man as dodgy, mainland Europeans are very trusting of Luxembourg and Switzerland and some North and South Americans like Puerto Rico and Cayman.

In any case, no major offshore jurisdiction is sloppy these days.

5. Investing in a house is the safest way.

Most brokers in your country will not accept you. If you use an indirect way to access them, such as using your bank statement as proof of address and pretending you still live at home, you could be setting yourself up for trouble in the future.

I’ve run out of clients, especially in places like Canada, that have had their accounts closed because the brokerage or bank knew about the residency issue.

This can cause unexpected taxes when you need to liquidate positions quickly, and other hassles.
Moreover, some tax authorities, such as those in Australia and Canada, suggest that expatriates must “demonstrate an intention” to be considered non-tax residents.

This may mean closing your gym membership and having as few connections back home as possible.
Even the UK, which is more liberal, has an automatic communication test and other tests.

Simply put, the more days you spend at home and the more connections you have with the UK, the more likely you are to be considered tax resident, even if you don’t spend 90 days a year in the country.

In many countries, the days of the “183 or 90 day rule” are long gone. As governments need money with Covid-19 and an aging population, this could get worse.

In reality, it is very important to create portable investment accounts that move with you from country to country and have fewer ties to your home country.

Ideally, you should also use a brokerage or adviser who will manage your account even if you move outside the European Union or any particular area.

If you want to invest as an expat or have ineffective investments, you can apply for my services here.

Do you suffer from financial indecision? Want to invest with Adam?

Adam is an internationally recognized financial author, with over 422.8 million answer views on Quora.com and a best-selling book on Amazon

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