The Global Expat Book

This book has been superseded by the new renamed 2nd Edition:

Millionaire Expat: How to build Wealth Living Overseas

The Global Expatriate’s Guide To Investing – From Millionaire Teacher to Millionaire Expat


Exploit your offshore status to build a robust investment portfolio

Most of the world’s 200 million expats float in stormy seas. Few can contribute to their home country social programs. They’re often forced to fend for themselves when they retire. The Global Expatriate’s Guide to Investing is the world’s only book showing expats how to build wealth overseas with index funds. Written by bestselling author, Andrew Hallam, it’s a guide for everyone, no matter where they are from.

Warren Buffett says you should buy index funds. Nobel prize winners agree.

But dangers lurk. Financial advisors overseas can be hungry wolves. They don’t play by the same set of rules. They would rather earn whopping commissions than follow solid financial principles. The Global Expatriate’s Guide To Investing shows how to avoid these jokers. It explains how to find an honest financial advisor: one that invests with index funds instead of commission paying windfalls.

You don’t want an advisor? Fair enough. Hallam shows three cutting edge index fund strategies. He compares costs and services of different brokerages, whether in the U.S. or offshore. And he shows every nationality how to invest in the best products for them. Some people want stability. Some want strong growth. Others want a dash of both.

This book also answers the following questions:

  • How much money do I need to retire?
  • How much should I be saving each month?
  • What investments will give me both strong returns, and safety?

The Global Expatriate’s Guide To Investing also profiles real expats and their stories. It shows the mistakes and successes that they want others to learn from.

It’s a humorous book. And it demonstrates how you can make the best of your hard-earned money.


[su_spoiler title=”Click Here To Read the Table of Contents”]

Scott Burns xiii
Acknowledgments xvii
Introduction xix


Chapter 1: Setting Your Bull’s-Eye 1
What’s This Ailment Expatitis? 3
Cheating Conventional Retirement Rules 3
Cooking Up the Road Less Traveled 5
The Earthquake and the Epiphany 6
Jujitsu Junkie Taps Out for Home 8
Now It’s Your Turn 9
Notes 10


Chapter 2: Building Your Pension 13
How to Never Run Out of Money 14
The Man with Nothing But a Backpack 16
The Couple with Swedish-American Dreams 18
A Front-End-Loaded Tale of Success 22
Notes 24


Chapter 3: The Truth about Stocks and Bonds 25
Halloween Grab Bag Treats Investors 26
Why Average Returns Aren’t Normal 29
Stocks Pound Inflation 29
What Has the Stock Market Done for You Lately? 31
Undressing Stocks with 50 Shades of Gray 32
The Stock Market Stars as the Great Humiliator 35
Fast-Growing Economies Can Produce Weak Returns 37
Bonds Are Protective Nets for Jumpers 38
Can You Lose Money With Bonds? 41
Notes 43


Chapter 4: Don’t Start a Fight with an Escalator 45
Yes, the Financial District Loves You! 46
Global Investors Getting Fleeced 47
Notes 50


Chapter 5: Where Are the Customers’ Yachts? 51
Global Investors Bleed by the Same Sword 52
American Expatriates Run Naked 53
Why Brokers Want to Muzzle Warren Buff ett 54
Financial Advisors Touting “The World Is Flat!” 56
Hedge Fund Money Spanked for Its Con 58
Why Most Investors Underperform Their Funds 62
Notes 65


Chapter 6: Don’t Climb into Bed with a Silver-Tongued Player 69
Featuring the Rip-Offers 71
The Ten Habits of Successful Financial Advisors . . . Really? 72
When Your Advisor Is a Sales Commando 73
Welcoming Sharks into the Seal Pool 74
Misled Investors Pay the Price 75
A Canadian Investor Gets Bled 75
Would You Like a Band-Aid for That Bleeding Gash? 77
Masters of the Insured Death Benefi t Illusion 77
Free Fund Switching Isn’t a Perk 78
Making Millions off the General Public 79
Fooling the Masses with Numbers 79
Regulators Making an Effort 80
Can Squeaky Wheels Gain Redemption? 83
If Investors Can’t Reclaim Their Losses 84
When High Fees Meet Gunslingers 86
A Son’s Inheritance Gets Plundered 86
British Teacher Learns a Costly Lesson 90
Playing Soccer Like Wasps around Honey 90
Most Investors Are Crazy 92
Notes 93


Chapter 7: Self-Appointed Gurus and Neanderthal Brains 95
Why Most Investors Should Hope for Falling Markets 96
It’s Not Timing the Market That Matters; It’s Time in the Market 97
High Unemployment and High Stock Returns 98
What Can You Miss by Guessing Wrong? 100
When Investors and Advisors Sabotage Their Rides 102
Popular Stocks Underperform 104
How About the Next Big Thing? 105
When Genius Fails 107
Notes 107


Chapter 8: An Employer’s Greatest Challenge 111
Fees—How Much Is Too Much? 113
So What’s the Solution for Global Employers? 115
Notes 118


Chapter 9: Couch Potato Investing 119
Don’t Bonds Tie You Down? 120
Is It More of a Fling Than a Real Relationship? 120
Potatoes Growing Globally 122
Bonds Relative to Age and Risk 124
What If You’re Falling Behind? 125
Profi ting from Panic—Stock Market Crash 2008-2009 125
Owning the World 126
Where Do You Plan to Retire? 127
Are You Retiring in an Emerging Market Country? 129
Does This Sound Too Good to Be True? 130


Chapter 10: The Permanent Portfolio: Growth without Risk 131
Gold in Isolation Is a Total Loser 132
A Disco-Era Brainchild from a
Twentieth-Century Socrates 132
This Great Portfolio Will Never Be Popular (But It Should Be!) 133
Why Does It Work? 137
What Has It Done for Me Lately? 138
Notes 139


Chapter 11: Fundamental Indexing:
Can We Build a Better Index Portfolio? 141
Like Top Basketball Players Getting the Most Court Time 142
Index Funds That Appear to Beat the Market 144
Investment Legend Likens Them to Witchcraft 144
Global Fundamental Indexes Might Shelter Us from Bubbles 146
Emerging Markets Show the Greatest Diff erence 146
Aren’t These Just Actively Managed Products? 147
Notes 148


Chapter 12: Capable Investment Advisors with a Conscience 149
Do You Have a Ninja’s Discipline? 151
Qualities of a Great Financial Advisor 151
Investment Professionals worth Considering 153
Notes 170


Chapter 13: Choosing Your Off shore Brokerage—For Non ]Americans 173
DBS Vickers Securities Opens the Door to Everyone 174
Why You Should Avoid E*Trade Financial 176
TD Direct Investing International 176
Saxo Capital Markets—A Jewel with Distractions 177
Comparing Fees with International Brokerages 179
Is Interactive Brokers the Dark Horse Winner? 184
Notes 184


Chapter 14: The 16 Questions Do-It-Yourself Investors Ask 187
What’s the Diff erence between an Exchange-Traded Index Fund (ETF) and an Index Fund? 187
Do Non-Americans Have to Pay U.S. Estate Taxes upon Death If They Own U.S. Index Shares? 188
What’s a Sector-Specific ETF? 188
Should I Buy an Index That’s Currency Hedged? 189
What’s the Scoop on Withholding Taxes? (For Non-Americans) 191
Will You Have to Pay Currency Conversions? 192
Should I Be Concerned about Currency Risks? 193
Do the Unit Prices of ETFs Show Which Are Expensive or Cheap? 194
If I Have a Lump Sum, Should I Invest It All at Once? 194
I’m in Some Expensive Products, but They’re Currently Down in Value. Should I Sell Now or Wait? 195
How Do I Open a Brokerage Account and Make Purchases? (For Non-Americans) 195
What If I Find a Higher-Performing Bond Index? 200
What If I Find a Cheaper ETF? 201
Should I Be Most Concerned about Commissions, Annual Account Fees, Fund Costs or Exchange Rate Fees? 201
How Little Can I Invest Each Month? 201
Stock Markets Are High. Should I Really Start Investing? 202
Let’s Go! 203
Notes 203


Chapter 15: Investing for American Expats* 205
Do You Currently Invest with Vanguard? 206
Couch Potato Investing with Vanguard 207
Couch Potato Investing with a Vanguard Stick Shift 209
When Investors Binge on Speculation 210
Charles Schwab Off ers a Great Deal 212
Doing the Couch Potato with Schwab 212
Permanent Portfolio Investing with Schwab 214
Fundamental Indexing Magic in the Works 214
Don’t Contribute Illegally to Your IRA 215
What Exactly Is an IRA? 216
Roth IRAs Are Diff erent 216
Notes 217


Chapter 16: Investing for Canadian Expats 219
Canadian Funds Earn an “F” for Costs 220
Brokerage Options for Expatriate Canadians 221
Brokerages for Canadians in Capital-Gains-Free Jurisdictions 222
Building a Canadian Couch Potato Portfolio 223
ETF Canadian Price War 227
The Permanent Portfolio, Canadian Style 227
Fundamental Indexing Portfolios 229
What About RRSPs and TFSAs? 230
Swap-Based ETFs, the Ultimate Legal Tax Dodge 231
Notes 232


Chapter 17: Investing for British Expats 235
Expensive Firms Performing Like a Virgin 236
Couch Potato Investing for British Expatriates 237
British Investors and the Permanent Portfolio 240
Fundamental Indexing for the British 241
Notes 243


Chapter 18: Investing for Australian Expats 245
Fancy an Australian Couch Potato? 247
How About an Australian Permanent Portfolio? 248
Fundamental Indexing for Australians 249
Notes 251


Chapter 19: Investing for New Zealand Expats 253
Kiwis Chilling Out With The Couch Potato 254
Permanent Portfolio for Kiwis 255
Fundamental Indexing for New Zealanders 255
Notes 257


Chapter 20: Investing for South African and South American Expats 259
South African Investors 259
South Africans Fry Up the Couch Potato 260
South African Writer Likes the Permanent Portfolio 261
South Africans Preferring Fundamental Platforms 263
South American Investors 263
Brazilian Investing Models 264
Notes 267


Chapter 21: Investing for European Expats 269
Country-Specifi c European ETFs 269
European Indexes That Investors Will Like 271
Why Not Choose the Simpler Option? 274
Calling Italians and the Swiss 275
The European’s Permanent Portfolio 276
Fundamental Indexing for Europeans 277
So What’s It Going to Be—Couch Potato, Permanent, or Fundamentally Indexed? 279
Notes 279


Chapter 22: Investing for Asian Expats 281
An Indian National Divulges Her Plan 282
Asians Embracing the Couch Potato 284
Asians Choosing the Permanent Portfolio 287
Fundamental Portfolio for Asians 288
Notes 289
Conclusion 291
About the Author 293
Index 295



[su_spoiler title=”Click Here To Read Chapter 5 – Where Are the Customer’s Yachts?”]

An out-of-town visitor was being shown the wonders of the New York financial district.  When the party arrived at the Battery, one of his guides indicated some handsome ships riding at anchor.  He said, “Look, those are the bankers’ and brokers’ yachts.” “Where are the customers’ yachts?” asked the naïve visitor.

Fred Schwed, Where Are the Customers’ Yachts?


If you’ve never read an investment book before, chances are you’ve never heard of index funds.  No, your financial advisor won’t likely discuss them.  Index funds are flies in caviar dishes for most financial advisors.  From their perspective, selling them to clients makes little sense.  If they sell index funds, they make less money for themselves.  If they sell actively managed mutual funds, advisors make more.  It really is that simple.

Most expats, however, should be interested in funding their own retirement, not somebody else’s.

The term index refers to a collection of something.  Think of a collection of key words at the back of a book, representing the book’s content.

An index fund is much the same: a collection of stocks representing the content in a given market.

For example, a total Australian stock market index is a collection of stocks compiled to represent the entire Australian market.  If a single index fund consisted of every Australian stock, for example, and nobody traded those index fund shares back and forth (thus avoiding transaction costs), then the profits for investors in the index fund would perfectly match the return of the Australian stock market before fees.  Stated another way, investors in a total Australian stock market index would earn roughly the same return as the average Australian stock.


Global Investors Bleed by the Same Sword


Now toss a professional fund manager into the mix—somebody trained to choose the very best stocks for the given fund.  Unfortunately, the fund’s performance will likely lag the stock market index.  Most active funds do.  Regardless of the country you choose, actively managed mutual funds sing the same sad song.

Professionally managed money represents nearly all of the money invested in a given market. Consequently, the average money manager’s return will equal the return of the market—before fees.  Add costs, and we’re trying to run up that downward-heading escalator.

Consider the UK market.  According to a study published by the Oxford University Press, “Mutual Fund Fees around the World,” the average actively managed fund in Great Britain costs 2.28 percent each year, including sales costs.2 Regardless of the market, the average 53 professionally managed fund will underperform the market’s index in equal proportion to the fees charged.

Ron Sandler, former chief executive for Lloyds of London, reported a study for The Economist, suggesting that the average actively managed unit trust in Great Britain underperformed the British market index by 2.5 percent each year. It’s no coincidence that the average UK unit trust (mutual fund) cost British investors nearly 2.5 percent per year. 

In Canada, Standard & Poor’s reported that 97.5 percent of actively managed Canadian stock market funds underperformed the Canadian stock market index from 2005 to 2010, thanks largely to the funds’ high management expenses.

In South Africa, nearly 90 percent of actively managed unit trusts underperformed the South African stock index, as measured by the Satrix 40 exchange-traded fund (ETF) during the fi ve years ending 2010.

In Australia, according to the Standard & Poor’s Indices versus Active (SPIVA) funds scorecard, 72 percent of actively managed funds underperformed their indexed benchmarks over the three-year period ending 2012.

As for American expatriates, beating a portfolio of index funds with actively managed funds (especially after taxes) is about as likely as growing a third eye.


American Expatriates Run Naked


Unlike most global expats, Americans can’t legally shelter their money in a country that doesn’t charge capital gains taxes.  And actively managed mutual funds attract high levels of tax.  There are two forms of American capital gains taxes.  One is called short-term ; the other, long-term. Short-term capital gains are taxed at the investor’s ordinary income tax rate.  Such taxes are triggered when a profi table investment in a non-taxdeferred account is sold within one year.

I can hear what you’re thinking: “I don’t sell my mutual funds on an annual basis, so I wouldn’t incur such costs when my funds make money.” Unfortunately, if you’re an American expat invested in actively managed mutual funds, you sell without realizing it.  Fund managers do it for you by constantly trading stocks within their respective funds.  In a non-tax-sheltered account, it’s a heavy tax to pay.

Stanford University economists Joel Dickson and John Shoven examined a sample of 62 actively managed mutual funds with long-term track records.  Before taxes, $1,000 invested in those funds between 1962 and 1992 would have grown to $21,890.  After capital gains and dividend taxes, however, that same $1,000 would have grown to just $9,870 in a high-income earner’s taxable account.7 American expats, as I’ll explain in a later chapter, must invest the majority of their money in taxable accounts.

Because index fund holdings don’t get actively traded, they trigger minimal capital gains taxes until investors are ready to sell.  And even then, they’re taxed at the far more lenient long-term capital gains tax rate.

In a 2009 New York Times article, “The Index Funds Win Again,” Mark Hulbert reported that Mark Kritzman, president and chief executive of Windham Capital Management of Boston, had conducted a 20-year study on after-tax performances of index funds and actively managed funds.  He found that, before fees and taxes, an actively managed fund would have to beat an index fund by 4.3 percent a year just to match the performance of the index fund.  8 Flying parrots will serve you breakfast before a portfolio of actively managed funds beats a portfolio of index funds (before fees) by 4.3 percent over an investment lifetime.

Researchers Richard A. Ferri and Alex C. Benke reported in their 2013 research paper, “A Case for Index Fund Portfolios,” that the slim number of portfolios that beat index funds before taxes between 2003 and 2012 did so with an annual advantage ranging between only 0.29 percent and 0.54 percent per year.  And that’s before taxes.

Published on – 02/12/14



[su_spoiler title=”Click Here To Read Book Reviews & Comments”]

“In a world full of finance books it is a pleasure to find one that (a) does not pull its punches and (b) is written with a sense of humor. Take it on your next long-haul flight. It is full of fascinating facts and gives unambiguous advice. The considerable knowledge and passion of the author makes this an easy read. The advice is clear and is supported with evidence. The book is written with expatriates in mind, but there is wisdom here that applies to all. I recommend this book—it has clear advice and will make you smile.”
—Ben Sherwood, Principal, Hillier Hopkins LLP, Chartered Accountants and Tax Advisors, UK; author, The 7 Secrets of Money

“Expatriates everywhere should thank Andrew Hallam for his clear, smart, and entertaining guide to financial freedom. His book is aimed at a growing and often overlooked group—people who are working outside of their home countries, often drawing big paychecks, but baffled by a maze of unfamiliar investing options. If that’s you, look no further for sound advice on how to see through the sales pitches and construct your own path to affluence.”
—Ian McGugan, The Globe and Mail, Toronto

“I have purchased a copy of this book for every member of my staff. It should be mandatory reading for any expatriate corporate or educational wellness program!”
—James Dalziel, Ed.D, Head of East Campus, United World College of South East Asia

“Andrew Hallam has hit another home run with his second book, The Global Expatriate’s Guide to Investing. His research is impressive and is made all the more believable by stories of the good and bad choices of real people. Peppered with common sense and plenty of humor, the Guide is a must read for expatriates looking to do the right thing regarding their retirement funds. Andrew Hallam shows us the money.”
—Paul Chmelik, Director, The American Embassy School, New Delhi, India

“Andrew Hallam has filled a void for all those navigating the treacherous waters of expatriate saving and investing. This should be the first book read by the Aussie exec in Hong Kong, the British teacher in Saudi Arabia, or the French engineer in Malaysia. Witty, readable, and profitable; don’t leave home without it!”
—William Bernstein, author, The Four Pillars of Investing and A Splendid Exchange