Did you know that 87% of expats stress about their financial future while living abroad? This happens even though they usually earn better salaries than back home.
Life gets way more complicated when you move your finances across borders. Many expats tend to focus on their daily expenses. They often forget about building wealth through investments. Expat investors face unique challenges that local investors never encounter. These range from complex tax systems to currency changes and limited options on familiar investment platforms.
These roadblocks shouldn’t stop you from growing your money. Smart planning and the right investment strategies can help you build a strong portfolio that works whatever country you call home. Success depends on creating a strategy that fits your mobile lifestyle.
Expat Wealth At Work shows you how to build an investment portfolio step by step that stays available as you move between countries. You’ll discover ways to set goals that match your international life. This guide covers risk management, tax planning, choosing the right investment platforms, and keeping your investments portable.
Why Investing as an Expat Is Different
Investing abroad looks entirely different from investing in your home country. Expats face financial challenges from a complex web of international rules, changing residency status, and currency issues that local investors never see. You need to understand these unique challenges to build a strong portfolio that works whatever path your career takes.
Limited access to home-country investment tools
Leaving your home country often cuts off your access to many investment options that locals take for granted. To name just one example, British expats can’t legally add money to tax-efficient ISAs while living abroad. American citizens also face tough restrictions because of regulations.
Regulations such as the Foreign Account Tax Compliance Act (FATCA) and Foreign Account Reporting (FBAR) have forced many international banks to restrict their services to American expats, and in some cases, their spouses as well. American expats now face a clear choice: they must either work with SEC-regulated, tax-compliant investment firms or risk putting assets in their spouse’s name.
Popular investment platforms like Vanguard.com accept investors from specific countries only. This leaves expats looking for other ways to invest through third-party platforms.
Currency and residency complications
The modern international professional moves between multiple countries throughout their career, unlike the “lifetime expats” of the past. This creates unique investment challenges that local investors never face.
Currency risk becomes your first hurdle at multiple levels. Your earnings might be in one currency, investments in another, while your retirement plans involve a third. Your investment strategy must adapt to possible changes in your base currency as time passes.
The situation also becomes complicated due to changes in residency status. The era of permanent expatriates has ended. People working in oil and gas, education, and other fields are frequently relocating globally, and they are more inclined to return home due to unforeseen circumstances.
You need portable investments because of this mobility. Without them, you might have to sell everything when moving between countries. These transactions could potentially result in significant tax bills during the most unfavourable times.
Governments worldwide have made their tax residency rules stricter. Many countries, including the UK, might treat you as a local tax resident if you keep enough “ties” to your home country—through business interests, property, family connections, and yes, investments.
Changing tax obligations
Tax issues create the biggest headache for expat investors. Your tax picture keeps changing based on:
- Your citizenship
- Your current country of residence
- The location of your investments
- The types of investments you hold
Most nationalities find it more tax-efficient to invest through a third country rather than sending money home. Americans face a different situation—they pay worldwide taxes no matter where they live.
Capital gains taxes usually kick in when you sell investments, maybe years or decades after buying them. An expat investing today with a 10-year plan can’t predict what tax rules will apply when selling, or even which country they’ll call home then.
Smart expat investment strategies use portable, third-country solutions because of this tax uncertainty. These solutions work best when they’re not tied to either your home country or where you currently live.
Step 1: Define Your Investment Goals
Your expat investment strategy needs clear goals that are the foundations of smart investing. These goals work as your financial compass and become crucial when you live across borders.
Short-term vs. long-term objectives
Your investment timeline shapes which strategies and products will suit your situation best. Expats often have different time horizons compared to domestic investors.
Short-term goals (1-5 years) might include:
- Building an emergency fund in your local currency
- Saving for an international property down payment
- Creating a relocation fund for your next assignment
These goals need liquidity and capital preservation more than growth potential. Then, lower-risk options like high-yield savings accounts or short-term bonds make sense despite modest returns.
Long-term goals (5+ years) benefit from time’s power. Statistics show investment risk drops significantly with longer holding periods. The S&P 500 data (1926-2015) shows daily investments had just a 54% chance of positive returns. However, 10-year investments showed a 94% success rate. Most impressive of all, investments held for 20+ years never lost money historically.
Time becomes even more valuable for expats who aren’t sure about their future location. It smooths out market swings and reduces short-term currency fluctuations’ effects.
Income vs. growth focus
Your financial needs and life stage should determine your investment approach.
Income-focused strategies put regular cash flow first. These work well for expats close to retirement or those who need passive income streams alongside their main earnings. Dividend-paying stocks, bonds, or real estate investments that create steady returns fit this approach.
Growth-focused portfolios build capital value over time. Younger expats with longer investment horizons who can handle higher volatility often choose this path. Growth investors put dividends back into investments instead of taking income to use compound interest’s power.
Many expats need a mix of both approaches as retirement gets closer. All the same, your current needs should guide how you split your assets.
Aligning goals with expat lifestyle
Your expat life should shape your investment goals. Here’s what to think about:
Portability comes first. Data indicates that the era of lifetime expatriates has ended. Today’s international professionals move often with little warning. Your investment goals must work with this mobility without forcing you to sell or pay tax penalties when moving.
Currency considerations matter when setting goals. Your retirement or major purchase currency might differ from what you earn now. This unknown factor means you need investments across different currency zones.
Your repatriation plans play a big role. Some expats go home, others stay abroad, and some pick a new country altogether. Each choice creates different investment timelines and tax situations.
Lifestyle inflation needs attention. Higher expat pay often leads to more spending that can hurt wealth building. Setting realistic goals means taking an honest look at how much you can save.
Geographic flexibility matters too. Unlike people investing at home who know where they’ll retire, expats face more unknowns. As one advisor puts it, “An expat investing in 2020, who has a 10-year investment time horizon, won’t know the tax rules in 2030, and might not even know where they will be living!”
Clear, flexible investment goals are the foundations of successful expat investing. They keep your financial future secure no matter where life takes you.
Step 2: Understand and Manage Risk
Risk management is central to successful expat investing. Your portfolio remains vulnerable to market volatility, currency fluctuations, and economic uncertainty without knowing how to understand investment risks and strategies to alleviate them. Three powerful strategies can significantly reduce your investment risks while maximising your long-term growth potential.
Why long-term investing reduces risk
Building wealth abroad makes time your greatest ally. Historical market data shows a remarkable pattern: your risk of losing money decreases the longer you stay invested.
The S&P 500 performance from 1926-2015 reveals this powerful principle:
- Daily investments had only a 54% chance of positive returns
- One-year investments improved to 74% positive outcomes
- Five-year investments reached 86% positive returns
- Ten-year investments achieved 94% success rate
- Most impressively, investments held for 20+ years showed 100% positive returns
This data shows that short-term market volatility smooths out over time. A long-term view provides much-needed stability for expats who face uncertainty about future living locations or retirement currencies. More importantly, staying invested through market downturns lets you benefit from eventual recoveries instead of locking in losses through panic selling.
Diversifying across asset classes
The age-old wisdom of not putting all eggs in one basket applies strongly to expat investors. Geographic diversification becomes essential because most international professionals can’t predict where they’ll live five or ten years from now.
Let’s think about varying across:
Geographic regions: The MSCI World Index tracks markets globally across all sectors. The S&P 500, though American-based, offers international exposure with only 63% in US companies. The rest spans markets worldwide: Japan (8.21%), the UK (5.47%), France (3.80%), and beyond.
Asset classes: Different investment types perform well under varying economic conditions. Government bonds often rise when stock markets fall and create a counterbalance effect. Bonds outperformed stocks during both the 2008-2009 Global Financial Crisis and the March 2020 pandemic-related market panic, providing portfolio stability.
Currencies: Spreading investments across multiple currency zones creates natural hedges against currency devaluation, especially since expats often don’t know which currency they’ll need for retirement.
Investment vehicles: A mix of ETFs, index funds, and occasional individual securities provides both broad market exposure and targeted investments that match your goals.
Note that markets take turns outperforming. US markets generally outpaced international ones throughout the past century, yet international investments took the lead during multiple periods. The right diversification lets you participate in growth wherever it occurs.
Reinvesting dividends for compounding
The third risk-reduction strategy involves reinvesting dividends rather than taking them as income. This approach creates a powerful compounding effect that accelerates portfolio growth while reducing sensitivity to market price fluctuations.
The FTSE100 provides a compelling case study. Although the British index has not kept pace with the S&P 500 in terms of raw price appreciation, reinvested dividends significantly narrow the performance gap. Yes, it is true that reinvesting dividends helps you generate returns even during periods of sideways market movement.
This reinvestment strategy works especially well for expats building long-term wealth, as your money works harder regardless of which global markets are currently outperforming.
When you combine these three approaches—extending your time horizon, varying broadly, and reinvesting dividends—a resilient portfolio emerges that can weather market turbulence and generate consistent long-term returns throughout your international career.
Step 3: Build a Tax-Efficient Portfolio
Tax efficiency is the lifeblood of successful expat investment planning. Your investment gains can quickly vanish due to unnecessary taxation without proper tax structuring. You need to understand your current tax situation and potential future scenarios as you move between countries to build a portfolio that minimises tax drag.
Avoiding capital gains traps
Capital gains taxes pose a major threat to your hard-earned investment profits. These tax obligations can multiply across different jurisdictions for expats and create potential double taxation scenarios. The best way to protect your wealth is to invest in jurisdictions that don’t charge capital gains tax on your investments.
This strategy becomes vital because many tax-efficient investment vehicles from your home country—like ISAs for British expats—are not available once you become a non-resident.
Capital gains taxes apply only when you sell investments, often years after purchase. An expat investing now with a 10-year horizon can’t predict:
- Tax rules a decade from now
- Their future home country at the time of selling investments
- Changes in bilateral tax treaties
Your expat investment strategies need flexibility because of this uncertainty.
Using third-country investment platforms
“Offshore” investing sounds dubious but means investing in a country outside your tax residency. Most expats find that third-country platforms create optimal tax efficiency.
Third-country investments offer several advantages:
- Better tax efficiency than sending money home (with notable exceptions, including American citizens)
- Protection from forced liquidation during relocation
- Less exposure to any single country’s changing tax regulations
- Access to global investment products you can’t get in your current country
Third-country solutions provide vital portability beyond tax benefits. You must be able to take your investments with you when you move. This portability helps avoid unexpected tax events related to forced asset sales during relocations.
Tax considerations for US and UK expats
British and American expats face very different tax scenarios that need specific approaches.
Offshore investing could benefit British expats. Non-residents can’t legally contribute to ISAs, but certain offshore investment structures let British citizens who later repatriate withdraw up to 5% yearly without tax penalties. UK-based platforms might create unwanted tax residency ties.
American expats face tougher challenges. The Foreign Account Tax Compliance Act (FATCA) and Foreign Account Reporting (FBAR) regulations have led many overseas financial institutions to turn away American clients. They now have two main options:
- Invest through SEC-regulated, tax-compliant investment companies
- Risk placing assets in a spouse’s name
American expats must report worldwide income regardless of where they live, which makes third-country tax advantages less helpful than for other nationalities. Tax outcomes can still improve with proper structuring through compliant platforms.
Building a tax-efficient expat portfolio means balancing current tax optimisation with future flexibility—your tax situation will likely change throughout your international career.
Step 4: Choose the Right Investment Platform
Your returns as an expat substantially depend on choosing the right investment platform. Some platforms offer convenient global access to economical investments that improve your long-term results. Others simply drain your wealth through excessive fees.
Avoiding high-fee bank products
Many expats make a common mistake. They invest through their local bank because it’s convenient. Busy international professionals often default to banks as the easiest option. However, this convenience comes at a significant cost.
Private banks usually push their investment funds. To name just one example, HSBC will naturally recommend their funds. This situation creates a conflict of interest that limits your investment options and increases costs.
The difference in fees is substantial. Quality ETFs from providers like Vanguard, iShares, and BlackRock cost as little as 0.1% annually. Many bank investment products, however, charge over 2% per year. This fee gap might seem small at first but grows dramatically over time:
- A 2% annual fee eats up 40% of your potential returns over 25 years
- A 0.1% fee lets you keep almost all your market gains for real wealth building
Bank platforms might look economical on the surface. Hidden expenses, however, eat away at your investment returns.
Banks still serve a purpose for expats —they’re excellent for emergency cash reserves. Several challenger banks now offer better fee structures for international clients. These work well for liquid savings, but not for long-term investments.
Comparing online brokers and fund platforms
Your expat needs require specific features in investment platforms. Here’s what to think about:
Geographic accessibility is crucial. The platform must accept clients from your current country. It should continue serving you after you move. Some platforms force account closure when clients relocate to certain places, which leads to selling at potentially bad times.
A full picture of fee structures helps you decide better. Consider looking beyond basic commission rates. Check currency conversion charges, inactivity fees, custody fees, and withdrawal costs. These “small” expenses add up over time.
Available investment options matter too. The best platform provides you with access to global markets, various ETFs, and currency flexibility that lines up with your expat investment strategy.
Regulatory protection deserves attention. Platforms regulated in major financial centres give you stronger safeguards than those in less established jurisdictions.
Accessing global ETFs and index funds
The lifeblood of a portable, economical investment portfolio for most expats comes from globally diversified ETFs and index funds. These products give you instant diversification across regions, sectors, and asset classes – perfect for international mobile investors.
Getting these investments directly can be tricky. One FAQ points out that “It isn’t easy to invest in Vanguard.com unless you live in the UK, US or several other countries where Vanguard accepts directly.” You have other options, though.
Several international investment platforms let you buy these economical funds whatever your location. These intermediaries help you access the full range of Vanguard, iShares, and similar products without geographic limits.
American expats need special attention. FATCA regulations mean you can use SEC-regulated, tax-compliant platforms or possibly put assets in your spouse’s name (this carries big risks). Success depends on working with providers who know how to handle US citizens’ unique reporting requirements.
Step 5: Make Your Portfolio Portable
Modern expats live a life of constant movement. People no longer stay in one place for decades. Your investment portfolio needs to adapt to this reality of frequent moves.
Why portability matters for expats
Today’s international professionals move between countries more often than ever. Oil and gas specialists, educators, and corporate executives relocate with little notice. Location-specific investments can cause major problems in these situations.
Portable investments help you avoid forced selling when you change countries. They protect you from:
- Tax surprises when you need to sell at bad times
- Losses from selling during market downturns
- The hassle of closing and opening new accounts
- Losing access to your investments during moves
Portability is now vital because global tax rules are becoming increasingly strict. Many governments, like the UK, now treat some expats as domestic tax residents based on their “ties” to home countries—these ties can be business interests, property, family connections, and the investments themselves.
Avoiding country-specific investment products
Your mobile lifestyle doesn’t need the complications of country-specific investments. You should stay away from:
- Tax-advantaged accounts that only residents can use (ISAs for Britons, 401(k)s for Americans)
- Products that charge penalties when you leave certain jurisdictions
- Investments that need local bank accounts or residency status
- Platforms that shut down accounts when clients move to certain regions
The best approach is to focus on third-country solutions that work independently from your home country and current residence. These “offshore” investments (just meaning outside your tax residency) give you more freedom as you move between countries.
Using multi-currency accounts
Currency flexibility is the foundation of a portable investment strategy. Most expats can’t predict their retirement currency, so having multi-currency options gives them needed flexibility.
Multi-currency accounts let you:
- Keep investment positions in different currencies at once
- Switch between currencies at good rates when needed
- Get dividends or interest in your preferred currency
- Match your holdings with future spending needs in different countries
This strategy works great because international professionals rarely know where they’ll live in five or ten years—or which currency they’ll need for retirement.
A portable investment portfolio looks beyond what’s convenient now and focuses on long-term flexibility. By choosing investments that move with you whatever your location, you stay in control of your financial future throughout your international career.
Final Thoughts
Smart planning helps expats build successful investment portfolios that address their unique needs. We’ve looked at the key challenges international professionals face when they invest abroad. These include complex tax systems, currency changes, and keeping investments movable.
You can create investments that work well regardless of where your career takes you by following these five steps. Start by setting clear goals that match your mobile lifestyle. Next, control risk through long-term investing and proper diversification while reinvesting dividends. Your portfolio needs to be tax-efficient, especially with unpredictable expat tax rules. Choose investment platforms that give you worldwide access without big fees. Last but not least, keep your investments portable as you move between countries.
Your success as an expat investor depends on steering clear of common traps. Bank products with high fees, investments tied to specific countries, and accounts you can’t move can hurt your wealth-building plans. The better choice is to focus on globally diversified ETFs, third-country investment platforms, and multi-currency options that fit your international life.
Note that today’s investment choices will shape your financial security for years to come. Your investment strategy needs to stay flexible because expat situations often change. Expat Wealth At Work is here to help you build a better investment life – reach out to us today for a free consultation!
Expat investing comes with its challenges, but it opens doors that aren’t available to domestic investors. The right approach lets you build a strong portfolio that grows steadily throughout your international career. This approach ended up giving you the financial freedom to live life your way – anywhere in the world you chose to be.