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🐧 How to create your expat investment portfolio
LEARN: 3 investing levers, FX fee hack, 4 ETF portfolios, $1000's of tax savings
Dexter Zhuang
March 11, 2023 • Estimated Reading Time: 11 minutes
Hey expats. We’re going to show you step-by-step how to setup your dead simple expat investing portfolio today. So easy your grandma can do it 👵
Today in 10 minutes or less, you’ll learn:
🧰 Three key investing levers
🎯 Define your goals and risk tolerance
🌏️ Use International Brokers to save FX fees
⚡️ Four example asset allocations & ETF portfolios
💸 $1000’s of potential tax savings (as a non-American!)
P.S. I’m writing soon about expat side hustles. If you have one, reply or DM me. I want to hear stories! 🙏
🧠 Guide to setting up your expat investing portfolio
🧰 0. Understand key investing levers
When it comes to investing, David Swensen, GOAT fund manager of Yale’s Endowment Fund, said there are only three primary levers for impacting long-term performance:
Asset allocation: what asset classes you buy
Market timing: when you buy them
Security selection: which financial instruments you buy within those asset classes
🔥 His hot take: Only one of these 3 levers actually matters for most investors: asset allocation.
The other two are kinda coin tosses. If you factor in fees/commission, then they are negative sum games.
Don’t @ me Yalies. I only got into Dartmouth 🤷
🎯 1. Define your investing goals
Work backwards from your long-term lifestyle vision to set your investing goals, which influences your asset allocation.
Steps:
Determine your ideal lifestyle. Be 100% honest with yourself. Consider things, experiences, people, and feeling state.
Calculate your required cashflow. Breakdown the assets & returns you need to support your lifestyle.
Choose a timeframe. Do you want to realize this cashflow in 5, 10, 20, or 40 years?
Example:
Let's say your ideal lifestyle will require you to generate $50k USD / year of passive income in 20 years. If you're expecting a 4% yield to generate this cash flow, then you'll need to build $1.25m worth of assets in 20 years.
If your current net worth is $250k, how will you grow your assets to $1.25m? 🤔
😈 2. Determine your risk tolerance
“Manage your money in a way that helps you sleep at night… Some people won’t sleep well unless they’re earning the highest returns; others will only get a good rest if they’re conservatively invested. To each their own.”
Psychology is a massively underrated part of investing, especially in handling risk.
Be honest with yourself:
Can you really stomach 30-50% drops and then wait 2-3 years until recovery?
If yes, you might be wired to optimize for the highest returns.
If no, optimize for what helps you sleep at night. (as a light sleeper, this is what I do 😴 )