International Teachers: Are you investing enough money?



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To find out if you’re saving enough money, use my free, 13 minute seminar below:

If you’re an international school teacher, you’re metaphorically swimming in a warm sea, surrounded by beautiful bodies.

Cultural eye candy meets your every glance. 

There are exotic jungles to explore, equatorial mountains to climb, colorful people to meet.  Aren’t you lucky you’re not at “home” where you might be paying higher taxes, dealing with colder waters — literally or metaphorically — and (potentially) earning lower salaries?

Not so fast. 

Most international school teachers are warmly swimming, miles from land, without a life preserver in sight. If they aren’t paying into a government pension program — such as social security for Americans, Canada pension plan for Canadians — they won’t reap the social rewards in the future.

Those bypassing a defined benefit program to work overseas are opting to swim on their own while the pension boat floats past. If you’re saving and investing enough money, however, this shouldn’t matter. 

You can enjoy your overseas lifestyle, and ensure that your swimming muscles are strong enough to get you safely to land.

If you have questions after the 13 minute seminar, please post them below in the comments:



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andrew hallam

andrew hallam

I'm a freelance finance writer, lucky enough to have been nominated as a finalist for two Canadian National Publishing Awards. I'm also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School, a book explaining how I became a millionaire on a teacher's salary, while still in my 30s. Working to empower people financially, I'm available to motivate and inspire people on basic retirement planning and index investing. I'm happy to comment on your questions, first, please read the Terms of Use.

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99 Responses

  1. brad says:

    andrew,as a investor, ( like your example in the book keith) from vancouver, and considering all that has gone on latley in the markets, would you still recommend the same indexs for investment thanks brad

    • I wouldn't ever alter a diversified, low cost index portfolio based on what the markets are doing Brad—unless I were just rebalancing it back to my orignal allocation after a market "swing".

      That said, there are now some cheaper exchange traded funds than those I outlined in my book. Those ETFs in the book are still great, but you can buy even lower cost funds now. We have Vanguard Canada to thank for those.

      Cheers,

      Andrew

      • B Keddy says:

        Good Morning

        I have $45k invested in TD-e-series US, Cdn. bond and Internation. They are up 10% since I started and they are in a RRIF Acct. What is your feeling on changing them to Vanguard funds?

        Love your book. It is slowly changing my investment ideas. I look after my daughter's RDSP about 44K, my RRIF, my husband's and 2 TFSA's. They don't have a lot of money in them but I want to grow them and gradually shift out of individual stocks. Index or ETF's would probably be a much better way to invest our money

        Thank you very much

        B

        • Hi B Keddy,

          The e-Series funds are great–especially if you're adding small amounts, commission free. The Vanguard ETFs have the lowest costs, but not if you're going to be adding small amounts to the portfolio each month. In this case, you'll pay transaction fees for each purchase. There are a number of ETFs available through iShares commission free, if you use the Scotia Trade brokerage: http://www.scotiabank.com/itrade/en/0,,4200,00.ht…

          Either way, congratulations on building a low cost portfolio of e-Series funds. They are excellent products.

          Cheers,

          Andrew

      • Carol says:

        Hi Fellow expat Teacher! I recently purchased your book The Global Expatriate’s Guide to Investing. What an eye-opener for planning for retirement! Learning that Vanguard is, sadly, not an option for me, I tried to go through Schwab to purchase their commission-free ETFs. I was told by an online representative that they do not accept accounts for American citizens residing in the Middle Eastern country in which I live. Could you recommend another option or brokerage for teachers like myself that want to invest? Are there options that are mentioned in the book for other expats that could also be utilized by Americans?

        Thank you for your guidance!
        ~Carol

  2. Colleen says:

    I really enjoyed your video. Can you include a 2% dividend on the $2,257625 (around $45,000) as part of your retirement income?

    Cheers,

    Colleen

    • Hi Colleen,

      I'm glad you liked the video. Please share it with others if you think it will be useful.

      As for the dividend, you can't add it to your income. If your portfolio grows by 7% each year, roughly 5% of that growth will come from capital gains, and roughly 2% will come from dividends.

      If you withdraw 4% of your portfolio each year, and take out the 2% dividend as well, you will be deducting 6% per year from your portfolio. Odds are high that, at this rate, you could run out of money if you increase your withdrawals to cover inflation over time.

      Cheers,

      Andrew

  3. Alain says:

    Nice and simple to follow video. I believe it will have been complete if you add the concept of how long will your money last at retirement? Years to live after retirement.

    I have used yahoo :How long will my money last with systematic withdrawals? at http://finance.yahoo.com/calculator/saving-spendi
    I believe this can influence also a lot your retirement goal.

    Best regards

    Alain

    • Thanks Alain,

      Here's something to consider: It's best not to try and die broke. The 4% or 3.5% withdrawal rate considers the money lasting perpetually. William Bernstein, in his book, The Four Pillars of Investing, showed how you could plan to die broke on schedule, or ensure that your money lasts perpetually (increasing your margin of safety) by applying the 4% rule. You only need about 25% more money (in terms of your portfolio size) to ensure high odds that the portfolio lasts perpetually, compared to the alternative of dying broke 20 or so years after retirement. Margin of safety are the important words to consider here. If the market performs poorly, you may still run out of money withdrawing 3.5% or 4% per year. But it beats the alternative of trying to guess how long you'll live and guess what market returns will be. If you plan to make the money last 20 years, and it lasts only ten…plenty of pain could follow.

      Cheers,

      Andrew

  4. P. Audet says:

    Hi Andrew,

    Thanks for the video. Here are my two questions:

    – The annual desired income you are referring to, is it before or after taxes?

    – I also got the impression from your video that investing in properties (real-estate) is safer. Am I correct?

    Philippe (also Canadian)

  5. Hi P. Audit,

    If you want to consider post tax income, then use post tax scenarios with every equation. If pre-tax income is what you would rather work out, then you would need to be consistent with that. It's interesting that you concluded my lean towards the safety of real estate. I don't actually own any revenue generating real estate myself, and feel very comfortable with my portfolio of stocks and bonds. That doesn't mean I won't buy revenue generating real estate at some point in the future. I just don't happen to own any currently.

    Cheers,

    Andrew

    • Nicolas says:

      Thanks Andrew. And thanks for the video, vital but kind of scary, at least for me. 😉

      As an aside, I would like to mention that rental income, in Canada at least, is 100% taxable just like a salary. Moreover, it can put you in a higher tax bracket if you get that kind of income while also working. Many would-be landlords seem to forget this basic fact when investing in a "income generating" property. Capital gains and dividends a much more lightly taxed.

      Cheers!

      Nicolas

  6. mid says:

    Hi Andrew

    I just finished reading "Millionaire Teacher". Very helpful and I loved your own story. I am also a teacher without a pension. I teach part-time in colleges and universities in Canada. More than half the teaching in post-secondary education is done by part-time instructors who are paid per course, with no benefits or job security, on a course by course basis. Sometime I get one course, sometimes five. Needless to say my employment is very precarious.

    I can tell your experience as a teacher contributed highly to explaining index investing in concrete and simple terms. It inspired me to try index investing with TD e-series, since I bank there, so I have set up a small brokerage account. I do have a lot of other investments. Have been in mutual funds for a long-time. They are doing well now, so will keep them for a bit longer. I have stopped contributing to my RRSP as I am approaching 60, will just let it grow. My TFSA is maxed-out.

    So my e-series will have to be in a non-registered account.

    Questions

    DRIP or no-DRIP? Which is the better way to avoid taxes? I am a bit unclear as to which would be better.

    Also should I tell my financial planner that I have started index investing on my own? I just switched to a new financial planner (mutual sales person) last year before learning about index investing.

    Thanks

    • plam says:

      I'd recommend index investing in the TFSA, since the growth there is tax-free. This is possible with TD. You can open a TD Waterhouse TFSA account and buy e-Series in there.

    • Hi Mid,

      Re-invest the dividends if you have the option. There's no taxable difference and it's nice to allow that money to compound.

      Your actively managed mutual funds are doing well because (as they say) a rising tide raises all boats. Since September, the international stock index us up 15% and the U.S. stock index is up nearly 14%. The U.S. stock index has risen 105%, including dividends, during the past 4 years.

      Don't hold onto an expensive fund because it has risen in value, without recognizing why it has risen. Even a rusty old boat will rise when the tide does….but your boat has some holes in it…expense ratio bullets.

      Cheers,

      Andrew

      • mid says:

        Thanks so much Andrew for your reply. And thank you Plan.

        I went ahead with a small amount of money and invested in some index funds in a non-registered account with a drip.

        Am excited to see what happens. Will keep an eye on my managed funds and contemplate slowing moving some of them over in the future.

  7. Neil says:

    A lot of expats live and work in China and since YouTube is blocked here, this video is not playable. Although some have VPN, not everyone does. You might want to think about having a link to the video directly from your hosting server so it could be downloaded.

  8. Dubaiteacher says:

    Andrew… read the book and have begun the process of switching over my funds and stocks to low cost alternatives. One Brandes fund I own has a fee associated with selling it. The fee goes away in July as I have had this for awhile. Do you suggest holding it or taking the hit and selling (around $300)?

    Secondly, I was on Money chimp and playing around with numbers and was wondering about bond allocation…. is the 7% really 'doable' when I will be switching more and more of my stock indexes to bond indexes as I age?

    • Dubaiteacher,

      July is just around the corner. It won't hurt to hold off until then.

      Nobody knows what the stock and bond markets have in store for us, going forward. A rebalanced portfolio of stocks and bonds (50/50) has averaged roughly 8% per year over the past 30 years. Will it earn 7% going forward? I don't know. And of course, nobody else does either. If in doubt, save more money.

      Cheers,

      Andrew

  9. Warren says:

    Andrew, I'm a big fan of your book and philosophy and recommend it everyone that asks about what to do with their money, but lacks the time and/or will to do fundamental analysis.

    You're background is also really interesting to me as my sister is an international school teacher and moved from Dubai, HK, Korea, etc.

    I'm helping her consolidate her retirement accounts and I'm disgusted by the fees the school funds charge to move things around, (contingent deferred sales charge over 6 years!, etc.)

    For someone less stable geographic than you, where do you suggest opening up a brokerage account? I'm looking for a) low transaction costs and b) no withholding tax for non-residents. So far, I'm looking at TD Direct Investing in the UK and also considering Interactive Brokers, but this would be a US based account. Appreciate any thoughts you have.

    Warren

    • Hi Warren,

      I'm assuming that your sister isn't American. In that case, she could open a Singapore-based brokerage account and buy ETFs– without living there. She wouldn't have to pay capital gains taxes either. Here's a link to an expat Canadian who did just that, from Japan: http://andrewhallam.com/2013/05/an-expat-canadian

      Cheers,

      Andrew

      • Mark says:

        Hi Andrew,

        I am new to all of this but very excited after reading your book. Im in the same situation as Jon but was wondering about exchange rates. I move around every couple of years to different international schools and I’m wondering how much of a hit I will take from sending foreign currency to Singapore each month? Are there ways to get better exchange rates?

        Thanks and keep up the good work Andrew. As a fellow international teacher, it’s well appreciated!

        • Hi Mark,

          Many people worry about exchange rate spreads. But in reality, they should be the least of your concerns. Yes, you may pay a 1% spread to move some money to your investment account if you get paid in a different currency, other than the currency of the ETF you’re buying. But that’s a one time hit for each transaction. And there’s nothing we can really do about that. The trouble is this: If you went with a firm like Alexander Beard, Friends Provident (any full service firm, in fact) you would pay the same spreads (perhaps higher!) but you wouldn’t see the spread take place. Any time you invest in an entity (an ETF, mutual fund or otherwise) denominated in a different currency than what you are earning, you will pay a currency spread cost.

          What’s more important is the fact that–with a low cost portfolio–you aren’t paying ongoing fees that drag on your portfolio, year in, year out.

          Expats should concern themselves far less with currency spreads, and much more with investment behavior and keeping a low cost portfolio.

          Cheers,
          Andrew

          • Mark says:

            Thanks for the quick reply Andrew! I just heard back from vickers securities in Singapore and they said that I would need to open a bank account in Singapore which means I need to go there. Things must have changed. That being the case and me being a Canadian expat who doesn’t plan on working again in Canada should I send money back to Canada and follow your advice for Canadians in your book (which is great by the way!) or is there a better path to take for an international teacher? I am currently teaching in Berlin but won’t be staying here for my whole career. I just had a baby girl so that has made me want to get my finances in order.

            Thanks for the help!

            Mark

          • Hi Mark,

            Nothing with DBS Vickers has changed. As I mentioned in my book, to open an account at DBS Vickers, you must first open a regular account at DBS in Singapore. And you must visit Singapore to do so.

            If you send your money back to Canada, and you have not established a very specific non resident account, you could find yourself in future tax trouble. Please review this section in my book, about a non resident’s TD Waterhouse account. To open such an account, you must do so in person…in Canada. You must also provide documentation of your current overseas residence, including information from your employer as well.

            I suggest that you open an account with TD Direct International. I mentioned them in my book. They have recently dropped their fees even further. With this account, you’ll never have to worry about having to pay Canadian capital gains taxes.

            Cheers,
            Andrew

          • Mark says:

            Or maybe I should try to find a brokerage here in Germany eventhough I will be leaving here soon? Do you know of any good European brokerages?

            I do have relatives in KL so I could fly over and make a trip to Signapore perhaps if Vickers is the best option going. Any advice would be great Andrew. thanks!

          • Hi Mark,

            I would stick with TD Direct International.

            Cheers,

            Andrew

  10. Peter Jackson says:

    Hi Andrew,

    I've enjoyed your video and have recently read your book. In your video you mention that real estate is a great hedge against inflation because it provides income that will keep pace with inflation over time.

    My question is why wouldn't anyone, instead of investing in Index Funds, invest in property at the outset. It makes no sense to invest in Index Funds and to buy rental property later. It is far better to buy rental property earlier. 20 or 30 years down the track it will have grown significantly in value and the rental would have too.

    Property also allows an investor to use leverage by way of a mortgage. This means that you can use the banks money to make you money. For example a 10% deposit on a property (that has a high return, which are definitely available) can mean a 100% increase on your money if the property increases in value by a mere 10%.

    I owned a property where the rental covered the mortgage repayments. This property increased 100% in 3 years which meant that my $10,000 increased to $110,000 in 3 years. As far as I'm aware, Index Funds can't do that.

    in the 1970's, my father put down a $2,000 deposit on a $11,000 property which he sold for $400,000 30 years later. If he had have invested the money in Index Funds over 30 years he would have only got $35,000. That is a significant difference even factoring in repairs and maintenance and capital gains tax!

    I can't help but think that investing in positively geared investment properties gives a far greater return than investing in Index Funds. Am I wrong?

    • Hi Peter,

      My apologies if the video communicated that people should buy index funds and then add property. Chronologically, I discussed rental real estate first in the screencast, then added index funds. But even then, I was just using an example; I don't think there's a proper order, one way or the other.

      It sounds like you have done very well with property. That's fabulous. Much, of course, depends on what you buy, when you buy it, where you buy it etc. Not everyone has done as well. The same can be said for investing in index funds.

      Currently, I don't own any property because I'm lazy; my stocks don't need maintaining, thinking about, repairing, evicting and they're pretty easy to find. That doesn't mean that I won't, once again, get off my butt and find some real estate (I'm tempted, especially, by yields in the U.S. right now, and think that's the world's best market) but I've done fine with the stock market as well. I'm 43, and (until recently) haven't exceeded more than $100,000 in income. Yet I could retire today, if that's what I wanted…sans real estate.

      Can index funds double in a few short years? Sure, but like real estate, it's not going to happen often. Including dividends, the S&P 500 has risen 105% in the past four years, which certainly allowed me to juice my returns when I rebalanced after the crash of 2008/2009.

      Much, also, depends on how people determine levels of risk. I'm a wimp. It's a personality I was born with. I won't ride a roller coaster (and we know they're safe) and nor would I drink a can of Coca Cola.

      I love not owing a penny to anyone, so I would prefer to buy a rental property with cash, rather than leveraging. We have to remember that every person is different, in terms of what they deem "risky" and comfortable.

      Rental real estate, however, certainly has its place as a great investment when purchased intelligently for positive cash flow. But diversification has its place as well.

      Cheers,

      Andrew

      • Barry says:

        Leverage/Gearing is the big difference also between what Peter has mentioned with the properties and the index fund strategy

  11. Kukok says:

    Hi Andrew, I am an international teacher like you, currently working in China. This job is amazing and has allowed me to save over 55k Euros in the last 5 years. My plan was always to invest this money in property back home, buying my first house, therefore I have been putting my money in deposits (3-4%) during all this time.

    But I also realize that I need to start building my retirement sooner rather than later. I’m almost 36 and I am not contributing to an state pension back home, so after all the reading, I believe Index Funds are the way to go. Right?

    So, now I am confused.

    Should I invest all my savings, in one go, in Index funds for, let say, 5 years and then buy my house?, is it safe to Invest it in Index funds if I am planning in buying my first house in the next 5 years? Too short?

    But also, as I want to start building my retirement, so

    Should I divide it half . ½ house, ½ retirement? I will have to wait longer to buy property (I am like you, I don’t like owing money so I much rather save as much as I can rather than borrow. Now It is a good moment to buy property in some European coutries though)

    I am starting to flirt with Index funds through ING online banking. Do you think it would be better to open an account with dbsvonline.com/ ? What’s best for an European who is planning to continue working abroad for life? Vanguard?

    Many thanks in advance. I am a newbie. I have a lot to learn so I hope my questions make sense to you and the community.

    Much appreciated,

  12. Sasha says:

    I am an international teacher and trying to sort out a place to invest my money. I will be moving to a new job next August and the school invests money into teachers' pension funds. If the company that you want them to put your money is not considered a pension fund, then the money will be taxed.

    Just in case they don't recognize whichever company I choose to invest in, I am thinking that it will be wiser to just lose the tax and get to put the rest of the money in some place I want it to be.

    It did cross my mind to open a pension fund that they would recognize in order to get all the money and not be taxed. The tax is about 30% but I would probably lose more in the long run?

  13. Sasha says:

    I am British and will work in Tanzania.

  14. Russel Fleming says:

    Dear Andrew

    Thanks for the email. I have already purchased the ibook and audiobook version of your book. I will be sharing it wil my teaching colleagues here in Nanjing, China. Like you I am Canadian and teaching overseas for the past 13 years.

    I have been investing for the past 5 years in an actively managed fund and now I need to figure out how to get my money out in the best way and then how to invest in indexes. I have written to my financial advisor and told him I will not be paying my next quarterly installment during the summer. He does not know my intentions yet, I still need to finish listening to your book and consider my options.

    Once I know where/how to put the money, would it be worth paying whatever penalties I need to to get about $80k out of managed funds and putting it somewhere else?

    Take care and have a great day.

  15. Sasha says:

    I am in the process of opening an account with Schwab in the US. I am just waiting for the application to go through. The initial amount to open the account is $10,000US for an expat.

    I originally wrote to them asking about investing and was surprised to get a call from them. They have been very helpful and not actually tried to tell me what to invest in or anything like that. They have called me whenever I sent them questions by email about opening the account. I didn’t have all the things they needed like proof of address as bills aren’t sent to homes here. However I was able to get my workplace to write a letter and Schwab called my work to confirm.

    Some of the Schwab ETFs have really low TERs and no transaction fees.
    I am thinking of investing in the US Broad Market ETF, the Developed World ex US, and Vanguard FTSE Europe ETF. Bonds don’t seem like a good option at the moment. I should invest in the UK being British but I haven’t found any to invest in yet. Advice?

    Really just getting my head around all this but it seems to be coming together.

    • Hi Sasha,

      Why no interest in bonds? Remember to create a diversified account with a variety of asset classes, rather than trying to speculate. Good luck….it’s great to hear this is possible for you!

      Andrew

      • Sasha says:

        Hi Andrew,

        I am of not investing in bonds because of your article about Dodging a Bond Market Bubble below. Also Warren Buffet said it wasn’t a good investment at this time so I am not sure yet what I will do.

        http://andrewhallam.com/2013/05/could-you-dodge-a-bursting-bond-market-bubble/

        At Schwab, one of the questions on the application asked whether I wanted a Sweep Account. I said no as I didn’t understand it fully but gather it has to do with money markets.

        Could you explain what a money market is?

        Thanks.

        • Hi Sasha,

          A money market fund is a cash account that offers a low rate of interest, but still higher than a savings account.

          I will always have bonds in my portfolio. If you opt not to, consider putting your (what would be) bond allocation into the money market account.

          Cheers,

          Andrew

        • Sasha, if my bonds did drop in value, I would be thrilled to bits. I’m only 43, and you know what I would do if the bond markets crashed. I’d sell stocks to load up.

          Bring on the bond market crash.

          The only thing I’ll never do is speculate. Market timing makes fools of most that try.

          Cheers,

          Andrew

          • Jeff says:

            Hi Andrew,

            In past posts you have said to 75 year olds to have a 75/25 bond stock ratio. Let’s pretend you are 75 years old today. I’m sure a bond crash would not be something you would want to see. Hypothetically if you were 75 how would you structure your portfolio?

            thanks

            Jeff

          • Sasha says:

            Hi Andrew,

            After I read your book I was very excited to start investing. However as a British expat I found it difficult to figure out where to invest. I asked a lot of companies about investing with them but it seems to depend on, not only your nationality, but also the country you are in at the time.

            For British citizens, HSBC might be a good place to try. If you have 25,000 pounds or more then you can open an expat account. Depending on what country you are in, you are then able to invest in their ETFs. You would need to contact the branch in Jersey (the island) to open the account. I am unable to invest with them at this time because of the country I will move to.

            I think DBS Vickers is an option too but it depends on the country you are in if you want to set it up online.

            For me, it seemed like Schwab is the cheapest and easiest company to invest in. I did contact TD Direct and they too were a possibility though with higher fees.

            If you open an expat bank account with Nationwide in Jersey, you can get up to 1.70% interest which is probably more than short-term bonds? Though it goes to 0.85% after a year.

            I will look into the money market funds. Thank you for all your advice. I now have a lot to think about.

            Sasha

  16. Kf says:

    Hi Andrew,

    Interesting seminar, simple and precise. However, I’m wondering if you could do a version for Singaporeans with CPF? On the side note, the 4% rule really makes the goal portfolio size very difficult to achieve :(

  17. Lloyd says:

    I’m another fan of your book and only just discovered your website. The presentation is excellent. I’ve been working on my sums. I am based in Hong Kong and teaching too. I am having trouble working out whether to base my investments here or to have an account in my home country (UK). There is always a hit with exchange rates and transfer fees. Any stock investments I make in the UK automatically have an initial 0.5% tax.

    A few of questions:

    Do you use a currency transfer company to send money overseas? I currently use my bank and their exchange rates and fees are okay but I feel I could do better.

    Hong Kong has many investment options- interactive brokers were recommended by someone I work with. Do you have an opinion on them?

    I have a Vanguard account in the US as I previously worked there but I am similarly concerned about getting my money “out” of the US when I need it. Do you foresee any problems there? Currently I only have a small investment in intermediate investment grade bond fund there.

    Thank you so much- I really think I need to urge many people I work with to read your book. Very few seem to be planning ahead-some have been caught in the financial advisor net.

    (PS you could consider deleting your earlier YouTube channel versions of the talk? I watched a couple that were basically the same but not quite as polished as this one! I am surprised they are not liked and commented on.)

  18. Kirk says:

    I just finished your book, and it was great. I’ve been investing in stocks for about 15 yrs. I’m a bit ashamed to say that I compared your strategy to my past performance and I would have been much better off with index funds. That goes double for my RRSP’s at the bank.
    I have a question. Excuse me if I missed the answer somewhere. I believe you said you preferred short-term bond ETFs. My question is why does it matter if it is short-term or long-term bonds within an ETF? Reason being that you aren’t actually locked into the bonds for any term. I could buy a short-term bond ETF and sell it in a month just as easily as a long-term bond ETF. Could you please clarify this point?
    Thanks for the book and you blog.

    • When bonds within a short term index expire, another short term bond is purchased in its place. If interest rates rise globally, that newly purchased bond will have a higher yield. Thus, the investor wouldn’t lose to inflation. If it were purely a long term bond index, the bonds within the index won’t be expiring for some time. In that case, if global interest rates rose, you would be stick with a low yield on your long term bond index. The opposite case would be true if interest rates fell over the next five or ten years.

  19. Mark says:

    Andrew-I have been investing in index funds the last 8 months or so. I am a non-resident Canadian and every month for dividends, I get the option for Canadian bonds, whether to buy securities or cash. I have been selecting securities for XBB through my brokerage and it allows me to do DRIP even though I am not a resident of Canada. Is this technically allowed as I see that you must be a resident to do this. Will I eventually get taxed on this? What do you do with your dividends and what do you recommend?
    Thx

    • Hi Mark,

      Whether you reinvest the dividends or not, you’ll be charged 15% withholding tax on the dividends. You won’t have to file a return; they come off at the source. If you can reinvest those dividends, fantastic, but keep in mind that you will have already paid tax on them.

      Cheers,

      Andrew

  20. Mike says:

    Hi Andrew, have just picked up your book and kindle and have completed it in a day! Currently, my investment portfolio consists of a basket of individual stocks and am contemplating liquidating them to a index/bond fund ratio based on your strategy. As such, will it be akin to putting all my eggs in one basket if I were to buy into current prices at one go or will a DCA approach be better?

    • It’s tough to say Mike. But studies done show that lump sum purchases tend to offer greater rewards than trickling money in over time with dollar cost averaging. If you do decide to sell your stocks, keep in mind that you will be going “market to market.” In other words, if stocks are high when you sell, you’ll be buying high. If they’re low when you sell, you’ll be buying low. Compared to just holding your equities, the level of the market becomes a bit of a wash. Your money would have fluctuated with the market (mostly) anyway.

      Cheers,
      Andrew

  21. Brian Lorch says:

    Hi Andrew
    Great video. Plan to pass this along to our kids. I’m not an expat and so, in following the video, I substituted in for rental income the expected value of OAS and CPP benefits my wife and I will received in retirement — together, it is almost 30K per year.

    So, if our income gap is $80,000, the $30K of gov’t income reduces it to 50,000. Is that a valid approach?

    Thanks

  22. Mags says:

    Hi Andrew,

    All this info has left me pondering the following question. A question many of your Canadian readers may have to ask themselves in this era of government civil service contraction.

    Do you ever envision a scenario where it is better to take money out of a Defined Benefits Pension Plan and invest it via indexing? If you cannot answer this in general terms, please answer the question using my scenario as an example.

    Here is my scenario:

    I may leave my workplace in a year. I will have the option to defer my annuity which would be:
    $11,119/yr age 60-65, $8449/yr after 65
    Indexing of the benefit is done based on the Canadian Consumer Price Index, which has averaged 1.87% since 1993.

    If I were to leave now, I will have paid out to me $76,000 (which is within tax limits) and $80,000 (in excess of tax limits).

    I will be 60 in 23 years (i.e. I am 37 years old). I believe I have about 11,000 in RRSP room carried over from 2012. I will not be working the year after I Ieave my job so I can expect a tax rate of 30-33%.

    My deferred annuity will not keep up with the inflation rate you suggested of 3%. Of course, if I were to stay with my employer until retirement my salary would stay with or ahead of inflation, which in combination with promotions (hopefully) would substantially increase my future hypothetical annuity, making me the envy of many a retiree. But since the annuity formula does not take inflation into account, only the annuity itself is indexed, I believe I am better off DIY index investing.

    Is my reasoning sound? Or do I exchange the low “return” of my pension plan in exchange for the certainty?

    Thanks for your blog, book and answer to my question,
    Margaret

  23. InternationalTeacher says:

    Hi Andrew,

    I am an international teacher and new investor. I have a couple of questions that I’d appreciate your advice on:
    1. As I am still a Canadian resident, I can still contribute to a TFSA and RRSP account. Would you recommend that I top up those two accounts yearly before purchasing ETFs?
    2. As for my husband, would you recommend that he sells his stocks that are losing money (roughly $20,000) and use the money that is remaining after cutting his losses ($10,000) to purchase index funds? He, on the other hand, is a non-resident of Canada and automatically has 15% NRT deducted. Is there a way to claim a tax return on his losses when he sells his stocks? He has already taken a $10,000 loss earlier in the year when he sold his some of his stocks to purchase ETFs. He is 43 years old and wants to balance his portfolio to include bond indexes. Do you have any recommendations for index bond ETFs?
    Thanks for your advice and articles – we enjoy reading them and educating ourselves.

  24. Robert says:

    hello andrew,

    I am 59 years old and recently retired. I have a nest egg of approx 2.1 million cdn.
    My house has recently been fully renovated so I have no big costs on the horizon and
    no debt at all.
    I also have an RESP for my 1 son in university that is separate from the above funds.
    I have no company pension although my wife will have a teachers pension when she retires
    next year after 20 years of teaching. In addition to my wife’s pension I would like to be able to
    withdraw 60-80k per year.

    What would be a reasonable equity weighting to have for a well diversified ETF portfolio
    given my age and the fact that I am retired?
    Should I invest in one lump sum or DCA over 2-3 years. or is their another
    investment approach you would recommend?

    THANKYOU in advance for your reply,

    Robert

  25. Robert in Alberta says:

    Dear Andrew,

    Love your book, articles and your comments

    I am 59 and recently retired with approx 2.1 million cdn in savings and RRSP’s.
    I have just completed a very large renovation on my home and thus have no large expenditures
    on the horizon, I also have no debt at all. In addition to the above assets I also have an RESP
    for my son who is in University. My wife will retire from teaching next year after 20 yrs . She
    has a defined benefit pension and will probably receive between $1800-$2000 a month when she retires.

    I would like to be able to withdraw 60k to 80K per annum from our retirement funds with a time horizon of 25-30 years.
    Is this realistic and if so what equity weighting would you suggest I use for a well diversified ETF portfolio at this point in my retirement?

    Do you think I would be best to do a lump sum investment or a DCA over 1-3 yrs? Are their any other methods of
    placing funds that I should explore? Including government bonds and GICs in the portfolio, I would not want to see a drop
    of more 20-25% in the portfolio overall. I am thinking 1/3 equities 2/3 bonds (and gics)?

    Thankyou, your answer is greatly appreciated

    Robert in Alberta

  26. Dane says:

    Great Post!

    If you planned a 50k/year retirement and then lived for another 30 years after you retired, wouldn’t the purchasing power of your 50k/year be eroded significantly over those 30 years by inflation? If so, how do you account for that? Do you aim for a higher amount/year initially?

    Sorry if I am confused and my question doesn’t make sense :)

  27. NewtoinvestinginCanada says:

    Hi Andrew,
    I just finished reading your book Millionaire Teacher. I must say I learnt a lot from this as I am quite new to investing in Canada. I moved to Toronto few months ago so this is my first year of investing. I just opened my RRSP and TFSA accounts at TD. I plan to follow the strategy suggested in the book. I am 40 so for my RRSP, I plan to invest in TD-e series index funds –
    TD Canadian Bond Index Fund – e(40%)
    TD Canadian Index Fund – e(20%)
    TD U.S. Index Fund – e (20%)
    TD International Index Fund Currency Neutral – e(20%).
    I plan to invest monthly so do I need to ensure the above percentages are met every month ?
    Can I follow the same strategy for my TFSA account as well? Should I worry about withholding tax in TFSA for US index fund? I would much appreciate your guidance for investing in TFSA account. Thanks

  28. NewtoinvestinginCanada says:

    Hi Andrew,

    I just finished reading your book Millionaire Teacher. I must say I learnt a lot from this as I am quite new to investing in Canada. I moved to Toronto few months ago so this is my first year of investing. I just opened my RRSP and TFSA accounts at TD. I plan to follow the strategy suggested in the book. I am 40 so for my RRSP, I plan to invest in TD-e series index funds –

    TD Canadian Bond Index Fund – e(40%)
    TD Canadian Index Fund – e(20%)
    TD U.S. Index Fund – e (20%)
    TD International Index Fund Currency Neutral – e(20%).

    I plan to invest monthly so do I need to ensure the above percentages are met every month ?

    Can I follow the same strategy for my TFSA account as well? Should I worry about withholding tax in TFSA for US index fund? I would much appreciate your guidance for investing in TFSA account. Thanks

  29. NewtoinvestinginCanada says:

    Regarding TFSA, the below was mentioned on cra website:

    “You can contribute foreign funds to a TFSA. However, your issuer will convert the funds to Canadian dollars, using the date of the transaction, when reporting this information to the CRA. The total amount of your contribution, in Canadian dollars, cannot exceed your TFSA contribution room.”

    Do I need to be concerned about this or would I be buying it in Canadian dollars when I make monthly contributions to US and international funds? Thanks

  30. Shawn says:

    Andrew,

    Thank you for the video and the book. It is very inspiring. I am a teacher in the US and have read and shared your book with others. I am attempting to make the best decisions I can to move forward maximizing my limited income for the future. I do have a couple of questions that I think others like me might have as well.

    *If I fully fund my IRA each year do you suggest taking any additional savings for the month after you have an emergency account/payed off debt, etc and investing into index funds? I assume the answer is yes, but I would love to hear your thoughts. It seems from the book that you put all of your savings funds after an emergency account into index funds each month.

    *For funding “retirement type” accounts do you suggest for an amount like $5500 to dollar cost average or lump sum/transfer if you have it?

    Thank you in advance. I am grateful for your work and for your practical advice.

    • Hi Shawn,

      To answer your questions:

      *If I fully fund my IRA each year do you suggest taking any additional savings for the month after you have an emergency account/payed off debt, etc and investing into index funds? I assume the answer is yes, but I would love to hear your thoughts. It seems from the book that you put all of your savings funds after an emergency account into index funds each month.

      The answer is yes. I would pay all high interest debt off first. Then I would invest in tax deferred accounts (like the IRA) and after that, I would invest in the same manner, in a regular taxable account.

      *For funding “retirement type” accounts do you suggest for an amount like $5500 to dollar cost average or lump sum/transfer if you have it?

      If you have $5000 to invest, you may want to invest it right away, instead of investing in small dribbles. Most of the time, lump sum investing beats dollar cost averaging…as long as that lump is invested as soon as you have the money, and you don’t wait to “time” the market.

      Cheers,
      Andrew

  31. Kevin says:

    Hi Andrew,

    Great book by the way. So good I’m reading it a second time.

    My question is what do you use to track what you hold and the total balances of each and percentages of each index. I currently hold a Ca/US/Int index and a canadian bond ETF in one Tax paid acct and would like to start selling stock in other accts such a spousal RRSP TFSA etc.and repurchase index funds with the proceeds. I find it will be much more cumbersome to have to add up all the other amounts from each account to figure out the total percentage of each index for the purpose of rebalancing. Surely there is some software available to enter purchases into that would take care of the ACB and allow you to track the total of each of the holdings.

    I really buy the concept of owning alot of companies vs only a few. I currently buy once a month discount brokerage ETFS.

    Any help would be appreciated.

  32. Sean Connors says:

    Hey Andrew,

    I’m ready to start investing through Vickers and would like to invest in the Thailand Stock Index (SET). I call Vickers and they said that I cannot have the Thai stock exchange on my list of markets to trade in. IS there a way of trading the Thai Stock Index any other way?

    Thanks
    Sean Connors

  33. Sean Connors says:

    Good morning Andrew,

    Thanks for the previous info on the Thai Stock Index on the NYSE. Another question I have. If it’s not a good idea to go over $60,000 for the Thai Stock Index on the NYSE, does that go for all stocks on the NYSE? Also, I would like to run my portfolio by you before I start my journey to becoming a Millionaire Teacher:
    44% XBB – Canadian Bond Index
    20% SPTSX or SPTSX60 – Canadian Stock Index
    20% STI – Singapore Stock Index
    12% VEA – Vanguard Market Index

    Thanks
    Sean Connors

  34. Leonard @ The Wallet Doctor says:

    You are right to point out the importance of being financially mindful while abroad. This is particularly true for those who are working overseas, but applies to anyone staying abroad for an extended amount of time. Its always important to keep financial goals in mind, even if you are far from home.

  35. Sean Connors says:

    Before I enter anything for my first order entry, I would like to know the symbol for the Singapore Stoke index. So far I found STI and ^STI. Which one is it, or is it a different one?

    Thanks
    Sean

  36. The Wallet Doctor says:

    I think its easy for teachers working internationally to forget about some of the serious financial issues that await them back home. Of course these individuals are working hard, but there is a certain experience of being on vacation which can be a powerful source of misuse of money. You’ve got some great advice here about how to deal with those challenges and be successful financially.

  37. John @ GoodPlanetLiving says:

    I have been making an investment for previous times 3 years in an definitely handled finance and now I need to determine how to get my money out in the best way and then how to spend money on indices. Thanks.

    http://firststepfinance.net

  38. Kailyn says:

    Hello Andrew,

    I read your book last week and am excited to finally wrap my head around some sane sounding financial ideas. I am an international teacher and am young so have just started investing (mutual funds with a firm I’ll have to pull – if only I’d found your book a year ago!) I am Canadian but went straight overseas after teachers college and don’t see myself going back to teach there. I don’t have big funds to invest yet so am looking at the TD eseries but also just noticed the posting from your friend in japan who had invested in the Singapore markets. I am unsure of what my best course of action would be considering taxes and the fact that I will likely be moving around every few years. Any recommendations or insights?

    Cheers, Kailyn

  39. Sean says:

    Great video. However, one important factor for many young expats is the question of where to start.

    Imagine you are 28 and you’ve just moved to Singapore or Dubai. You use the money earned in your first year as an expat to pay down your remaining debts (student, let’s say) in the home country. So now you have zero debts. Great! But you also have no assets (such as a house).

    Now in your second year as an expat, let’s say you could afford to put away 35,000 dollars, but you don’t know where that 35k should go.
    *You want to keep some liquid as an emergency fund
    *You want to start a pension (ETFs all the way)
    *You want to put together a deposit for a house somewhere

    How would Andrew approach the above conundrum?

  40. Andrew says:

    Dear Andrew,

    Thanks for the video and your book (looking forward to the new book).

    At the moment I am investing in index funds through DBS Vickers with the long term goal of continuing to rebalance my portfolio of about five indices (ETFs), while at this point making quarterly contributions.

    I did however get into a long, and yet to be finished, discussion with a friend of mine about the pros and cons of ETFs vs. company specific DRIPs (those with large companies like Coke, Johnson & Johnson, P&G, McDonald’s, etc).

    I am a 30yr old Canadian expat with Singapore PR, he is a 30yr old Singaporean.

    The main arguments for the DRIPs method (with the companies listed) included:
    – ETFs have higher operating costs;
    – ETF dividends are diluted among all those holding the ETF versus directly benefiting from the dividend of one stock;
    – when drawing down at retirement you need to draw down from your capital invested in ETFs vs. just drawing on the dividends of the company stocks listed;
    – DRIPs offer diversification anyways as all the companies listed above are already diversified in the products and markets they service;
    – at retirement, if the market goes down so does the value of your capital invested in ETFs with no guarantee that the dividends will still be paid from those ETFs; where historically large companies, like those listed above, continue to pay out dividends;
    – not as efficient to hold an ETF with companies in it that aren’t performing as well, when you can just hold the companies that are consistently performing well and pay good dividends.

    I understand the 4% rule as described in the video. Will this be as reliable and high as just owning the company stock that pays consistent dividends?

    Your thoughts will be more than appreciated.

    Sincerely,
    Andrew

    • Hi Andrew,

      Neither you nor your friend would have adequate diversification with a handful of dividend paying stocks. Plus, by selecting U.S. dividend paying stocks, you will pay (it gets taken at source) a mandatory 30% withholding tax on your dividends. With a Canadian listed U.S. stock ETF, you would pay just 15% tax. So in the end, you would earn higher after tax earnings with the ETF. Secondly, if you purchased the stocks you mentioned (they are only available off the U.S. exchange, even though you can buy them through a Singapore brokerage) your heirs would pay the U.S. Estate tax when you die. This is a massive tax, payable by heirs when the original account holder owned $60,000 USD or more in U.S. domiciled equities. This doesn’t apply to Canadians living in Canada. But it would apply to you and your Singaporean friend. To read more about this, check out my post here: http://andrewhallam.com/2014/01/expat-index-investors-should-duck-u-s-estate-taxes/

      Cheers,
      Andrew

  41. Ani says:

    Do you have any specific tips for those who have rental property in Mexico? I have reading many sources where I could get more information about mexico real estate and how we can earn from them. Found this post but seems quite old http://bit.ly/1uFqclK Is it still relevant and valid?

    • Hi Ani,

      I don’t have any specific tips for those with Mexican rental properties. But I’m curious that you are asking. Be sure that any properties you do buy (here goes that tip I said I didn’t have) has a rental yield of at least 8%. From what I have seen, living down in Mexico, rental yields are terribly low. That doesn’t mean every region is like that, but here’s how to do the math. Assume you paid $100,000 for the property. If you can collect at least $8000 in rental income from that property (that’s 8%) this is a good thing. But from my view of rental yields down in Lake Chapala, they’re running about 5% or less. The yields in this region aren’t worth investing in the properties. That said, the yields where you are looking might exceed 8%. That would be great.

      Cheers,
      Andrew

  42. Patrick says:

    Hi Andrew,

    I am a 29 year old teacher currently working at at international school in Malaysia. I just started reading your books and although I have started investing already, I am hoping to switch to low index funds asap as they do seem to make more sense.

    Here is my question: I am currently on a 3-year leave from a Canadian school board. However, I am planning on staying abroad for longer. Because I am on leave, I have the option of buying back my BC teacher’s pension. Even though it is quite expensive to do so, I am saving enough money in Malaysia to cover that cost (and possibly more). I am wondering if I should buy back my pension through the BC Teacher’s Pension Plan for those 3 years or if it would be best to take my savings and put them in a low index investment portfolio. I already contributed to a teacher’s pension plan for 6 years in Canada so buying back 3 more year would give me a total of 9 years in a vested Canadian pension plan. Do you think buying back those 3 years would be worth it?

    Thanks so much in advance for your insight.

    Patrick

  43. Lroy says:

    Hi,

    I found the video very interesting. I’m interested to know what your depth of understanding is when it comes to the British tax system/pension system?

    Firstly, I currently have a property in the UK that I rent (I am an expat in the UAE). The property was my primary address so I do not get taxed as heavily should I choose to sell. However, I think the tax on any further properties would be higher so I’m not convinced about buying any further properties.

    My second question is related to QROP pension transfers – I have just moved my pension pot into a QROPS and I am investing via friends provident, with the account being managed by cannacord. Having done a little reading on your page I am now concerned about friends provident! should I be? This worry has brought about concerns related to the advice that I am receiving from my Financial advisor so an feedback that you could provide would be appreciated!

    Thank you for such an informative website!

  44. Carl says:

    Hi Andrew,

    I have just compulsively read your expat investing book. I think it opened my eyes to many things, so thank you. I suspect it will have a positive impact on my life! I have two questions, one specific the other broad:

    1. I have opened a Td trading account, and cant find any vanguard uk indexes, ( which you mention a fair bit) but there are lots of vanguard Ireland. Is that the same? and does it matter ( I am a uk national working in switzerland)?

    2. I want to slightly complicate something close to the couch potato portfolio with a few sub categories of equities and bonds. The important thing ( i had foolishly previously overlooked) seems to be selling the overrepresented categories ( that have grown faster) and rebalancing by buying the ones that have not grown so fast.

    You reinforced so many things to avoid/do in your book, but whilst this element is probably obvious, I think I need to read some more..i.e. to prevent the temptation to invest through ‘the rear view mirror’. Where should I look to fully convince myself? And presumably if I had some sub categories then the principle is the same, rebalance them all, so that money goes to falling or plateauxing areas?

    • Hi Carl,

      Yes, the Irish domiciled ETFs are the way to go. For other reading to further inoculate you for rebalancing, you could read anything by Larry Swedroe, Scott Burns, Burton Malkiel, Paul Farrell, Daniel Solin….the list goes on and on.

    • John says:

      TD Direct Investing International Luxembourg just sent me an email announcing new fees for trades. So if I understand it correctly, the new commission rate will be 14.95 Euro for trades under 250,000 Euro. Any trades over 250,000 will be charged a commission of .3%The previous commission was 28 Euro, I believe, for trades under 250,000 Euro. Can anyone confirm this?

      Also, as an EU citizen, Carl, are you purchasing Irish domiciled EFTs to avoid taxes on dividends and bond interest? What is the advantage of using Irish domiciled ETFs?

  45. Carl says:

    Thank you Andrew and John. Thanks for the tip-off. John, though If I understand you it is not changed for trades under 250k?

    I m not sure about the tax implications John. My motivation was to avoid buying from a US domiciled firm because I ( perhaps mistakenly) was considering death duties. I was trying to buy vanguard UK index shares, but they all seem to be domiciled in Ireland now. I just assumed that this was to save them taxes?

    I dont know if it has tax implications for me. I pay taxes in Switzerland, so I am imagining that at some point I will be paying them some taxes to them ( income, capital gains or wealth). Also if I ever move back to the UK when I am older there are probably implications especially re capital gains taxes. I guess I could have used a swiss organisation, but I dont think it would make a difference. So I don’t know, do you? I need to do some homework.

  46. Adam jennifer says:

    hello Andrew,
    Thanks for sharing with us its very helpful for me. I am international teacher from canada.I love your article very much.

    Cheers

    Adam

  47. Keith Folse says:

    Andrew, I have told MANY people about your book, and I have mentioned you in my TEFL courses (for future expat teachers of English) and at TESOL seminars.

    I had not seen this short PPT explanation until now. It’s very clear, very practical, very easy to follow.

    I wish I had heard and heeded this info many, many years ago. I try hard to pass this info along now to my future TEFL teachers.

    Keith Folse
    Orlando, FL USA

  48. Teacher Wannabe says:

    Hi Andrew, my wife and I are in our mid 30s, originally from Malaysia and now settled down in Calgary for the last 3 years. I have a B. Eng Degree and working in oil an gas, while my wife has an MBA and currently working in a local bank. We are thinking of following your footsteps in getting expat teaching jobs globally, but we are unsure where to start.

    I have done some research and found that most international schools need teachers with a north American teaching license and some years of teaching experience. As both of us do not have any experience in teaching, could you please advice us if this is a feasible idea, and if yes what is the best / quickest way to be certified and get a teaching job overseas?

    Any good suggestions on good locations to start off overseas?

    Thanks in advance!

    Teacher Wannabe

    • Teacher Wannabe,

      Because you and your wife already have degrees, you could likely enrol in a post degree professional education program at a University. It would likely take you about 1.5 years to complete. Once you have done that, go ahead and apply. Ignore what the schools suggest about experience required. Singapore American School, for example, has such a requirement, but they regularly hire teachers straight out of university. Other schools likely do something similar.

      Good luck!
      Andrew

  49. Trevor says:

    Dear Andrew,
    Love your work. Was reading your article about Wealthbar as I’m a Canadian teacher working overseas for the long haul most likely. Was in Singapore like you, but now going for another tour in Japan. I’m very interested in the low index funds as I’m a casualty of EagleStar. I’m concerned about my non-resident status as there appears to be plenty of grey area here. Any advice on whether it makes more sense to set up investments in Canada or in Asia where I will most likely work for the next 20 years? I do own a property in BC and that has gone pretty well in terms of dealing with the taxes on that. Any thoughts would be greatly appreciated.

  50. Shawn says:

    Hi Andrew,

    You might be interested in knowing that TD Waterhouse has seemingly changed policy on non-resident accounts.

    I’m a non-resident Canadian working in the UAE and tried to open a non-resident account in person this summer. I found out that there is a list 50-something countries that TD Waterhouse will no longer issue accounts for, if you are resident in these countries.

    The UAE is on the list, and they denied me an account. I’ve since started the process of opening one with TD Direct Investing.

    I’m not sure what other countries are on the list, but it’s definitely relevant to anyone looking to open a non-resident account!

    Shawn
    Dubai, UAE

  51. Shawn says:

    No problem, and in any case, I should say thank you. It was both of your books that got me to this point.

    I’m a teacher too and always wanted to find a way to invest my money wisely, but just didn’t know a simple and cost-effective way to do it myself. I did a lot of additional reading and there’s so much misinformation and bad advice out there.

    The more I researched, the clearer it became that you can’t really beat index investing over the long term. It’s really nice being able to sleep soundly at night knowing that something so simple works so well for the average investor!

    Cheers,
    Shawn

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