Whenever you talk to someone about investing, they invariably assume you are referring to equities, such as stocks and bonds. However, when it comes to investing, there are more ways to invest your money other than just buying stocks or bonds, particularly if you are an expat. Before I go any further, let me just say that I am not a financial advisor, that this should not construed as financial advice, and that this article is just meant to provide a general introduction to how expats can invest their money. The more options that you have to invest your money, the better, so it will behoove you to look into all possible opportunities wherever you live, no matter what your county of citizenship might be.
For starters, the most obvious form of investment that most people overlook is investing in your own business. If you have a side hustle or even your very own business that you derive your income and livelihood from, you have more control over operations, finances, and of course, the vision and mission of the business. Therefore, you give yourself a better chance to be the architect of your own future, than if you remained a company employee. Further, you might be able to take advantage of some niche in a foreign country and tap into an unmet need, generating great profits.
If you are not interested in a business that you own or operate, either because of large capital requirements, time constraints, or you do not wish to take on that much risk, you might want to own a portfolio of real estate assets. It is pretty much a given that there will always be people in this world who will be renters, and so there is a demand for rental property, which will help you generate rental income.
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If you get into a growing country/market early and the value of the property increases over time, it will be worthwhile to invest in it. Further, while your rental property is increasing in value, you are also hopefully deriving some good cash flow from monthly operations. This double benefit of capital appreciation and cash flow is what makes real estate a good way for expats to build their wealth. Another good reason to invest in real estate is because of your ability to diversify your assets, which is what is always recommended by financial planners. Adding real estate to your portfolio of assets has the ability to lower the chance that your portfolio becomes susceptible to the whims of the market.
Here are three other ways that anyone, especially expats, can invest their money in ways other than stocks and bonds:
- P2P (Peer to Peer Lending)
- Equity Crowdfunding
- REIT’s or real estate investment trusts
There are online P2P services that offer loans to businesses, for personal use or anything else. You might be wondering how P2P loans are different from getting a loan from a bank. There is no bank when you are involved with this kind of thing. Your money is pooled with the money from other investors and with these investors you make a loan to the client(s), asking for the funds. Then, you will get a fixed amount of repayments each month and part of this repayment includes the interest that you would be owed. However, there is a risk involved with P2P lending. The risk is that you would be lending money to people that may not have been able to get a loan from a bank, or are unable to go through the traditional ways of getting a loan. This could increase the possibility that they could end up defaulting on the loan.
Equity Crowdfunding is another way that you can invest your money as an expat. If you do not want to own your own business for whatever reason, you can choose to own part of someone else’s company. Companies that are in the process of starting up have the option of offering shares of their companies on equity crowdfunding websites. If you choose to invest in a company, you own part of that company, and therefore, if the company succeeds financially, you will reap some benefits. However, if the company fails, you may lose all or part of your money.
REITs, or real estate investment trusts, is when a company owns and typically operates real estate which generates income. Note that this is different from when an individual owns real estate for the purposes of generating income. REITs are part of a fixed-income portfolio or a part of the company’s portfolio. There is another major difference in a REIT compared to other real estate companies and that is that a REIT does not engage in the development in real estate properties to resell them. Instead, when there is an REIT that is established, properties are bought and developed so that the company can include them as part of its portfolio. REITs provide a way for you as an investor to earn a share of the income that is produced through commercial real estate without you having to go and buy commercial real estate.
No matter which country you are currently living in, there may be various options available to you. While equities are an attractive investment given the ease of investing and lower capital requirements, you might want to look into other options, such as those described above. After all, at some point in the past, you decided to leave the shores of your home country and become an expat. Therefore, you owe it to yourself to look into what financial adventures might be awaiting you in foreign lands.