Investment strategies before moving overseas

Question

I'm moving overseas soon and am looking for investment strategies.

My goal is to cover living expenses and let compound interest work for me and bring in some kind of yield.

I’ve considered real estate because of the leverage and potential tax credits if I move back to Australia, but it seems complicated with too many variables.

Another option is investing in fully franked dividend stocks for tax benefits as a non-resident.

Any thoughts or suggestions would be greatly appreciated. Thanks!

Answer

Investing to cover living expenses while living overseas can indeed be approached in several ways, each with its own set of advantages and considerations.

1. Real Estate Investment:
Investing in real estate can provide a steady income through rental yields and potential capital gains. However, as you mentioned, it involves numerous variables such as property management, maintenance costs, and fluctuating real estate markets. Additionally, tax implications for non-residents can be complex, and it’s essential to consult with a tax professional to understand the specific impacts on your situation.

2. Dividend Stocks:
Investing in fully franked dividend stocks can be an attractive option, especially for covering living expenses through regular income streams. Australian stocks are particularly appealing due to the high dividend yields and franking credits, which can offset some of the tax liabilities. However, as a non-resident, the tax treatment of dividends and franking credits may differ. Typically, non-residents are subject to withholding tax on dividends, and the benefit of franking credits can be less advantageous compared to Australian residents.

3. Global Equities and Diversification:
While focusing on Australian dividend stocks might seem appealing, it’s also worth considering a diversified portfolio that includes global equities. This approach can help spread risk and tap into growth opportunities in different markets. International stocks might not offer the same level of dividend yield as Australian stocks, but they can provide capital growth and potential dividends from a broader range of industries and economies.

4. Bonds and Fixed Income:
For a more conservative approach, especially if you prioritize stability and lower risk, bonds and other fixed-income investments can be suitable. They provide regular interest payments and are generally less volatile than stocks. You can consider government bonds, corporate bonds, or fixed-income funds that suit your risk tolerance and investment horizon.

5. Exchange-Traded Funds (ETFs) and Managed Funds:
ETFs and managed funds can offer both diversification and ease of management, as they allow you to invest in a broad array of assets through a single transaction. There are ETFs and funds that focus on dividend stocks, real estate, bonds, or a mix of asset classes, which can be tailored to your income needs and risk profile.

When considering these options, it’s crucial to factor in your risk tolerance, investment horizon, and the specific financial regulations of the country you’ll be residing in. Consulting with a financial advisor to navigate these aspects can be very beneficial.

Regarding Pearler, it provides a platform that can facilitate building and managing a diversified investment portfolio. Pearler’s focus on long-term investing and features like auto-invest can help in systematically investing in chosen assets, which could be particularly useful if you’re managing investments from abroad. This approach aligns well with your goal to let compound interest work for you while generating yield to cover living expenses.

You can find out more about this topic here: October Investing Q And A

Disclaimer

I am an AI-powered chatbot and not a financial advisor. The information provided is for educational and informational purposes only and should not be considered as financial advice. Investing involves risks, and past performance is not indicative of future results. It is important to conduct thorough research and consider your own financial situation and risk tolerance before making any investment decisions. It is always recommended to consult with a qualified financial advisor or professional before making any investment decisions.

Answer

Hey Lucas.

There’s no one best option because it depends on lots of different things, far too many to mention here.

Here’s something to consider…

Real estate can be powerful due to leverage, but in most places of Australia unless you have a gigantic deposit (30%+) you are typically still going to be out of pocket each month to cover the mortgage repayments.  Especially right now as interest rates are up and yields (after costs) aren’t all that attractive.

If you don’t mind this, then real estate might work well for you.

Shares don’t come with the above issues, and no expenses or admin to worry about.  But to make the most of this asset class its often best if you can add to the portfolio over time, even by small amounts.  Either way this will be more of a hassle free option, even if the upside isn’t quite as high due to no leverage being used.

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