Investing is undoubtedly a positive way to plan for your financial future, safeguard assets, and create wealth management structures that are aligned with your life overseas, retirement plans, expected outgoings and attitude towards risk.
However, to collate all of those varied factors, you need a strategy which sets out key parameters, indicators linked to decision-making, and predefined goals which influence the investment products you select, the risks you are prepared to take, and ultimately when and where you invest.
Just as in many life decisions, the ‘why’ is an essential element which a professional expat wealth management adviser will help to ascertain. Chase Buchanan looks at what you wish to achieve with your wealth and assets and builds a detailed and forward-thinking plan to incorporate your income, future intentions and age.
Here we explain some of the fundamental aspects that will influence your strategy and help you create tangible, time-specific goals and discuss the importance of creating quantifiable objectives and priorities.
Considerations When Creating an Expat Investment Strategy
Why do you need to create goals to be able to construct an investment strategy? The crux of investment is to help your wealth grow, either through capital appreciation, interest earnings or returns, to support your aspirations.
Setting investment goals is the first step to building a personalised investment strategy, where a wealth management professional will need to understand the motivating factors to make tailored recommendations. For example:
- Do you need to accumulate a certain return by a specific age to finance your retirement?
- Are you keen to safeguard your wealth for the next generation as an estate planning exercise?
- Does your projected income have shortfalls you wish to accommodate in your investment strategy?
- Will your approach be based around short, medium or long-term investment products and assets, or a mix of all three?
Irrespective of the answers, this initial consultation is a meaningful part of developing a custom investment strategy and helps to pin down the core requirements and objectives that matter most to you, from investment portfolio performance to tax efficiency, financing your retirement plans or generating the returns necessary to support your family in the years to come.
Even expatriates with a long-established strategy may need to review their investment approaches due to changes in tax regimes, variations in their plans and priorities, or other adjustments to their circumstances.
Our previous guide to Investment Portfolio Review Timings provides further insight into when a review may be necessary.
Next, we work through all the areas to think about when discussing your investment goals with your financial planner or wealth adviser and why they help create the foundations of a high-specificity investment strategy.
Investment Timings
Investments are broadly grouped into short to long-term products and assets, and your age and expectations in terms of retirement, employment, business ownership and engagement in commercial interests will naturally impact the ideal timings of your investments.
It is common to assume that these timings are always aligned with your age, but the right approach may also depend on what you’d like to achieve with your money. For example, if you are within a few short years of retiring and want to maximise your potential returns as quickly as possible, you might opt for higher-risk investments with more attractive potential pay-outs – accepting the increased risk of making a loss.
Timings can also relate to the market, with some more volatile periods meaning a short-term investment is favourable while taking advantage of unusual conditions. Likewise, tax regime reforms may present an opportunity to make above-average returns on a short-term investment, even if your wider strategy is focused on long-term wealth accumulation.
Risk Exposure Analysis
Risk is always integral to wealth investing because even the safest investments can go up and down. Setting goals helps to determine your risk appetite and the level of risk you are prepared to take in return for the opportunity to earn greater returns or profits.
This part of the investment strategy process is detailed because an adviser will also assess where you cannot accept risks and where your other financial commitments impact your risk exposure appetite. As we’ve seen, those close to retirement could, in some scenarios, assume high risks, even though the convention is to avoid risk as much as possible before a planned drawdown.
One of the most appropriate options is to analyse risk exposure per product or asset in conjunction with overall portfolio risk. Investment diversification – splitting investments between classes, economies, sectors, countries and products – can offset higher risks, protecting your portfolio from severe losses while accessing the benefits available from higher-risk opportunities.
Capital to Invest
The amount of capital you have to invest will affect your product choices, the returns you can make, and your tax position. Some types of investment products have minimum thresholds or optimal investment values to access the most favourable returns – whereas others are accessible at any investment value.
It is also necessary for expats to consider personal preferences when choosing investment approaches. For example, some investors only wish to invest in funds with a positive societal or environmental impact, whereas others are interested in technology, innovation and medical advancements.
Planned Outgoings, Drawdowns and Events
Although most investment strategies are designed around generating the best possible returns or capital growth, your approach must also incorporate your planned events, which could include:
- Retirement
- Property purchases
- Large expenditures
- Education expenses
- Relocations
A good investment strategy builds in these plans and events while considering your priorities and objectives, alongside anticipated returns and the amount of capital you have available to invest.
Finally, your goals will also depend on your access to returns. Where some investment products are only accessible on crystallisation events, others provide steady returns in the form of coupons, dividends or other pay-outs. Assessing your time horizon, overarching goals, and expectations will ensure you construct a solid, well-designed strategy based around your objectives.
For more information about designing an investment strategy, revisiting your investment approach, expat wealth management services or assessing whether your goals remain relevant, please get in touch with your nearest Chase Buchanan Wealth Management office at your convenience.
*Information correct as of July 2023