By Geoffrey Mann – November 30, 2023
If you have a few extra dollars, dong, bhat, or whatever currency at the end of the month, maybe it’s time to start thinking about socking some away. There are so many reasons to start saving as early as you can. An investment savings plan allows you to save and invest in global stock markets.
Anyone who wants to secure their financial future and grow their savings can benefit from opening an investment savings plan. Whether you are starting to save for a specific goal, such as buying a home or retirement, or simply looking to maximize your returns, investment savings plans can be a powerful tool for achieving your financial objectives.
These plans are especially well suited for younger expats who want to begin investing in the stock market at a modest rate. Monthly contributions can start as low as $100 or $250 USD, depending on the provider.
Fundamentally, it allows individuals to profit from global stock markets without a large investment.
Stock markets have historically been one of the best ways for individuals to build wealth over time. Investment savings plans allow small-time investors to pocket big-time earnings in stock markets. This applies a basic rule of finance: you need to put your money to work.
The Standard & Poor 500 index (S&P) measures the prices of some of the biggest companies on United States stock markets. The average increase in the S&P over the past ten years is more than 10%.
So, if you had started contributing $250 USD monthly into a fund linked to the S&P, and stuck with that program for 10 years, your total $30,000 in contributions would have grown to more than $40,000. If you just let that money sit and earn for another 20 years, it would balloon to nearly $200,000. And these amounts are conservative because they use an 8% annual increase instead of the S&P’s typical 10% or more.
Investing a portion of your hard-earned money in the stock market is a tried-and-true way to grow your wealth. Those with relatively small amounts to invest can struggle to find efficient ways to take advantage of the markets, but an investment savings plan makes it possible for most.
Managing finances can be challenging for expats, so many maintain plans in both their adopted residence country and back home. Yes, they should consider it and the answer for many is also yes:
Portable when you move. You can contribute to an investment savings plan from just about anywhere. So if you move, you won’t be forced into a series of decisions about where and how to manage your portfolio.
Tax-exempt jurisdictions. An investment savings plan will be located for legal purposes in a jurisdiction that doesn’t tax investments. So, while you may be subject to some forms of taxation in your home country, you won’t need to worry about local taxes. Common examples are Guernsey, the Isle of Man and the Cayman Islands.
Safe, well-regulated, experienced. These jurisdictions have a long history of expert money management, backed by strong regulators to ensure your money is safe. Funds are held by banks such as BNY Mellon and JP Morgan.
Strong, stable currencies available. You will be able to choose the currency of your plan, typically USD, GBP, EUR or AUD.
There are some basic but relatively expensive things that most of us want at some point in our lives: a home, excellent education for our kids, a comfortable retirement. Maybe you want a boat or a yearlong holiday or a vacation home or …
For most of us, paying for these things requires some planning and patience. Unless you’re making a lot of money (in which case you’re probably not reading this), you’ll need to think about what you’re willing to give up now in order to have these things later. The point is: if you’re willing to skip a few nights out every month, or buying those new shoes, or a Netflix subscription, or the imported sushi, or a new sofa, or whatever, an investment savings plan can help you reach your goals faster. Setting money aside is a good first step, but using an investment savings plan to buy into stock market funds will get you there a whole lot faster.
Tenzing offers investment savings plans from four providers, each with different pros and cons. A 15-minute conversation with an experienced investment professional can go a long way toward helping you understand which might be the best fit for you.
These articles are intended to give you enough information to make informed decisions, but investment solutions are complicated. Whether you still have questions on this topic or feel ready to take the first steps toward getting a policy, our advisors can help.
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