Vanguard for Expats – How to Guide
If you are an expat looking to invest with Vanguard, but live overseas, you’ve come to the right place.
Whether you want to invest with them because they are one of the biggest fund managers in the world, or because you like what they stand for, or simply because they are offer the best funds for you doesn’t matter.
What matters is its never been easier to invest, no matter where you live.
In reality, just about anyone can do it.
In this guide, we give you two options.
- International Vanguard Platforms
- Alternative Investment platforms with access to Vanguard funds
Whether or not you can go with the first option will depend on where you live and your current situation.
On the other hand, option two is going to be available to 99.9% of expats reading this.
Not only that, but in many cases it is a more compelling option.
Lets get into it.
International Vanguard Platforms
Contrary to popular belief Vanguard doesn’t just operate in the US. It has a number of international operations that you may be able to open an account with.
You’ll have to fulfill various requirements and be officially classed as resident in that country to open an account, but that should be a straight forward process if you tick all the right boxes.
Vanguard have a presence in each of the following regions/countries:
- Americas: Canada, Mexico, United States, South America
- Asia Pacific: Australia
- Europe: Austria, Belgium, Denmark, Finland, France, Germany, Iceland, Italy, Liechtenstein, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom
If you live in one of those places and meet Vanguard’s residence/domicile requirements you may be able to invest directly.
To check, simply visit Vanguard Global, choose your country and you’ll be given the relevant contact details.
Depending on which country, it’s likely you’ll be able to send them a message using their online form, chat with a bot/followed by online representative or give them a call.
Perfect. Unless you don’t live in an eligible jurisdiction or do but don’t meet the relevant criteria.
You see, like many things in life for us poor expatriates, trying to open a Vanguard account can get messy if your details don’t look good on a form. In other words, even if you live in one of their countries of operation you still may run into a brick wall due to your non resident status.
But if that’s you, don’t worry. There’s another option. And the best news – it is super easy. You just use an investment platform that’s open to expats. Spoiler alert: There are many!
Alternative Investment Platform
Here’s the thing. You own the shares no matter where you bought them from. If you buy shares in Vanguard funds from a different investment platform you still own those shares, just like you would if you bought them directly. There’s no difference.
You still get access to all those super low cost high quality options.
And in fact, believe it or not, investing with Vanguard can be cheaper if you don’t use their own platform because other options have cheaper fees.
Hard to believe. I know. But it’s true.
You see Vanguard still has platform fees. The exact amount you pay will depend on exactly where you live.
As an example, Vanguard UK charges 0.15%. Not crazily expensive, but then again, this is a time when many alternatives don’t even charge equivalent fee.
Many people living abroad go with an alternative.
Just complete four steps and you are good to go.
Key Steps
- Open an investment account with a platform that accepts expats.
- Choose the funds you want to invest in (more on this below).
- Log in to your account and purchase shares in your chosen funds.
- Repeat whenever you have fresh money to invest.
It is really that simple!
Funds Suitable for Expatriates
Which funds you choose is entirely down to your personal requirements. There are a lot of them.
But a maximum of two funds should fulfill most investors requirements.
You may even get away with one. Lot’s of people like LifeStrategy and Target Retirement. The ultimate set it an forget it, all in one choices.
The UK versions of these funds come packaged as index funds meaning expats can’t invest. However, you can invest in the European versions of LifeStrategy. Just bear in mind, these are tilted towards the euro rather than the pound.
If you live in Europe or intend to retire there, that’s not an issue. Living elsewhere not so much. That is because tilting towards the euro exposes you to currency risk.
If the Euro strengthens against whatever currency you use (or will use in retirement) you could loose money. But again, there are ways around this problem if you don’t live on the continent.
Vanguard Lifestrategy Alternative
In practice, something very similar to LifeStrategy can be put together with a couple of ETFs.
You simply use two funds. One for stocks (shares) and another for bonds.
And with Vanguard it’s easy to put together a globally diversified portfolio of stocks and bonds with just a couple of funds anyway.
Take the following two ETFs for example:
Global Aggregate Bond UCITS ETF (VAGP)
FTSE All World UCITS ETF (VWRL)
With those you’ve pretty much got the same thing as a Vanguard UK Life Strategy fund anyway. Global stocks and bonds with the bonds being hedged to pounds so you don’t have to worry about currency risk if you intend to retire back to the UK.
An alternative might be to go for a UK bond fund. Lots of people do. A popular one being Vanguard U.K. Gilt UCITS ETF (VGVA).
Whether you choose those or some other combination, the process ends up being the same. Just go to your investment account, enter your tickers (ie VAGP or VGVA and VWRL) and click buy. It couldn’t be simpler.
Investing in these or similar would widely diversify your investments over different assets and geographies. It would be tax efficient and low cost.
The only thing you need to worry about is how to split your money between stocks and bonds. (You can read more about that here if you are interested).
That’s it! You have invested with Vanguard. Remember, it is you that owns the shares in the funds not your broker so you really have invested with the guys themselves.
(Just to be clear this is an example not a recommendation).
If you aren’t planning on retiring back in the UK or Europe we’ve talked about some options for you here.
Target Retirement
Along similar lines, you can use those same funds to do something very similar to Target Retirement.
The idea with this type of fund is that you increase your bonds & cash vs your stocks (shares) as you age. You can do this yourself by simply rebalancing at set regular internals. Say every one to five years.
The exact extent you rebalance depends on what system you use to allocate your money between stocks and bonds. Again, more on that here, but a popular method is your age in bonds with the rest in stocks.
So if you were 40, that would be 40% of your money in bonds and 60% in stocks. And then if you decided to rebalance every five years, you’d wait until you were 45 and then organize your portfolio accordingly so that you now had 45% in bonds and 55% in stocks. Though not always, you’d usually do this by selling some stocks and using the proceeds to buy bonds.
My guess is, it will take you no longer than an hour.
Alternatives
Everybody loves Vanguard, but that doesn’t mean there aren’t good alternatives out there.
Sure, all things being equal, choosing Vanguard probably makes sense, but sometimes things aren’t equal or more likely you simply don’t have access to the particular fund you want.
Dare I say it, as good as they are, you could just use another fund provider. These days there are plenty of cheap ETFs out there.
The biggest alternative is iShares. And they are a perfectly acceptable option. They have equivalents to most Vanguard options. Usually for similar prices, but sometimes even cheaper.
Another big alternative that has come on to many expats radar in recent times is Invesco.
This is because they have released their own version of FTSE All World UCITS ETF with a cheaper ongoing charges figure (OCF). This could make a difference to your investment returns. We’ve compared it with Vanguard’s version here.
