I often write on Quora.com, where I am the most viewed writer on financial matters, with over 284.8 million views in recent years.
In the answers below I focused on the following topics and issues:
- How can an American expat invest from overseas, if firms like Vanguard won’t accpet such applications?
- How can somebody invest from Latin America into global stock markets?
- Is it possible for a Latin America expat living in Dubai to invest in index funds?
- Why won’t inflation be a big threat?
- Are there any similairities betweeen the 2008-2009 financial crisis and today’s situation?
- Is it silly to want to retire at 40? I explain why retirement doesn’t need to mean being lazy!
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It isn’t true that you can’t legally invest in the US from overseas. You can.
What is true, however, is that many online brokers, DIY platforms and advisors don’t accept non-American residents.
This includes Vanguard. Some even go as far as to close down the accounts of US expats, who don’t inform them before they go abroad.
It is also high-risk to rely on a US address, like a family members place, if you get caught.
It is better to be 100% compliant.
The ways around this rule are:
- Invest with some of the few DIY brokers who do accept US expats living overseas, or for that matter non-Americans who live outside the US
- Find an investment advisory service that accepts expat Americans, or for that matter non-Americans who want to invest in US stocks.
- An increasing number of Americans are not only changing their residency, but also citizenship. Every year there is a new record due to these tax and investment complexities.
For non-Americas living overseas, it is easier. Countless firms allow non-Americans to invest on the US stock market directly, or indirectly through the London Stock Exchange and others.
For American expats it is difficult but not impossible. It also depends on your residency as well.
Imagine a traffic light system:
Red = very corrupt countries, which are also sanctioned by the US and EU. This makes your job harder.
Green = very vanilla and typical expat destinations like Singapore. That makes things
Amber = In the middle. For example, some poorer countries which have a history of corruption but they aren’t sanctioned by the US or EU. There are providers who will accept for these places.
It depends on which country you are speaking about in Latin America. Venezuela and Cuba, for example, are difficult, as they are sanctioned.
Most financial institutions won’t want to accept clients coming from these countries, due to the compliance issues involved.
There are exceptions. If you are an expat living in these countries and the money is paid outside, with clear source of wealth, then you might be OK.
For instance, if you work at the British Embassy in Cuba as a UK National, with money paid to a UK bank account, then it is easier than if the money is locally sourced income.
Fortunately, the majority of the countries in Latin America are easier than these two examples.
In this case, all you need is
- Find a bank, DIY brokerage, or advisor who accepts for the country you are resident in. Ideally, find a portable and international-minded one, especially if you are an expat or plan to live overseas as a local. The last thing you want is for your account to be closed down if you move from country to country.
- Give your proof of address dated in the last three months, proof of ID, and do an application form for the source of wealth and to verify your identity.
- Fund the account once approved and make the trades. If you want to buy stocks on the US stock exchange, which I wouldn’t recommend, you usually need to complete a W8-Ben form. In comparison, if you are happy with ETFs or funds, there are ways around this. One example of this is by purchasing ETFs tracking the US stock market, which is listed on the London, Irish, or some other stock exchanges
It is a simple process really, apart from in countries which make getting money out of the country difficult, like Argentina.
In these cases, many people will invest monthly using debit or credit cards, rather than sending out lump sums which are sometimes restricted.
However, the bigger question is this: how can you invest successfully rather than just investing per see.
Most people need to avoid this situation/result:
The biggest reasons for the depressing results above are:
- Emotion. Getting too excited when markets are skyrocketing (the 1990s and now). Panicking when markets are down (2000, 2008, and 2020). An estimated 35% of do-it-yourself (DIY) investors panic sold last year, with another 35% not adding more so they could “wait and see”.
- DIY investing without having the knowledge to do so.
- Not focusing on having a long-term investing plan, and sticking to that plan, even if a big event like Covid happens
- Sometimes not investing in a tax-optimized plan, which affects the net returns
- Delaying investing, to begin with, and the delays indirectly lead to lost growth. 80% of investing success is just getting the process started.
If done right, you can avoid all of these pitfalls.
If you are actually living in Dubai, it will be simple, assuming you are actually earning locally.
It is true that investing from some countries in Latin America, like Cuba or Venezuela, is difficult.
If your residency is in Dubai, this won’t affect you, unless you are trying to found the account from one of the few Latin American countries which is sanctioned.
All you need to do is find a DIY broker or advisor who offers index funds or ETFs, and do the necessary source of wealth and anti-money laundering documentation.
This usually includes an application form, proof of address and ID. Many brokers provide this service in a place like Dubai.
What is harder is finding a broker which is truly portable. At least half of the local options, especially when it comes to banks, won’t be keen to keep your account open if you leave the country and return to Latin America.
I would also do a lot of reading if you do decide to invest by yourself, about “behavioural finance”.
The book below is a good start:
The reason is simple. I have lost count of the number of people who know a lot about investing, and claim they won’t do silly things like market time, but then do it!
I think the primary reason is that base level human nature is so powerful, things like “fight to flight” and the basic instinct to panic sell when markets are down, that the rational side of the human brain often gets put in second place to the emotional side.
The Vanguard Group did a survey where they compared investors who invested in their ETFs.
They looked at how the DIY investors did relative to the advised ones in the same funds.
They found that advised clients did better, due to emotions, and other studies have shown that investors who are dead, or forget they have accounts (so act as though they are dead) outperform even many professional investors.
So, controlling emotions is key.
I doubt it will happen at all. In fact, I doubt even very high inflation will happen. People claiming this today are the same people who predicted it in 2008.
This video explains nicely why QE isn’t money printing:
What is more likely is that decades of lower inflation might end. Inflation in the 1980s was lower than the 1970s.
Inflation in the 1990s was much lower than the 1980s. Inflation in the 2000s was a bit lower than the 1990s.
Inflation in the 2010s was very slightly lower than 2000–2010. In some places, like. the eurozone and Japan, it was barely above 1%.
We could see slightly higher inflation, and indeed asset price inflation, but i wouldn’t worry about the media reports.
We have been here before. In 2010–2011 inflation was on the rise. Oil was up. All the talk was of USD weakness and inflation, caused by QE.
What has happened since? The USD has strengthened on 2010 prices against most major currencies. Inflation has also been low.
Oil and commodities have had a bad decade, despite the recent run. Oil, silver, gold, and the rest were all higher in 2011 adjusted for inflation than they are in 2021.
I don’t see any similarities because there isn’t a housing crisis, in terms of decreasing prices, in most developed countries.
In fact, there is a boom in the UK, US, Australia, and many other countries. The boom has been caused by:
- Low-interest rates
- Covid-19 resulting in more people requiring space. In other words, they need a home office. It is easier to upscale housing if the commuting costs have been cut
- Tax incentives in some countries, like in the UK where stamp duty has been cut. People want to rush in before that incentive ends.
- In some countries, weak house price growth since 2008, at least outside of the big cities.
It is true that some places are seeing a huge fall in house prices, like Dubai in the UAE. Prices haven’t recovered yet.
But the two crises aren’t comparable. This time around, it seems that policymakers want to avoid the mistakes of 2008–2009, which resulted in a slow recovery.
Even though the initial shock was much bigger, the recovery has also been more robust.
In 2008–2009, it took the US about 2.5 years to recover in terms of GDP, and 7–8 years when it comes to unemployment.
This time it has taken just over a year, with unemployment seen back at pre-pandemic levels quickly.
The recovery is so strong in some parts of the world that some people now worry about overheating!
If you would have predicted an overheating economy in 2021 or 2022 in the middle of 2020, people would have thought you were mad!
I don’t think it is, especially if somebody hates their job. When somebody says “retire” it usually just means retiring from paid work.
Some people engage in more volunteering work, or hobbies, after formal retirement.
What is nuts is retiring from paid work, being bored, and lacking purpose. Various studies have shown that people live longer and happier, lives if they have a purpose linked to work.
There is a big debate about why life expectancy is high in Japan. Many explanations have been given.
But one which is seldom given is the fact that many older Japanese people volunteer or have jobs.
This gives them purpose.
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters, with over 287.1 million answers views on Quora.com and a widely sold book on Amazon
In the article below, taken directly from my online Quora answers, I spoke about the following issues and subjects:
- Why are millennials and Gen Z actively investing in the stock market through the web and app than the previous generation? Or is it a myth?
- What does nobody tell you about starting your own business?
To read more click on the link below.