I often write on Quora.com, where I am the most viewed writer on financial matters, with over 262.2 million views in recent years.
Table of Contents
In the answers below I focused on the following topics and issues:
- How good a long-term investment is the Vanguard ETF? Considering there are many types of ETFs, I break the question down, and compare Vanguard to competitors like iShares.
- What are the best resources for comparing the cost of living differences for people looking to live overseas? Is the so-called Big Mac Index a good indicator of living costs if you move overseas?
- What investments, and indeed investment platforms, are globally portable for expats and those who suspect they might retire overseas?
- What are the downsides of being very highly educated? I look at many of the positives and negatives, including from my own perspective as somebody who didn’t like business school.
- Are we really in a stock market bubble? I compare US stock markets to historically values, and to the current CAPE ratios in Europe and emerging markets. More importantly, why are interest rates so important for asset prices?
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How good of a long-term investment is the Vanguard ETF?
There are hundreds of Vanguard ETFs, all focusing on different variables.
The most popular ones are
- The S&P500
- Total stock market exchange
- Total international stock market
- Total bond market
- Total international bond market
- Vanguard FTSE Emerging Markets ETF
- Vanguard Growth ETF
- Vanguard Value ETF
- Vanguard Health Care ET
- Vanguard Consumer Discretionary ETF
Most of the broadly diversified ETFs, like the S&P500, are fine for most people, if you hold them long-term in tandem with other investments, and reinvest the dividends.
With that being said, your returns from Vanguard won’t be much different to iShares and other providers:
After all, they are tracking the same investments, with similar fees.
What is more likely to make a difference is your own behaviour.
In Vanguard’s own Investing Alpha series, they found that those who went into the funds or ETFs through advisors did better than DIY clients for the following reasons
So, often the investment itself isn’t as important as other things, like spending habits, if you try to time the market etc.
How do I compare the cost of living in certain cities of different countries?
Some people say the Big Mac index is a good guide, as it doesn’t just compare prices.
It also compares how many minutes it would take you to buy a Big Mac.
The issue is, the price of fast food, and food in general, isn’t always the best guide to general prices.
Take the Big Mac index itself. Some of the countries listed near the top of the list are expensive and some cheap:
Hong Kong has relatively cheap food prices, at least in supermarkets, but it is a very expensive place to live.
The same is true in London and most big European cities, Singapore and many other places.
The prices of groceries is relatively cheap, at least adjusted to quality.
A better resource is Numbeo Cost of Living. It isn’t perfect, especially for countries and cities with fewer expats, as people don’t contribute as much and the sample is therefore small.
InterNations is also a good resource for this matter and events.
For bigger and more popular cities, it is pretty good. It also allows you to check different prices such as housing, the cost of a beer etc.
That means if you don’t drink or have housing provided by your employer, you can adjust for that.
Honestly the best way of all is to actually visit a place for an extended period of time, and live as you would if you were living there, as opposed to being a tourist.
That isn’t workable for most people though, unless they are traveling a lot to that location for business.
The reason why this works so well is that it adjusts to your own personal preferences and an “expat lifestyle”.
Many locations are super cheap if you can localise your tastes, but expensive for many expat services.
Take China as one example I could use of many. Want a Chinese beer from the store or convince shop?
You can get a half decent one for 30–50 cents. Want to drink a pint of imported beer in a bar?
More like $6-$10. The same is true of cigarettes, cheese and many other items, unless they are manufactured locally like Coca Cola.
What are the investments that are globally portable?
This is a question many expats ask.
Most investments themselves are globally portable. It isn’t illegal, at least in most countries, to own individual shares, ETFs , funds etc.
Now sure, you might have to pay more taxes if you move to another country, or less, depending on the jurisdiction.
Yet it isn’t illegal to move abroad with most investments.
The issue is, you have to hold the investments in an investment platform, bank or another place.
This is regardless of whether you are a do-it-yourself (DIY) investor or have an advisor.
Most investment platforms aren’t fully portable. Hargreaves Lansdown, the biggest provider in the UK, doesn’t allow people outside the EEC to add additional money if they move abroad.
Even if they did, tax-friendly structures like ISAs aren’t available to expats.
Questrade, probably the biggest provider in Canada, also doesn’t take non-residents.
They have sometimes in the past, but I have heard they now can’t accept expats any longer.
Most local advisors, in the majority of countries, either can’t accept expats or aren’t familiar with the situation many face.
That means expats, future expats or people who suspect there is at least a chance they will move abroad in the future , need to find specialised providers.
For people with relatively small pots, some DIY providers like SwissQuote and Saxo are fine, provided they have the emotional control to invest.
That is easier said than done. Everybody says they won’t panic sell when markets fall, just as everybody makes New Year’s Resolutions about weight loss!
Actions speak louder than words, but there are a percentage of people who are good at investing by themselves.
For people with reasonable chunks of money, time poor, the inability to keep emotions out of investing or complicated situations, getting portable advice or guidance makes sense.
What is the downside of being too highly educated?
Being highly educated, both in terms of formal and informal education, is a good thing.
The most important things is learning how to learn. If you do that, you can engage in lifelong learning.
The people you meet, moreover, is key. The reason to do an MBA, for example, isn’t what you learn, it is who you meet.
Yet it has many indirect downsides to being highly educated such as:
- People who are only highly educated in terms of formal education often can’t think outside the box.
- Formal education has become more bias over the years. When I studied at university, a lot of the things taught at business school are complete nonsense to quote Munger and Buffett. Yet the humanities, such as politics, was far worse. A lot of the nonsense we are seeing in the West today, like identity politics, comes from certain ideologies running through the universities
- Education doesn’t change quickly enough. So, for the last twenty years, schools have been good at producing engineers, doctors etc. Few have been good at producing AI engineers or social media experts. Most social media experts, people with the biggest profiles, were self-taught. School and university isn’t just about getting jobs, but it is part of it. The economy has changed.
- Some highly educated people get a sense of certain tasks being beneath them. For example, a PHD in portfolio theory might assume that he/she deserves to be given clients because of all their knowledge, rather than needing to find them.c
- Formal education doesn’t’t teach financial education well enough
- Expectations vs reality. Some people might think everything will be easy, just because you are well educated, and the public will care about your qualifications. The public in business care about the “what’s in it for me” question, and solving their problems.
- In some schools, competition isn’t any longer promoted. Participation medals are given to kids who finish last in the race. There is a lot of talk about why kids from fee-paying schools do well in the UK. One area which is seldom mentioned is competition. When it comes to graduate employment, the kids that do well in assessment centres have had experience in competition. Practice makes perfect. Many highly-educated kids are put into a high competitive world in their early 20s without a competitor mentality.
The sensible thing is to do well in terms of formal education but combine it with:
- Self education. No matter what your key subject, it is s a competitor advantage to know about other things. For instance, if you are in medical school, but you still learn a bit about digital marketing and personal finances. A person like that has a better chance of setting up their own successful medical clinic in the future.
- A questioning of how things are done. Question the teachers, lecturers etc. Don’t just be institutionalized.
- Other experiences like internships, travel etc
Let’s not forget as well that many kids who fail at school have more hunger.
Are we currently in a stock market bubble?
If we look at most non-US stock markets, they look incredibly undervalued considering the interest rates situation.
Some European and Emerging Markets have a CAPE ratio of about 15.8 times earnings.
To put that in perspective, American stock markets have only been that cheap twice in thirty years!
One of those times was during 2009 and the Great Recession! Another was in 1991:
More importantly, however, some European and Emerging Markets are that cheap during a period of 0% interest rates.
This leads me to the US situation. It is true that American stock markets look much more highly valued compared to historical averages and the aforementioned markets.
However, interest rates are like the blood of markets. Or the oxygen. As Buffett says below, if interest rates stay this cheap for a long-term, stocks actually look incredibly cheap even in the US:
If interest rates rise, that is a different story. Stocks, on a CAPE basis, were incredibly expensive in early 2000.
More expensive than today during a time of higher interest bond and interest rates.
It was therefore unsurprising that many people took some money off the table when you could make 6% in bonds!
The big thing that could affect stocks is if interest rates go back to those levels.
Even if they do, which doesn’t seem likely for a long time but nobody knows, the long-term investor will make more in stocks than bonds and cash.
Even if somebody bought at the height in 2000 and just held until now (21 years), they would have made more than in bonds and cash.
If they had invested more on a monthly basis, that would have further increased the returns, as stocks were cheap in 2000–2003 and 2008–2011.
The long-term investor therefore doesn’t worry about whether stocks are in a bubble or not.
He/she just invests “forever”.
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters, with over 262.2 million answers views on Quora.com and a widely sold book on Amazon
In the article below, taken from my online Quora answers, I spoke about the following issues and subjects:
- Is 45000 GBP a sufficient salary for an family expat of three to live comfortably in London?
- What is the best and worse of British culture, including from a financial perspective and attitudes to success?
- Is Korea more expat friendly than China?
- What is it like to emigrate to many countries in your life?
To read more click on the link below.