International Teaching: Perils to Beware
With no pensions to contribute to, International Teaching can be a hazardous occupation.
You save your money in a school sponsored plan and trust that the money is fairly allocated.
The administrators at most international schools have great intentions. But most schools are plagued by visits from silver-tongued financial representatives, bleeding employees like leaches. Products sold by reps for Zurich International, Friends Provident and Generali Vision ferment along the halls of shame.
Sadly, they’re widely spread among international educators.
Understanding how much money you should have made on your investments is easy. Just pick a simple benchmark. Let me explain:
Assume that you bought a simple stock market index and a simple bond market index. A stock index compiles a bunch of stocks; no trading takes place. No experts would be trying to pick hot stocks or hot funds. You’d just own a representative of every stock within the given market. You would also have a bond allocation as well. For the sake of this example, let’s assume you were a conservative investor, putting 50% of your money in a bond index and 50% in a U.S. stock index.
This would be a cheap, maintenance free, boring strategy. But it has spanked the returns of most investment professionals.
Here are the historical results, to May 13, 2013, assuming $5000 was invested in the U.S. stock index and $5000 in the U.S. bond index.
- After one year, you would have turned $10,000 into $11,344.
- After three years, you would have turned $10,000 into $13,278.
- Buying 5 years ago, right before the market crash of 2008/2009, you would still have turned $10,000 into $13,086.
- Buying ten years ago would have turned $10,000 into $18,474.
Back-tested to 1986, a 50/50 split between the stock and bond market indexes would have generated a portfolio of $85,360.
The portfolio above is conservative. Increasing the stock allocation would have improved results, but only if the investment fees were low.
Expats can use this link to find examples of low cost platforms.
Above all, remember the three things an international teacher should never do:
- Never pay a sales commission to buy a fund
- Never enroll in a plan that penalizes you for withdrawing money
- Never fall for an insurance linked investment scheme through Zurich International, Friends Provident or Generali Vision (read all the posts here)
For more information, please check out my international bestselling book, Millionaire Teacher.
As an international teacher, you deserve a fighting chance.
Costs in the Mists of Time: South China Morning Post
Royal Skandia’s high commissioned Investment Linked Assurance Schemes are similar to those sold by Friends Provident and Zurich International
Hong Kong Consumers Angry After Being Sold Complex Insurance Product ILAS: South China Morning Post
ILAS Products Under Scrutiny: International Advisor