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Success habits forum
What skill will be most needed in the 2020s?
Will new skills and mindsets be required?
I am not convinced that most of the fundamentals will change. Working hard, smart and long will always be useful. As technology plays a bigger part in our lives, working smart will merely become more important.
Who will gain more traction in the digital world – the person making 200 cold calls a day or the person who gets in front of millions online? The answer is obvious.
Likewise, investing money has always beaten saving long-term, as this graph from Quora shows:
Yet with interest rates likely to stay relatively low for years, that gap could just increase. Historically, the S&P500 has done 6.5%-7% above inflation long-term, and savings accounts 2% above inflation. I think that will change, and the gap is likely to widen long-term.
So, in essence, the same trends are likely to accelerate. That means any skills related to the online world, and investing, will become more valuable.
Predicting the future is tough though.
Property forum
What are the keys for successful property investments?
The keys are
1. Being a professional in the space. I have seen many people beat the stock market with property short, and even, medium term. I haven’t seen many DIY investors do it long-term, unless they get lucky. Real estate professionals can be different.
2. Investing in real estate investment trusts (REITS) if you aren’t a professional real estate investor. It is cheaper, more efficient, less hassles and can be held with bonds and stocks.
3. Focus on yields and leverage, and not capital appreciation. Hoping that the person coming after you will pay more for the same asset is speculation. Hoping you can “out research” the market isn’t likely a winning strategy in this world of open information. If Manila, London, Shanghai or any other property market is obviously such a good buy, then everybody else in the finance world will know too. In reality, smaller units can have better rental yields, if you AirBnb.
4. Don’t take big risks like put the house in your spouse’s name. I have seen many expats make this mistake because doing so is easier.
What are the biggest mistakes expats makes in regards to personal finances and investments?
The biggest mistakes I have seen are:
1. Not investing enough to begin with. In many of our home countries, we pay high taxes, and in return for that get some kind of pension. Overseas, people typically need to invest more just to be where they would have been back at home.
2. Linked to the first point, there is a keeping up with the Jones’ mentality in some of the larger expat cities like Dubai, Singapore, Shanghai etc. This is best avoided.
3. Only sending money back to home countries. This can be tax-inefficient . Most providers back home don’t even accept expats, and lying about your residency is never a good idea. Take the UK as an example. If you live in the UK, you can invest in a tax-efficient investment ISA. You can’t if you live overseas. If you try to use a bank statement as proof of address, and invest in an ISA, it is tax fraud. Usually more tax-efficient investments are available for expats.
4. Not having portable investments. Few investment platforms offer true portability if you move from country to country. This is essential for expats to avoid hassles and unexpected capital gains taxes.
5. Only investing in illiquid investments like property and businesses. Few people in the US, UK or Canada are interested in investing in Cambodian or Inmobiliaria vietnamita back home. They come to Asia, and suddenly “familiarity bias” means that they are more likely to do it, because “everybody else seems to be”. I am not saying you should never buy property, but the risks involved in emerging market property is huge.
6. Giving money to a local wife or husband to buy land because the law makes it easier. This one is self-explanatory.
7. Neglecting wealth protection like health insurance. In our home countries, it isn’t a must. In many overseas countries it is.
8. Lastly, making the same mistakes people tend to make back at home, like market timing, speculating etc.
Expat forum
What kind of investing and personal finance problems do you experience as an expat?
Hi Adam. To answer this question, the biggest problem I feel is lack of coherent information.
There are lots of articles about how US expats should never invest with foreign banks (in this case, banks in your country of residence) due to PFIC taxation. And how many foreign banks/companies refuse US citizens as a result of FATCA. And how most US-based banks refuse US-citizen expats, though there is never any explanation as to why that is the case. Many say “because of FATCA” and “reporting obligations”, but seeing as how FATCA exists to force extranjero banks into disclosing US citizen information back to the IRS, it is unclear why US-based banks would refuse an expat.
There are lots of questions no one seems to address, and for the residency country I will use Norway as the example:
1. Many recommend using a US address (of a relative, as example) in order to claim “US residency” to open an account. The legality of this is never discussed.
2. Taking #1 into consideration, Norway requires their residents to declare worldwide earnings. This is never addressed in relation to #1 above. If the US-based bank in question requires US residency and you successfully open a US-based account using a US address for “residency”, what complications arise when you, as a real tax resident of Norway, have to declare those earnings?
3. PFICs, FATCA, MiFID II: Due to PFIC taxation, it is generally recommended for US expats to only invest with US-based companies into US-domiciled ETFs. MiFID II, however, apparently doesn’t allow European residents to invest in US-domiciled ETFs. So….what?
4. Clear implications of investing in PFICs. Very little information is given besides “heavy taxation will occur” and “complicated paperwork.” It would be nice to understand this in a little more detail, including whether Norwegian/resident tax would be deducted in addition to the PFIC US-tax rate, or if you would pay resident tax rate + the difference in tax then to the US (tax treaty?).
5. What actual, real-life options do US expats have besides being recommended to speak with a tax expert? Naturally, that is important and should be done. However, I wish some real example recommendations (ie. banks/companies/services to look into, etc) were given. I would prefer to have as much knowledge and information as possible before paying high fees to a tax expert only for them to use their allotted time to simply educate.
This is my frustration. And judging by the myriad of posts on Reddit by US-expats, I am far from the only one with these questions.
That makes a lot of sense. It is very difficult for Americans, and the situation keeps changing.
By the way, did you see my article for Americans?
Hi Adam, thanks for the reply. Could you please link it? I may have read it, but I am not sure. I saw one article from 2019 or 2020 I believe. It was one where you talked about working on a robo-advisor app for expats if I recall correctly. A real robo-advisor accessible to expats is really something I would like. Canadians have one, why can’t we!? That’s a bit of a joke but completely relevant because it is true (CI Direct Investing).
A primary reason I’d like one is because I do not have $50k on hand to invest (an example). I want to save/invest monthly with something like Betterment, Wealthfront, or the myriad other options US residents have without some wild minimum.
By the way, I just earlier watched your interview with the guy from Beacon. You two were fantastic, he obviously knows his stuff and seems like a treasure trove of valuable knowledge. Have you done any more videos with him?
Ironically I was about to put the video on here. Here it is for everybody else.
Here is the article but it isn’t as updated as the webinar.
You are also correct in suggesting that robo-advisors are a great option if somebody doesn’t have a sizeable lump sum to invest. I will soon be having access to a US license but usually it is best for people with 100k or more, as monthly investment options in the US can’t be done efficiently through advisors.
So I, like you, would quite like to see a robo advisor deal with this niche of people who want advice but aren’t able to get it efficiently.
One option you might want to consider is “index hugging”. In other words, rather than investing in funds and ETFs, try to mimic the market by buying the top 20% of the S&P500 by market cap.
I guess you have already heard about this option though. It reduces the risks associated with holding individual positions.
It isn’t perfect, but it reduces these issues you allude to.
I will try to do more videos with Beacon as well after your feedback.
Saving and investing forum.
What lessons should we learn from the Japanese Nikkei’s “comeback”?
The Japanese Nikkei is back above 30,000 for the first time in three decades.
The biggest lessons I have learned are:
1. Today’s winners aren’t always tomorrow’s, and vice versa.
2. It is very difficult to predict the future. Few people expected the Nikkei to be one of the best performing stock markets in the 2008-2021 period back in 2008. Few people expected much of the Nasdaq in 2003, 2004 or 2005, when it became unfashionable. I am sure markets like the FTSE in the UK will have their periods in the sun as well.
3. Reinvesting dividends is key. Somebody who reinvested dividends would now be up, even if they bought at the worst possible moment.
4. Diversification is important, as is a long-term perspective. Somebody who bought the Nikkei, S&P500 and a bond index at the peak of the Japanese bubble economy, and reinvested dividends from all three investments, would have done very well.
5. Most people buy high, and sell low, because they are attracted by recent strong performance – recency bias. A Vanguard study found that net inflows were highest during 1999-2000 – 18 years into a bull market. Net sales/outflows were highest during 2008-2009. It is unlikely all of these outflows were due to the bad economy and people needing the money.
6. After years of US stock market outperformance, more people are looking for alternatives in Asia and beyond. The South Korean, Taiwanese, Hong Kong and even Mainland Chinese stock markets are also doing very well.
7. Few people can keep to a long-term strategy and avoid just following trends.
Saving and investment forum
I think savings and investing should be used for different purposes. In the past, I had only savings account because I didn’t know the difference and genuine ‘investing’ was something for other people than myself. It was considered as a safe way to ‘keep’ my money. However, now I realised that is not true and my ‘investment’ has been growing, not just staying as is.
¿Le duele la indecisión financiera? ¿Quiere invertir con Adam?
Adam es un autor reconocido internacionalmente en temas financieros, con más de 231 millones de respuestas vistas en Quora.com y un libro muy vendido en Amazon.
Lecturas complementarias
In the article below, taken from my online Quora answers, I spoke about:
- How do most millionaires make their first million? Inheritance, investing, salary or businesses?
- Has the stock market really changed compared to ten years ago? I challenge that notion.
- Do attitudes differ between wealthy and non-wealthy people?
- Interest rates are 0%. How can retirees invest in a safe and long-term manner?
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