Progressive, Adventurous, Cautious or Secure: Which Type of Expatriate Investor Are You?

A recent report sent to us from Lloyds TSB International has been designed to get expatriates thinking about which type of investor they are.  The report creates expat investor labels – e.g., the Specialist Investor – and goes on to outline which types of savings or investment paths might best suit someone who identifies themselves with the label…

Whilst being labelled is perhaps an uncomfortable concept for many – after all, we’re each individuals especially when it comes to our financial situation – we appreciate what Lloyds TSB International has done.  It has created an accessible way for an expat to really think about their risk profile, their investment objectives, and to potentially discover suggestions that they can go on and research further into which types of offshore or international savings or investment schemes may potentially suit them.

We’re going to identify the labels and define them for you, and discuss openly and independently the types of products that you might like to ask your financial adviser about, depending on where in the list of labels you perhaps identify yourself most closely as fitting.

The Secure Investor

If you’re looking for absolute security with your money; perhaps you have a limited amount of cash available to you, and you want to keep this relatively close at hand in the event of a rainy day type emergency, you might think of yourself as a secure investor.  In reality, even the most adventurous investor should listen to their inner secure investor and have at least a small sum squirreled away in a secure account.

Investments that may suit this type of expatriate investor are cash based, perhaps giving a return in the form of interest paid.  The interest may be relatively low however, as the account that may suit this sort of investor’s risk profile is instant access.

Things to bear in mind are that yes, we should all probably have an amount of cash close to hand to cover for short-term emergencies, but that holding all your money in such an account can expose you excessively to the erosion effects of inflation.

The Cautious Investor

A Cautious expatriate investor is likely to want to strike a comfortable balance between the secure investor’s path, and the achievement of some growth.  Investments that launch your cash into the stock market are probably unattractive because of their potential volatility, but at the same time, if you have money to save you’re likely to want it more protected from inflation, so perhaps an obvious answer will be a secure savings account. 

There are so many different types available from multiple banks and building societies onshore and offshore, that you have a good choice.  All offer a range of features to suit most savers.  For example, some allow you to fix your interest rate for the duration of the deposit, others link to the money markets to increase the potential return, some offer headline rates annually so you have to shop around for the best deals.

Some international savings products offer the investor access to equity markets over a fixed period, whilst still guaranteeing 100% capital protection at maturity.  These can be the perfect solution for a more cautious investor.  Alternatively, what about a money fund where investors’ cash is pooled and placed on deposit with trusted banks at a higher rate of interest than you could achieve yourself as an individual saver.

Remember that the purchasing power of your money could be significantly affected by inflation though…and you absolutely have to find the right products based on your risk profile and expert and professional advice.

The Balanced Investor

The balanced investor doesn’t come with a juxtaposing counterpart in the form of an unbalanced investor according to Lloyds TSB International’s labelling, you’ll be glad to know!  Rather, the balanced investor is defined as someone who takes a balanced approach to their saving and investing over the medium to long term.  This can allow for the spreading of an individual’s exposure to risk by investing across different types of assets in a range of markets over a longer period of time.

Such a balance can suit those saving for retirement over the long term for example…or for those planning a family or with small children who are well aware of the rising cost of education.

For the balanced expatriate investor out there, a simple strategy could be committing to funds that are based on your balanced approach.

The Progressive Investor

Are you of a mind that the stock market can potentially deliver the strongest returns over the longest period and outperform many other methods of investment – but you’re still concerned by the volatility of so-called emerging markets?  In which case, according to the definition of the investor types that we have received, you may consider yourself a progressive investor.

You may accept and benefit from exposure to mature stock markets in the UK, the US and across Europe, but avoid the seesaw effect of associating with emerging markets.  You may accept that if you’re ever going to see a decent return on your cash so that you can retire at 65, you will need exposure to equities.

Whilst inflation may not be the watchword for you, the fluctuating fortunes of stock markets will need to be on your mind, and you will have to come to terms with that disclaimer “the value of your investment can go down as well as up, and historical performance is no indicator or guarantee of future performance.”

The Adventurous Investor

If you’re either happy to gamble or you’re well aware that the most significant potential returns can only be delivered when you expose yourself to increasing risk, you might consider yourself an adventurous investor.  An adventurous approach can be a path taken by those desperate to trade up for a yacht, those who have a great deal of wealth and who can ‘afford’ the risk, or those who really have confidence in the future of emerging, less tried and tested markets.

You should seek expert advice before you proceed however, and be absolutely aware that you are risking every penny of your capital potentially.  For such investors there are many direct paths to the exposure they’re seeking, from direct share dealing to committing cash to funds that are exposed to higher risk, higher potentially returning markets.

The Specialist Investor

The final definition is for the specialist investor who is keen to move away from the traditional approach of saving cash on deposit or committing funds to a certain market.  Lloyds TSB International talk about such an investor perhaps looking to UK or International Specialist Funds or Schemes that often carry a very high risk of capital loss, volatility and potential return where an investor’s entire capital can be put at risk.  However, there are many investment paths that can fall beneath this particular umbrella. 

You may consider yourself a specialist investor if you look to gold, fine wine, real estate or art as your asset of choice for example.

In Conclusion

The labelling of expatriate investor ‘types’ is just a fun and accessible way for you as an individual to perhaps begin to plot out the type of exposure you’re willing to accept in return for wealth security, financial growth, fiscal advancement and long-term capital appreciation.  By reading this report you will have done some valuable groundwork before you speak to a qualified and experienced financial adviser about your financial status.  You can then work with them to identify your unique and personal approach to wealth management, and find the most appropriate and applicable path for you.

Note: thanks to Lloyds TSB International for their assistance with this report, and who state that: “The information contained in this guide does not constitute an invitation to buy or the solicitation of an offer to sell securities or accept deposits or to provide any other products or services in any jurisdiction to any person to whom it is unlawful to make such an offer or solicitation, nor should it be construed to constitute any investment advice.”

If you would like financial advice or assistance, please contact us using our expatriate financial services form, and we will put you in touch with the right adviser to help you.