There are many bankers who prey on expats. Some will cold call you at work, while others you may run across at a party or on the golf course. Unfortunately, they offer some of the worst financial services out there. Drawing a parallel between these concepts and ocean-faring vessels with small apertures is a valid proposition. They pay “advisors” huge commissions while their clients investments lose money.
Unfortunately, the expat financial services community routinely sells these products.
A professional sport, a medical specialty, or a legal career are not like investing. With just one hour of labor per year, you can outperform the best fund. And most hedge funds wouldn’t be able to compete with you.
This is obviously not something you studied in school. Warren Buffett, though, concurs with us. Several economists who have won the Nobel Prize concur with this assessment.
Investing is simple.
You should take the following actions: Set up a low-cost, diversified portfolio. Set aside money on a regular basis in an amount you can afford. You’ll regret waiting a year to rebalance. After fees, most seasoned investors cannot outperform a low-cost portfolio.
Over time, the stock market becomes advantageous, and you should profit from this. Assume that in January 1970, you had €1,200 available for savings. You gave around €3.29 per day, for an annual contribution of €1,200. By August 30th, 2023, your savings would have increased by €65,565 if you had started saving in 1970. If you had earned the average global stock return, it would currently be worth almost €1.6 million. When compounded, the rate of return is 10 percent annually. Few experienced investors ever got close to that. The typical mutual fund manager may have increased the starting amount to approximately €800,000. The difference between €1,600,000 and €800,000 is sizable. A typical expat pension plan would only have produced a pitiful €342,000 from investing this amount.
These are not random numbers. According to an economist who won the Nobel Prize, after deducting their annual expenses, regular investors make the same amount of money as the stock market. These fees are comparable to ants in a home. They don’t offer much reason for optimism. They won’t need much to destroy your house. A diversified, low-cost portfolio will outperform about 90% of professional investors over the long term when costs (commissions for hungry salesmen) are taken into consideration. Your finances will benefit from the market’s increase.
This might not seem significant if you have a sizable pension waiting for you when you retire. However, most expats took their vows with them when they departed the nation. So, do you want to have fun or make money?
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