How much will politics impact my investments?

Most investors use political events as a trigger to make changes in their portfolio and yet we are not convinced that you can trade on the back of political headlines with any effectiveness. True, had you properly forecast the outcome of the Brexit referendum, you might have made quite a bit of money on the currency, but this extraordinary event is a one-off. History is littered with examples of market miscalculation of political events. When Donald Trump scored an upset victory to become US President, many market participants assumed equities would sink.

Equities did so for a couple of hours and then proceeded to rally strongly. Likewise, European political risk has picked up sharply this year and yet the valuations of European equities and their US equivalents on a sector-by-sector basis show no daylight between them.

The latest developments are in the UK. The headlines show PM Theresa May fighting on three fronts simultaneously: against the Brexiteers, the Remainers and the EU. Yet sterling rallied after the resignations of two senior Cabinet Ministers last week and the FTSE is actually ahead of European markets year-to-date.

The mid-term elections in the US are another source of political uncertainty.

Historically, however, markets have rallied after the polls regardless of who has won, simply relieved that the uncertainty has been removed. Furthermore, we recently reviewed our investment in Indian equities, and despite the huge risks to the markets when there is an election upset, we discovered that Indian stocks performed equally well under different governments and coalitions over the decades. Why trade on the back of a headline when you can buy a good growth story?

Markets love to fret about political events but over the long run, politics don’t matter and won’t affect corporate returns or performance. Better to concentrate on picking the right investments and let politicians come and go in the meantime.

The potential income shock awaiting pension savers

A global study of investor attitudes finds that those close to retirement expect to replace 74% of their salary when they give up work. The reality for those already retired is very different

After a lifetime of saving, investors may be in for a shock when they come to retire, the results of a global study suggest.

Investors close to retirement (aged 55 and over) expect they will need income equivalent to 73.9% of their current salary to afford to live comfortably in retirement.

But those already retired say the average amount they actually receive is far less, at 60.8% of their final salary. On average, 85% said this was sufficient but 58% also said they could use a little more money.

These were among the key findings of the Schroders Global Investor Study (GIS) 2018, which surveyed more than 22,000 investors across 30 countries.

Expectations for the income needed for retirement varied geographically with non-retired investors in some countries – Poland and Indonesia – believing that they will need more than 100% of their salary for a comfortable retirement. Those already retired typically receive far less, as shown in the table below.

Across regions, investors in Asia and the Americas expect to need the highest replacement rate, believing they will need three-quarters of their current salary.


How much are savers putting away for retirement?

The amount of income investors can expect in retirement is dependent on a range of factors but one of the most important is the rate at which people put money away.

The average investor saves 12.2% of their current salary for retirement. However, that is less than the 14.4% they think should be saving to reach their target.

The rate varies regionally. In Europe, non-retired Belgians save the least (9.2%) as a percentage of their current salary to fund retirement and the Danes say they save the most (12.5%). In Asia, people in Hong Kong save just 10.9% of their current salary for retirement compared with 15.3% for Singaporeans. In the Americas, Canadians save the least (11.9%), while the US saves the most (15.4%).

The gap between what people are saving and what they think they should be saving was widest in developing economies. For example, people in Chile are currently saving 12.8% of their current salary but think they should be saving 19.2%, a difference of 6.4%.

The only people currently saving more than they thought needed were the Danish, 12.5% vs 12.3%.

How much you need to save, depending on returns achieved

Calculating the right amount to save for retirement is a challenge for investors. The final savings total and the income it will provide, are affected by a range of factors. It is not just about how much you save but it is determined by the returns you achieve and the amount of time you’re invested.

You also need to consider how much you want your pension income to be compared to your working income. This largely comes down to the lifestyle you want in retirement and how much of this your country’s government pension will provide. Our study shows that globally investors are aiming for a 74% replacement rate. This is relatively high against most financial planning modelling. For example, future net replacement rates (including government provision) average 63% among OECD countries, according to OECD and G20 indicators.

The model developed by Schroders, below, shows the level of investment returns needed to achieve replacement rates of 66% and 50%, assuming this is being funded by private savings alone. It is based on the rates of retirement income available today from a guaranteed annuity. The scenarios will vary if you choose instead to keep the money invested or take it as a cash lump sum.

To explain one scenario, if someone saves 15% of their salary from the age of 25 and wants to retire at 65, they would require an average annual return of 2.5% above inflation (the middle column) to achieve a retirement income worth 66% of their working income. If they contributed 10% of their income, however, they would need a return of 4.2% above inflation.

It’s worth noting that if you only save 5% of your salary from age 25, you may need returns that exceed inflation by 7% to create a retirement account large enough to replace 66% of your salary, based on today’s rates of annuity income.

To put that into perspective, the Credit Suisse Investment Returns Yearbook shows that over the last 118 years, global equities have delivered annual real returns (taking inflation into account) of 5.2%. While it is difficult to forecast future returns accurately, the Schroders Economics Group expects that, given the current environment and future growth prospects, lower average returns above inflation of 3.8% a year are likely from global stockmarkets over the next 30 years.


Global Investor Study: Read the full findings

Global Investor Study: Why 70% of people keep investing after retirement

Schroders commissioned Research Plus Ltd to conduct, between 20th March and 23rd April 2018, an independent online study of over 22,000 people in 30 countries around the world, including Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, the Netherlands, Spain, UAE, the UK and the US. This research defines “people” as those who will be investing at least €10,000 (or the equivalent) in the next 12 months and who have made changes to their investments within the last 10 years.

Case Study: You're an expat posted abroad for a number of years with a young family

We look at an expat family who have been posted abroad and is likely to be staying for a number of years. They wanted to make that sure that the family would ‘supercharge’ their finances whilst they were in a low-tax environment. They will eventually return to their home country and would need to make this as painless as possible.

The couple in the mid 30’s with two young children. One of the spouses’ works whilst the other is looking to work as there full time help at home. The children are in pre-school. They have a property in the UK that they had rented out, and this was paying the mortgage that existed on it. They had to get permission from the lender to do this and are paying an extra fee per year.

They wanted to know about saving whilst they were in a low tax regime so that they can get the supercharge on their finances compared to what they could do at home. Another goal of their expat tenure is to have the mortgage paid down and maybe adding another property that they can rent for an income.

After running the cash flow modelling using specialist financial planning software we looked at what they could save every month without impacting their spending. We then added in the future school and university fees and their desire to pay off the mortgage on their house and the 'what if' option of buying another rental property. The modelling also showed what their current retirement income would look like today.

We helped them open an additional bank account for savings away from their current or spending account. This segregated away cash for any potential emergency.

We calculated the 'human capital' of the working spouse and then estimated the amount of insurance to cover the family should there be an early death or one of the parents suffering a critical illness. This was put into a trust to keep to it out of their estate and not susceptible to UK inheritance tax.

The cash flow modelling, projected that by paying an extra every month off their mortgage can save them two and half years’ worth of interest and their mortgage would finish early.

The disposable money (after making sure there is three months’ worth expenses in the joint bank account) is sent into a Singapore based investment platform. Invested 100% into low-cost index equity funds. The platform has no penalty or lock-in period in the expectation of the future being uncertain because of their expat status. When and if there is a need to return to their home country they can start the repatriation plan by using the accumulated assets to fund local pension and tax-wrappers.

We also helped them to make voluntary contributions to ensure they were on track to receive their full state pension when they retire. The cash flow modelling is re-run every year and adjustments are made to their circumstances i.e. increases in income and expenditure. The actual return of the assets (portfolio and property) in the local currency and the currency they think in and will eventually spent their retirement income in are adjusted as well. The assumptions such as inflation and future returns are also forecasted. The ‘what if’ strategies can then be based on these facts and changed if they need to be.

The outcome is that the couple are aware of what they future finances look like, understand if there is a market crash and how this will impact them and they have made provision of the future expenses. They can now relax and enjoy their expat life without too much worry.

Seven Ways to Fool Yourself

The philosopher Ludwig Wittgenstein once said that nothing is as difficult for people as not deceiving themselves. But while most self-delusions are relatively costless, those relating to investment can come with a hefty price tag.

We delude ourselves for a number of reasons, but one of the principal causes is a need to protect our own egos. So we look for external evidence that supports the myths we hold about ourselves, and we dismiss those facts that are incompatible.

Psychologists call this “confirmation bias”—a tendency to select facts that suit our own internal beliefs. A related ingrained tendency, known as “hindsight bias,” involves seeing everything as obvious and predictable after the fact.

These biases, or ways of protecting our egos from reality, are evident among many investors every day and are often encouraged by the media.

Here are seven common manifestations of how investors fool themselves:

  1. “Everyone could see that market crash coming.” Have you noticed how people become experts after the fact? But if “everyone” could see a correction coming, why wasn’t “everyone” profiting from it? You don’t need forecasts
  2. “I only invest in ‘blue-chip’ companies.” People often gravitate to the familiar and to shares they see as solid. But a company’s profile and whether or not it is a good investment are not necessarily correlated. Better to diversify
  3. I’m waiting for more certainty.” The emotions triggered by volatility are understandable, but acting on those emotions can be counterproductive. Uncertainty goes with investing. Historically, long-term discipline has been rewarded
  4. “I know about this industry, so I’m going to buy the stock.” People often assume that success in investment requires a specialist’s knowledge of a sector. But that information is usually already in the price. Trust the market instead.
  5. “It was still a good call, but no one saw this coming.” Isn’t that the point? You can rationalize a stock-specific bet as much as you like, but events or external influences can conspire against you. Spread your risk instead.
  6. “I’m going to restrict my portfolio to the strongest economies.” If an economy performs strongly, that will no doubt be reflected in stock prices. What moves prices is news. And news relates to the unexpected. So work with the market
  7. “OK, it was a bad idea, but I don’t want to sell at a loss.” We can put too much faith in individual stocks, and holding onto a losing bet can mean missing opportunities elsewhere. Portfolio structure affects performance

This is by no means an exhaustive list. In fact, the capacity for human beings to delude themselves in the world of investment is never-ending. But overcoming self-deception is not impossible. It just starts with recognizing that, as humans, we are not wired for disciplined investing.

We will always find one way or another of rationalizing an emotional reaction to market events. But that’s why even experienced investors engage advisors who know them, and who understand their circumstances, risk appetites, and long-term goals. The role of that advisor is to listen to and acknowledge our very human fears, while keeping us in the plans we committed to at our most lucid and logical.

We will always try to fool ourselves. But to quote a piece of folk wisdom, the essence of self-discipline is to do the important thing rather than the urgent thing

Jim Parker, Dimensional

Top 10 Investment Guidelines!

The media would have you believe that a successful investment experience comes from picking stocks, timing your entry and exit points, making accurate predictions and outguessing the market. Is there a better way?

It’s true that some people do get lucky by making bets on certain stocks and sectors or getting in or out at the right time or correctly guessing movements in interest rates or currencies. But depending on luck is simply not a sustainable strategy.

The alternative approach to investment may not sound as exciting but is also a lot less work. It essentially means reducing as far as possible the influence of fortune, taking a long-term view and starting with your own needs and risk appetite.

Of course, risk can never be completely eliminated and there are no guarantees about anything in life. But you can increase your chances of a successful investment experience if you keep these 10 guidelines in mind:

  1. Let the market work for you. Prices of securities in competitive financial markets represent the collective judgment of millions of investors based on current information. So, instead of second-guessing the market, work with it.
  2. Investment is not speculation. What is promoted in the media as investment is often just speculation. It’s about making short-term and concentrated bets. Few people succeed this way, particularly after you take fees into account.
  3. Take a long-term view. Over time, capital markets provide a positive rate of return. As an investor risking your capital, you have a right to the share of that wealth. But keep in mind, the return is not there every day, month or year. 4.Consider the drivers of returns. Differences in returns are explained by certain dimensions identified by academic research as pervasive, persistent and robust. So it makes sense to build portfolios around these.
  4. Practise smart diversification. A sound portfolio doesn’t just capture reliable sources of expected return. It reduces unnecessary risks like holding too few stocks, sectors or countries. Diversification helps to overcome that.
  5. Avoid market timing. You never know which markets will be the best performers from year to year. Being well-diversified means you’re positioned to capture the returns whenever and wherever they appear.
  6. Manage your emotions. People who let their emotions dictate their decisions can end up buying at the top when greed is dominant and selling at the bottom when fear takes over. The alternative is to remain realistic.
  7. Look beyond the headlines. The media is by necessity focused on the short term. This can give you a distorted impression of the market. Keep up with the news by all means, but you don’t have to act on it.

Sailing with the Tides

Embarking on a financial plan is like sailing around the world. The voyage won’t always go to plan, and there’ll be rough seas. But the odds of reaching your destination increase greatly if you are prepared, flexible, patient, and well-advised.

A mistake many inexperienced sailors make is not having a plan at all. They embark without a clear sense of their destination. And once they do decide, they often find themselves lost at sea in the wrong boat with inadequate provisions.

Likewise, in planning an investment journey, you need to decide on your goal. A first step might be to consider whether the goal is realistic and achievable. For instance, while you may long to retire in the south of France, you may not be prepared to sacrifice your needs today to satisfy that distant desire.

Once you are set on a realistic destination, you need to ensure you have the right portfolio to get you there. Have you planned for multiple contingencies? What degree of “bad weather” can your plan withstand along the way?

Key to a successful voyage is a good navigator. A trusted advisor is like that, regularly taking coordinates and making adjustments, if necessary. If your circumstances change, the advisor may suggest you replot your course.

As with the weather at sea, markets can be unpredictable. A sudden squall can whip up waves of volatility, tides can shift, and strong currents can threaten to blow you off course. Like a seasoned sailor, an experienced advisor will work with the conditions.

Once the storm passes, you can pick up speed again. Just as a sturdy vessel will help you withstand most conditions at sea, a well-diversified portfolio can act as a bulwark against the sometimes tempestuous conditions in markets.

Circumnavigating the globe is not exciting every day. Patience is required with local customs and paperwork as you pull into different ports. Likewise, a lack of attention to costs and taxes is the enemy of many a long-term financial plan.

Distractions can also send investors, like sailors, off course. In the face of “hot” investment trends, it takes discipline not to veer from your chosen plan. Like the sirens of Greek mythology, media pundits can also be diverting, tempting you to change tack and act on news that is already priced in to markets. A lack of flexibility is another impediment to a successful investment journey. If it doesn’t look as though you’ll make your destination in time, you may have to extend your voyage, take a different route to get there, or even moderate your goal.

The important point is that you become comfortable with the idea that uncertainty is inherent to the investment journey, just as it is with any sea voyage. That is why preparation and planning are so critical.

While you can’t control every outcome, you can be prepared for the range of possibilities and understand that you have clear choices if things don’t go according to plan.

If you can’t live with the volatility, you can change your plan. If the goal looks unachievable, you can lower your sights. If it doesn’t look as if you’ll arrive on time, you can extend your journey.

Of course, not everyone’s journey is the same. Neither is everyone’s destination. We take different routes to different places, and we meet a range of challenges and opportunities along the way.

But for all of us, it’s critical that we are prepared for our journeys in the right vessel, keep our destinations in mind, stick with the plans, and have a trusted navigator to chart our courses and keep us on target.

The Seven Roles of an Adviser

What is your financial adviser for? One view is that your adviser should have unique insight into the markets to give you an advantage. But of the many roles your professional adviser should play, fortune-teller is not one of them.

The truth is that no-one knows what will happen next in investment markets. And if anyone really did have a working crystal ball, it is unlikely they would be plying their trade as an adviser, a broker, an analyst or a financial journalist.

Some people may still think an adviser’s role is to deliver them market-beating returns year after year. Generally, those are the same people who believe good advice equates to making accurate forecasts. But in reality, the value a professional adviser brings is not dependent on the state of markets. Indeed, their value can be even more evident when volatility, and emotions, are running high.

A professional financial planner plays multiple and nuanced roles with their clients. They focus on the needs, risk appetites and circumstances of each individual and irrespective of what is going on in the world. None of these roles involves making forecasts about markets or economies. Instead, the roles combine technical expertise with an understanding of how money issues intersect with the rest of people’s complex lives.

There are at least seven hats your adviser wears to help you, and none of them involves staring into a crystal ball: –

The expert: Now, more than ever, investors need advisers who can provide client-centred expertise in assessing the state of their finances and developing risk-aware strategies to help them meet their goals.

The independent voice: The global financial turmoil of recent years demonstrated the value of an independent and objective voice in a world full of product pushers and salespeople.

The listener: The emotions triggered by financial uncertainty are real. A good adviser will listen to clients’ fears, tease out the issues driving those feelings and provide practical long-term answers.

The teacher: Getting beyond the fear-and-flight phase often is just a matter of teaching investors about risk and return, diversification, the role of asset allocation and the virtue of discipline.

The architect: Once these lessons are understood, the adviser becomes an architect, building a long-term wealth management strategy that matches each person’s risk appetites and lifetime goals.

The coach: Even when the strategy is in place, doubts and fears inevitably will arise. The adviser at this point becomes a coach, reinforcing first principles and keeping the client on track.

The guardian: Beyond these experiences is a long-term role for the adviser as a kind of lighthouse keeper, scanning the horizon for issues that may affect the client and keeping them informed.

These roles are a world away from the old notions of selling product off the shelf or making forecasts. Knowing your adviser is independent, and not plugging product, will help to build trust in someone with whom you can share your greatest hopes and fears.

Over time your adviser, the listener, becomes the teacher, the architect, the coach and ultimately the guardian. Just as your needs and circumstances change over time, so the nature of the advice service evolves.

None of the roles of your adviser is dependent on forces outside your control, such as the state of the investment markets or the point of the economic cycle. However you characterise these various roles, good financial advice ultimately is defined by the building of a long-term relationship founded on the values of trust, independence and knowledge.

Source: Jim Parker, Dimensional Fund Advisers

The Evolution of International Money Transfers – From Barter to Bitcoins

The Evolution of International Money Transfers – From Barter to Bitcoins

As a medium for exchanging value, Money is probably the most important invention that has had a such a deep impact on the way the humanity has evolved. It will not be an exaggeration to state that the shape of world today is largely a result of an amazing invention, which has been an integral part of human history for more than 3000 years!

As a concept, money is not meant to stay static or idle. Money serves its purpose only when it moves from one hand to another and from one place to another, reflecting economic activity that benefits its participants. The concept of exchange of value, which originated as a system of barter – exchange of goods and services for other goods or services – has evolved over time taking various forms such as clay tokens, agricultural products, livestock, metal coins, paper notes, plastic cards, electronic/mobile records, cryptocurrencies, with each new form aiming to eliminate the pitfalls of its earlier forms.

International Money Transfers for trade payments as well as for individual remittances, too, have evolved over time with the changing shape of money and breakthroughs in industry and technology.

As a provider of digital international money transfers, InstaReM, look back in the past to understand how the concept of money transfers has evolved since the ancient times.

Barter System – 3000-600 B.C. The earliest long-distance trade is recorded between Mesopotemia and Harappan civilization of Indus Valley around 3000 B.C. For a long time, the trade between nations was largely based on the barter system. For centuries, the traders from the East and the West exchanged gold, silver, ivory, precious stones, spices, musk, camphor, sandalwood, wine, tea, salt, wool, silk, muslin etc. in barter trade.

Metals & Metal Coins – 600 B.C. to 16th Century AD The earliest coins – made of gold and silver alloy – are recorded to be minted between 610 and 600 B.C., as national currency in Lydia, a region that is part of today’s Turkey. As international trade expanded, gold and silver ruled the roost as the currency of trade. The invention of money made trade between nations simpler, as traders could negotiate though the medium of exchange.

Currency Exchange/Trading– Ancient Times – 4 Century AD Currency trading and exchange first occurred in ancient times. Money-changers (people helping others to change money and also taking a commission or charging a fee) lived in the Holy Land in the Biblical times. During the 4th century, Byzantine government kept a monopoly on the exchange of currency.

International Banking – 15th to 18th Centuries AD During 15th century, the Italian banking family Medici opened banks at foreign locations to exchange currencies on behalf of textile merchants. To facilitate trade, the bank created nostro ("ours" in Italian) account book which contained 2-columned entries showing amounts of foreign and local currencies.

Forex Market in Amsterdam – 17-18 Century AD During the 17th (or 18th) century, Amsterdam maintained an active Forex market. In 1704, foreign exchange took place between agents acting in the interests of the England and Holland.

Birth of the US Dollar – 18th Century When the British colonized America, the government restricted the colonists from minting currency. But the colonists used any foreign currency they could get their hands on. Particularly popular was the large silver Spanish “Dollar”, which gained significance during the American Revolution. The US adopted the Dollar in April 1792, which over time became the best-recognized currency in the world.

Western Union – Mid-19th Century The New York & Mississippi Valley Printing Telegraph Company was founded in 1851 - renamed the Western Union Telegraph Company in 1856. In 1872, Western Union launched Wire Transfer - a method of electronic funds transfer from one person or entity to another - on its telegraph network, changing forever the way money moved within and across the borders.

International Wire Transfers Become Mainstream – Late 19th Century With a boom in globalized industrialization, Wire Transfers became increasingly popular in the late 19th century. As more and more people started working with contractors and innovators overseas, banking became increasingly globalized, including how people sent and received funds internationally on an individual basis. This had never happened before.

International Payment Network (SWIFT) – Late 20th Century Global network the Society for Worldwide Interbank Financial Telecommunication (SWIFT) facilitates international payments. Founded in 1973, SWIFT does not actually move money; their network transmits messages between banks that allow the banks to make transfers. Used largely for business and banking-related transfers, SWIFT handles about transactions worth $5 trillion per day.

PayPal Revolutionizes Money Transfers – End of 20th Century At the fag end of the 20th century, PayPal emerged as the first online money transfer company to get into the limelight. PayPal made online money transfer possible, that too at a fraction of the cost that larger money transfer companies and banks were charging. In 2017, PayPal’s annual payment volume amounted to US$ 451.27 billion.

The Money Transfer Industry Today The world has become an entirely globalized place, where people’s careers, travel, and general way of life is much more nomadic than it ever has been before. With evolution in technology, options for money transfer have also become more advanced.

Bitcoin/Blockchain/Cryptocurrencies – 21st Century Bitcoin is a digital currency of 21st century. It uses a peer-to-peer system and the transactions take place between users directly without an intermediary. Transactions are verified by network nodes and are recorded on a publicly-distributed ledger called blockchain. Based on the blockchain technology, Bitcoin was invented in 2009 by Satoshi Nakamoto as an open source technology. Today, the Blockchain is increasingly being adopted by fintechs for facilitating fast cross-border money transfers.

Looking Ahead With fintech firms increasingly taking on banking sector with efficient and cost-effective offerings in financial services, the future of the International Money Transfer industry looks exciting. While we see increasing adoption of Blockchain by the Money Transfer companies, with breakthroughs in Artificial Intelligence and Machine Learning, there are immense possibilities in Voice-based cross-border transfers.

Article by: InstaReM, Asia-Pacific’s leading digital cross-border money transfer company was set up in 2014, offering convenient, cost-effective and efficient money transfer to a vast majority at a fraction of the costs of the traditional Money Transfer Operators.

Understanding which step you are at when planning your expat finances

Step 1 - Why

Why are you doing this? Is it for retirement? Is it for savings? Is it because you want to buy a house or send your children to university. There is always a reason why you are doing this in financial services

Step 2 - How

This is the vehicle that is used to do the planning in Step 1. This could be an investment portfolio; it could also be a property. If you want to retire, then you may use a conventional pension, a state pension and property to achieve this. If you want to protect your dependents from you dying, then an insurance policy will do this. The cost of the vehicle is key here

Step 3 - Where

This is the detail in step 2. Where do you allocate your investments? Is it in equities or bonds? Where do you buy the house? is it in the UK or Europe or Asia? How much cover do you need for the insurance to provide for your family if you are not there?


Is a trade war really ‘easy to win’ for the US?

Who wins in a trade war? Donald Trump believes that trade wars are ‘easy to win’, but what does winning look like?

Trade wars have seldom had good outcomes and at worst, have prompted global recession In trying to shore up US manufacturing, Trump is threatening the consumer economy There is a significant risk that American businesses will lose contracts to sell overseas China’s initial response to US trade tariffs appeared relatively restrained. However, in recent days it has launched retaliatory tariffs on a range of US goods and the trade war looks set to escalate, with all the associated repercussions for global stock markets.

The markets are right to be nervous. Trade wars have seldom had good outcomes, no matter what Donald Trump thinks. In extreme cases they have prompted significant inflation and led to global depression. Economists cite protectionist trade policies as one of the key factors accelerating the Great Depression.

Trump’s view is that China has been unfairly flooding the US with cheap goods and nicking its intellectual property. He wants to repatriate US manufacturing, shoring up the forgotten rust belt that forms his core vote. However, this is likely to come at a high price.

It takes time for new production to come on stream. In fact, US aluminium manufacturers have said they don’t have the capacity to replace production from China. In the short-term – and possibly the long-term as well - aluminium costs are going to rise. That means the price of cars, appliances and anything else that uses aluminium is going to rise.

This is a sledgehammer to crack a nut. In trying to shore up US manufacturing, Trump is threatening the consumer economy on which the US economy has been so successfully built for so long. Inevitably there will be some demand destruction as consumers hold off on new purchases or upgrades.

Then there is the flip side -all those American businesses that will lose contracts to sell overseas. Building a business in the crowded and capricious Chinese market is not easy. To have ploughed resources into building exports to China only to lose those contracts because the White House would rather revive old industries than support new ones is likely to be particularly galling. Their customers are likely to find more dependable suppliers, based in countries with more rational and reliable governments.

There is also the issue that while countries amass Dollars through the sale of goods to the US, they have an incentive to buy US government bonds. If they’re not amassing those Dollars, then they won’t. If demand drops for US debt, that creates a problem for a government with a huge deficit. Winning? I’m not so sure.

What Do Expats Need to Know When Buying a Home Overseas?

A significant number of expats who move overseas are more than happy living on rent, although there are others who prefer owning their own homes. While buying a home requires that you pay attention to different aspects, if you plan to buy one outside of your home country, matters may get even more complicated. Fortunately, a little groundwork will hold you in good stead.

Consider the Trade-offs:

When you move to a new country, buying a home largely limits your ability to explore new regions, which you get to do if you’re renting. The money you pay as down payment stays invested in the house, and you cannot use for other investments such as stocks and bonds. Besides, the cost of servicing your new home loan might end up being a burden, especially if you have an existing mortgage in your home country.

Pay Attention to Local Regulations:

Start by determining if you’re allowed to buy the property of your liking in your new country of residence. For instance, if you wish to purchase a property in Singapore, the Residential Property Act (Chapter 274) has a bearing on whether you may or may not qualify to buy it without government approval. While you may purchase properties categorized as “non-residential” or “non-restricted residential” without government approval, buying a “restricted residential property” as an expat requires that you get government approval.

If you plan to buy a property in India, regulations require that you qualify as a ‘person resident in India’. Buying a home in the United States or the United Kingdom, on the other hand, comes with very few restrictions.

Real Estate Agent Fees

Real estate agent fees tend to vary from one country to the next. In Singapore, sellers usually pay 2% for Housing & Development Board (HDB) properties as well as private properties. On the other hand, buyers pay 1% for HDB properties and nothing for private homes. In the UK, while sellers need to pay 0.75% to 3.5% as fees, buyers pay no fees at all. Buyers don’t have to pay fees in the U.S. Buyers’ fees in India may vary from 1% to 2%. In Germany, a buyer may end up paying 2% to 6%.

Getting a Loan

Eligibility criteria and restrictions for getting home loans tend to be region-specific. In Singapore, you may qualify to borrow up to 90% of the home’s value if you are in a strong financial position. If you’re unable to meet the criteria to qualify for the top bracket, you may still get a loan of up to 80% of the home’s value. If you have an existing mortgage, you can borrow up to 60% of the home’s selling price.

If you plan to purchase a house in the U.S. or the UK, expect to pay at least 40% of the home’s selling price on your own.

Making the Down Payment

Instances of expats making their down payments using foreign currencies are fairly common. Given that a down payment toward a house involves a large value transfer, it may be worth your while to compare different overseas money transfer companies. Like banks, the top players in this field such as InstaReM, TransferWise, WorldFirst, and OFX provide high levels of security. In addition, they also tend to offer better exchange rates and charge lower fees.


Buy a home in a foreign country may be simpler than you imagine, provided you meet the required eligibility criteria. With a steady source of income, you may even qualify for an expat mortgage. However, it is important that you start

Recent Market Volatility - A Bump in the Road?

As the markets tumbled, with the S&P 500 index showing its largest one-day fall since August 2011 and the subsequent drop across world markets that followed, many investors were shocked at the extent of the losses. At the same time, the VIC, the volatility index, recorded its largest one-day rise in history, showing just how deep the sell off was. There have been warning signs, in the bond market in particular, with yields rising from 2% in September 2017 to 2.8% today, reflecting the stresses within the markets as interest rates begin to rise.

Accelerating interest rates

This current sell-off seems to have been triggered by the Friday Non-Farm Payroll data, which came in firmly ahead of expectations. This strong showing indicates strength in the economy, which raised fears of faster interest rate rises than had been previously anticipated from the Federal Reserve, and with three rises in 2017, the possibility of more throughout 2018 concerned investors, particularly heavily leveraged ones.

Federal Reserve Chairman, Jerome Powell, faces a testing time in balancing this situation in the coming months, and the fear that caused this latest sell-off is only a small part of a broader issue he must contend with. Since the financial crisis in 2008, cheap credit has powered the markets, but we are now entering a new phase, with liquidity being pulled back from the financial system as uncertainty takes hold.

The big question

With signs of potential volatility being present for a while, the biggest question asked by this sell-off is a simple one, is it a one-time adjustment, similar to the one encountered in 2013 based upon the panic resulting from a reduction in quantitative easing, or is it something more significant, and the start of a bear market?

Our view on the road ahead

Looking at the broader picture, the sell-off and associated volatility is not something that would cause us to change our medium-term perspectives or asset allocations. Over the coming weeks, there will likely be more volatility, bringing instability and unpredictability as investors change their priorities depending on their thinking about future interest rates and inflation direction, and will likely create more attention-grabbing headlines and panic for the uninformed. However, with our long-term viewpoint we can approach these incidents for what they are, minor corrections during the upward trend, and simply sit tight with our positions.

Asian investors in London property risking hefty death tax bills

Overseas investment into the London residential new-build property market is dominated by Asian investors who may be overlooking UK inheritance tax in their financial planning.

using data from the UK’s Office for National Statistics (ONS) and Centre for Housing Policy, shows that an estimated £1bn ($1.4bn, €1.1bn) was invested in the London new-build property market alone in 2017 from Asian investors, predominantly based in Hong Kong and Singapore.

Asia accounted for 61.4% of total overseas sales; with the Centre for Housing Policy’s research showing that 31.5% came from Hong Kong, 20.8% came from Singapore, 5.4% came from China and 3.7% came from Malaysia.

The research also shows that it’s not just those with surplus cash who are investing in the UK property market, but serious investors are prepared to take a leveraged position; in Singapore 67.5% of property sales are from a mortgage, well above the average of 53.5%, and in Hong Kong 54.6% of sales are mortgaged.

This shows investors in Singapore and Hong Kong are more likely to borrow in order to invest in UK property compared to investors from other regions.

Inheritance tax exposure

With so much money flowing into the UK new-build property market, investors need to be aware of their potential exposure to UK inheritance tax (IHT). IHT is payable on death on any property or assets owned in the UK by the deceased.

This is irrespective of domicile status or whether the deceased lived in the UK or overseas.

UK IHT is set at an eye-watering 40%, so needs to be properly planned for.a high number of investors in the region, both individuals and company investors, could be left exposed if they are unaware of the potential IHT liability.

Over 30% of those surveyed overseas either didn’t know or didn’t realise there would be a UK IHT liability on UK property, and just 7% claim to fully understand UK IHT.

If an investor’s estate is hit with a UK IHT bill that they haven’t planned for, this could potentially create a real headache for their beneficiaries, who may not have the cash to pay the IHT bill and may not be able to sell the assets quickly enough to access what they need.

To help ease this headache, if investors know there is a future liability on their estate, they can put plans in place to provide their executors with the required funds.

For example, by writing a life policy in trust, or using appropriate IHT. trust planning alongside their investments during their lifetime.