I am also an American who has occasionally given informal investment advice to non-Americans. I agree with the broad strokes of what is written above, and I want to add a note regarding how hard it can be for people who aren’t Americans or who don’t have access to the types of investment tools:
If you don’t have some sort of employer matching, if you don’t have some sort of tax sheltered/preferential account available to you, and if you don’t have a way to access American stocks, it can be really hard to invest. Many countries don’t have something like Vanguard, or don’t have stock markets that have a long-term upward trend. Sometimes the best option is to try and open an international account to invest in VTSAX or VTI or VOO (or something similar), but that usually involves additional fees. So this is basically just to say that I have sympathy for how hard it is to do these things when you don’t have access to several of the most impactful methods/tools.
Sometimes people can just buy those funds. I’m guessing that people in relatively wealthy/developed economies have the best options (and people living in their home country tend to have better options than people working internationally, since many finance/investment/banking things are restricted by citizenship). Most major European countries probably have services like Interactive Brokers or Vanguard or similar options (although I haven’t looked into the details of it). And I assume that things generally are improving over time: things available now weren’t available in 2015, and things which were available in 2015 weren’t available in 2010. Commission-free trading is now very common among the large brokerage firms, which is a huge improvement for the individual investor.
Folks in Europe, UAE, and similarly wealthy/developed areas probably have the best options available to them. The investment options available to a Spaniard or a Emirati are probably better than those available to, say, a Peruvian or a Mozambican or a Vietnamese. A few years back a friend from [undisclosed non-OECD country] was looking to invest her savings, and the least bad option we could find was to pay extra fees to invest through a brokerage in her home country that allowed her to buy American index funds; the native/local funds just weren’t very good. So she was able to invest, but it took extra steps and cost her more money to do so.
So I don’t want to make it sound like nobody outside of the USA can invest. I just want to emphasize that it is harder for people who don’t have the good fortune to be born in or to live in develop countries; they often don’t have access (or have to pay more fees for access) to some of the following things, and it is a lot harder to build wealth if you don’t have access to these things:
low fee investment brokerages
brokerages with commission free trades
able to invest without risk of currency fluctuations
index funds/mutual funds that track a good stock market
being able to invest in global markets without paying extra fees
tax sheltered/tax advantaged investments (Such at the IRA in the USA, a RRSP in Canada, or a Super in Australia)
employer sponsored/supported investments/savings (a 401(k) match is fairly common among ‘good’/elite/white-collar jobs in the USA)
If you will indulge me in some rambling, one thing that sticks in my memory is learning that a countries economy can grow a lot while it’s stock market does quite badly. I wish I had the image to share, but remember an image from a finance class I took showing China’s GDP growth over many years alongside it’s stock market growth; if a Chinese person had invested a broad index of Chinese stocks, it would have had very modest growth. It disabused me of the notion that I should try to invest in a country if it’s economy is growing. And of course, Chinese people have the added challenge that the currency can’t be traded freely. And brokerages that technically have operations in China might not be open to retail investors; I recall seeing a few years back that Vanguard opened operations in Shanghai, but it was only private investment advice for high-net-worth individuals, and regular citizens couldn’t open their own account. When I lived and worked in China as a foreigner with a visa, I wasn’t allowed to invest because all the investment firms required investors to have a China National ID Number. (my apologies for focusing on China so much, it is the area I know best)
Thanks for sharing your perspective! For any reasonably large economy, I’d think an analog market index fund would be the best alternative. But I admit I didn’t look at it in detail. I know that the Millennial Revolution couple are Canadian, and they had some posts on how they invest in America. Those might be of interest.
I am also an American who has occasionally given informal investment advice to non-Americans. I agree with the broad strokes of what is written above, and I want to add a note regarding how hard it can be for people who aren’t Americans or who don’t have access to the types of investment tools:
If you don’t have some sort of employer matching, if you don’t have some sort of tax sheltered/preferential account available to you, and if you don’t have a way to access American stocks, it can be really hard to invest. Many countries don’t have something like Vanguard, or don’t have stock markets that have a long-term upward trend. Sometimes the best option is to try and open an international account to invest in VTSAX or VTI or VOO (or something similar), but that usually involves additional fees. So this is basically just to say that I have sympathy for how hard it is to do these things when you don’t have access to several of the most impactful methods/tools.
I’m surprised to read this. Interactive Brokers (as an example) is available in many countries, has low fees, and there are many similar country-specific services. Can’t people just buy VWCE/VWRP/IWDA?
All my friends in Europe and UAE don’t seem to find it hard to invest
Sometimes people can just buy those funds. I’m guessing that people in relatively wealthy/developed economies have the best options (and people living in their home country tend to have better options than people working internationally, since many finance/investment/banking things are restricted by citizenship). Most major European countries probably have services like Interactive Brokers or Vanguard or similar options (although I haven’t looked into the details of it). And I assume that things generally are improving over time: things available now weren’t available in 2015, and things which were available in 2015 weren’t available in 2010. Commission-free trading is now very common among the large brokerage firms, which is a huge improvement for the individual investor.
Folks in Europe, UAE, and similarly wealthy/developed areas probably have the best options available to them. The investment options available to a Spaniard or a Emirati are probably better than those available to, say, a Peruvian or a Mozambican or a Vietnamese. A few years back a friend from [undisclosed non-OECD country] was looking to invest her savings, and the least bad option we could find was to pay extra fees to invest through a brokerage in her home country that allowed her to buy American index funds; the native/local funds just weren’t very good. So she was able to invest, but it took extra steps and cost her more money to do so.
So I don’t want to make it sound like nobody outside of the USA can invest. I just want to emphasize that it is harder for people who don’t have the good fortune to be born in or to live in develop countries; they often don’t have access (or have to pay more fees for access) to some of the following things, and it is a lot harder to build wealth if you don’t have access to these things:
low fee investment brokerages
brokerages with commission free trades
able to invest without risk of currency fluctuations
index funds/mutual funds that track a good stock market
being able to invest in global markets without paying extra fees
tax sheltered/tax advantaged investments (Such at the IRA in the USA, a RRSP in Canada, or a Super in Australia)
employer sponsored/supported investments/savings (a 401(k) match is fairly common among ‘good’/elite/white-collar jobs in the USA)
If you will indulge me in some rambling, one thing that sticks in my memory is learning that a countries economy can grow a lot while it’s stock market does quite badly. I wish I had the image to share, but remember an image from a finance class I took showing China’s GDP growth over many years alongside it’s stock market growth; if a Chinese person had invested a broad index of Chinese stocks, it would have had very modest growth. It disabused me of the notion that I should try to invest in a country if it’s economy is growing. And of course, Chinese people have the added challenge that the currency can’t be traded freely. And brokerages that technically have operations in China might not be open to retail investors; I recall seeing a few years back that Vanguard opened operations in Shanghai, but it was only private investment advice for high-net-worth individuals, and regular citizens couldn’t open their own account. When I lived and worked in China as a foreigner with a visa, I wasn’t allowed to invest because all the investment firms required investors to have a China National ID Number. (my apologies for focusing on China so much, it is the area I know best)
Thanks for sharing your perspective! For any reasonably large economy, I’d think an analog market index fund would be the best alternative. But I admit I didn’t look at it in detail. I know that the Millennial Revolution couple are Canadian, and they had some posts on how they invest in America. Those might be of interest.