I often write answers on Quora, where I am the most viewed writer for investing, wealth and personal finance, with over 225 million views in the last few years.
On the answers below, taken from my online Quora answers, I focus on a range of topics including:
- What are the investment options for expats living in Belgium?
- If investors think there is a bubble happening in the stock market, how can they deal with that, and how shouldn’t they react to fears about a bubble?
- What does the GameStop story tell us about the world we are living in today?
- Are Vanguard life strategies good funds?
If you want me to answer any questions on Quora or YouTube, or you are looking to invest, don’t hesitate to contact me, email (email@example.com) or use the WhatsApp function below.
As an expat living in Belgium for three years now, what are some of the best ways to invest my money?
It depends on your needs. If you have relatively simple needs, which is less likely as an expat compared to a local, you can DIY invest using countless platforms.
This can work well if you have a lot of self-control and don’t have complicated needs.
It can cause problems though, including people paying more taxes than they need to by buying US-domiciled funds, panic selling and speculating.
In addition to that, many DIY platforms aren’t truly portable. I was dealing with a case a few weeks ago where a client was investing with one Dutch broker, which happens to be one of the biggest in Europe.
He moved outside the countries they accept clients for. He owned five ETFs.
To cut a long story short, they did allow four of those ETFs to be transferred to a new broker.
For some reason which I can’t fully understand, they refused to send one ETF.
They would only send to his bank account by cash. That meant he paid quite a hefty amount in taxes, considering how long he has held the position, and how much it gained in value.
He was happy for me to share the story as a warning to others about not investing with firms which don’t allow a true cross-border experience.
Other than that, you can invest through advisors into various investments and buy into local and international property and alternative investments.
The best options do depend on your situation, but for expats the best options are usually
- Portable and cross border. As explained above. It is important you face as little hassles as possible when you move
- Liquid. You can’t sell 10% of your property if you have an emergency. If you invest in funds like ETFs you can sell a small proportion if you have an unexpected emergency.
- Tailored to your age. In general, government bonds should be kept to a minimum when you are young, but increased as you age. They don’t perform that well compared to stocks long-term, but they are like parachutes when stocks fall. This is especially the case for short-term bonds.
- Tax-efficient – You can’t completely avoid taxes in most situations, but you don’t want to pay more than you need. The aforementioned American ETF example is a case in point.
I also wouldn’t worry about currencies too much. If you buy the S&P500 in USD, and it does 10%, you wouldn’t have gained or lost anything compared to getting 20% by investing in the S&P500 GBP dominated in British Pounds, because the Pound has fallen 10% against the dollar.
The investments will adjust to any currency fluctuations. In the last decade, British investors have “made” more money at least in Pounds than US investors have made in USD, due to the currency issue.
The importance is more staying internationally diversified, which will indirectly give you currency diversification.
It does sometimes make sense to have an account which is denominated in the currency you will retire in, but it won’t make that much difference.
How do investors deal with a market bubble while investing in the stock market?
Want three incredible statistics?
- Imagine somebody bought the Nasdaq at the peak in 2000. In other words, they bought it at the very worst time. In addition to that, they didn’t add one penny or dollar after that until now. How much would the investment be worth now? The answer is close to 300%. The Nasdaq has risen by almost three times since the 2000 peak, despite taking 11–14 years to recover.
- Now imagine somebody invested the inflation adjusted equivalent of $100,000 during the worst moment in 1929. They then invested the inflation-adjusted equivalent of $10,000 a year every year, and reinvested dividends. How many years would it have taken to reach a profit? 7 or 8 years. The reason? Markets were so slow for the first four years of the great depression that buying cheaply helped once markets started to pick up again. Reinvesting dividends also helps. We can see a similar pattern if somebody has invested in the Japanese market during the peak.
- If somebody had bought the Japanese Nikkei market at the peak and held on for decades, without adding one penny or dollar, would now be slightly up if they had just reinvested their dividends. The Nikkei peaked at 36,000. It is now at 28,800. So, it is one major market which is down from its height. Yet with dividends reinvested, you would be up. The same with the UK stock market, the FTSE100. It has done badly compared to the FTSE250 and S&P500. It has been pretty much stagnant in capital value terms for 20 years. Yet somebody who reinvested dividends would be up by about 5% per year. And of course somebody who would have invested monthly as opposed to one big lump sum at the peak would have earned more.
These two statistics show you can deal with any bubbles by
- Not trying to buy those specific stocks which might be bubbling
- Not trying to avoid the markets because you think it might be in a bubble as per the Nasdaq point.
- Investing in lump sums and “dollar cost averaging” – buying every month.
- Reinvesting dividends. As per the charts below, dividends make a huge difference. People forget this.
Another point would be by being diversified. In the last ten years, US stocks have done much better than international ones and bonds…..and for that matter REITS.
A sensible investor would thereby rebalance from one to the other. In other words, less a small amount of US stocks and put into cheaper international ones or bonds.
If a crash then comes, like in 2020, it is a great chance to rebalance the other way – in other words less bonds if they rise during a crisis and buy undervalued stocks.
Look at last year as a great example of how this strategy could work. The S&P500 went up by about 17% last year.
Yet somebody who rebalanced from bonds to stocks during the worst of the crisis would have made a bit more.
The most important thing to remember of all is that somebody who is worried about the best time to get into markets, and indeed worries about market bubbles, is less likely to win long-term compared to the person who just invests at regular intervals and forgets about it.
What does Adam Fayed think of the GameStop and AMC stock surge on investments?
I wrote about this on my website over a week ago. I warned that it could end badly, despite all the people claiming they had some great technical analysis of why the stock would keep going up.
Regardless, the news story does show some interesting trends. Firstly, it shows how social investing is becoming bigger.
Reddit is similar to Quora but tends to attract a younger crowd. The percentage of people who care about traditional authority has dwindled over time, across all age groups.
The days when businesses, big and small, could rely on things like qualifications and experience is long gone.
These days, getting a shout-out from an influencer on YouTube or Instagram is much more valuable than getting a new qualification, in most industries.
We saw a similar thing a few weeks ago in the UK. The UK’s regulator, the Financial Conduct Authority (FCA), put out a warning about Bitcoin, saying people could lose their money.
What the FCA said was correct. Bitcoin could go to close to zero or to 100k or more, as it is only being propped up by supply and demand.
It doesn’t pay a dividend, coupon or yield so people buying it are only hoping that the next person coming along will pay more.
Nevertheless, most people shrugged, and rightly so. Even though there are a few fanatics who are deluded about Bitcoin, most people buying it are just keeping a small amount of it and know it is a speculation/punt.
The point is, twenty years ago people would have cared that such a “respected” regulator like the FCA warned investors about something.
These days, they don’t, or at least most people don’t. In comparison, if the head of the FCA was an influencer on Reddit, YouTube, Quora, Instagram or Facebook, people would pay more attention.
The world has changed, and has been for a while. The speed of change is just becoming quicker.
I therefore think it is likely that similar stories like GameStop will pop up from time to time.
It is also a mistake to think this only influences younger people. Older people to the “Reddit crowd” just use other platforms (like Quora, Twitter or Facebook) to communicate.
What do I do when I want a product or service? I Google, look at online reviews and so on.
Many others ask the community on Facebook groups as well. That social aspect is more important these days than what traditional authority thinks.
Trends also can trickle up and down. Instagram started out as a platform for kids, as did Facebook and Twitter.
It would therefore be a mistake to assume this is just a bunch of kids engaging in the next big thing.
What does Adam Fayed think about low cost global multi asset funds such as the Vanguard Life strategy range and similar?
They are pretty good because they combine stocks and bonds into one fund.
They have performed well long-term as well, as the chart below shows:
The higher the equity component = the better returns long-term if the past repeats itself, but you have higher volatility.
The only negatives about them are
- They aren’t a good bet for non-Americans sometimes. There are equivalents for non-Americans which aren’t as risky from a tax point of view.
- The way they are used. Vanguard’s own research shows that the average investor doesn’t get the above percentages, for all the normal reasons. They panic sell when there is a crash, come in at the top etc. This is especially the case for people who don’t use advisors. When Vanguard’s own research team compared the performance of people on DIY platforms using Vanguard funds to those who use Vanguard funds through advisors, they found that DIY investors got worse returns due to these behavioural elements.
- Some of these funds don’t have an international component. International stocks haven’t done as well as US equities long-term, but they do outperform during some periods of time. After 12 years of over performance, we might finally see international stocks do well during this decade compared to US ones.
As a final point, there are now many equivalents from iShares and other companies which are just as good.
They just don’t have the same brand name as Vanguard.
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters, with over 225 million answers views on Quora.com and a widely sold book on Amazon.
I regularly answer questions from readers on Quora, YouTube and adamfayed.com.
These questions tend to be on financial matters such as wealth accumulation.
In the article below I discussed:
- How many investment bankers really retire in their 30s?
- What are the tried and tested ways to get rich investing, or at least grow wealthy?
- Which habits, personality traits and decisions help make people successful?
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