Updates have been sporadic as things are busy. I have a few posts that I want to work on but in particular I'd like to get this post out. I've made and set goals for 2013 but that post will have to wait.
A reader, Chris, posted a comment asking how I invest in US equities while living in Asia (Yokohama specifically). It made me pause and think as investing has become such a routine thing for me I forgot that there was a time when I myself also didn't know that path. It's really not too difficult. In fact if you're already sending money home to pay of credit cards, student loans, or for savings then you're 90% of the way there. For the sake of completeness however let's start from the beginning before you even get on the plane.
The Long Journey Begins
You've got a job in Asia! Awesome!
If you are reading my blog I'm assuming you are somewhat familiar with frugal living and that you have a desire to decrease your expenses, increase your income, and invest as much as you can per month. I'm also assuming you probably just graduated from college and have some student debt and perhaps some if not a ton of credit card debt. Moving to Asia isn't always cheap. Maybe your employer didn't pay for your plane ticket, maybe you got stuck paying key money to your landlord, etc. All of this can be sorted out in time. But here is my personal opinion.
PAY OFF ALL DEBTS BEFORE STARTING TO INVEST.
This might just be me but I didn't feel comfortable having $25,000 in student loans at 6% and starting to invest in companies. You might feel different about this and that is fine. We all get to feel different about our debts. But if something happened while I am here and I suddenly couldn't be making my loans payments I didn't want to be forced to sell my equities at a loss due to market timing. Plus taxes. Oh gawd taxes! Your taxes will get even more complicated.
Another reason I suggest paying off your debts first is that it's great practice for investing. If you have been sending 50% of your paycheck home to pay of debt then you have learned to live on only half your pay! That's great! It means once your debt it gone you are set at a 50% savings rate. That puts you in the stratosphere of savings rates as far as US citizens are concerned.
This brings us to Step One: How do I send money home?
Well I can only speak for myself and Japan at this point but I'm sure many countries will have similar methods. These are methods I have used personally:
Post Office: These guys are everywhere and you can send money home through them a couple of ways. You can send a bank wire, or you can get them to print an actual check or money order and send the physical check to someone you trust to deposit it in your bank account. The cost is ¥2,000 (or it was when I was using them) and they publish the rate you get so you will know how much money your yen is worth. Drawbacks include: It's not online so you have to go in each time, your bank on the other end might charge a receiving fee, if you use the physical check it could be lost or damaged or the person you thought you trusted turns out not so trust worthy. Personally I think I used the Post Office only once.
GoLloyds: This was my first online experience. GoLloyds was also what most people I know used. It's mostly online but you might have to visit an ATM if you can't wire money from your Japanese bank online. The gist is you set up a GoLloyds account and then transfer money to it from your bank account. They then forward the money to a foreign back account that you set up. This can all be done online if your Japanese bank has online services. The GoLloyds fee is ¥2,000 and your bank will generally charge you a fee as well to wire money to them. My old bank charged me ¥500. They publish their rates for the day each morning so you can see if you like it. I used GoLloyds for a great long while. If you get your friends to sign up you can get free transfers. This is the most expensive that I would ever pay for sending money home.
Xe.com: This is no longer a viable option but I used to use them for sending money home. They charged no fees except but I was still charged a fee from m bank in Japan (again about ¥500). Unfortunately they shut down due to regulations changing.
So what do I use now? Well like I said most people I know used GoLloyds but it's worth it to go outside of the norm and try to find something special. That's what I did. I now pay
no fees to transfer money home. How? My part time job has a deal with Citibank and if I deposit my paycheck into my Citibank account I get free transfers. In addition my bank back home is a credit union so I don't get charged on either end. This is very important.
FEES WILL KILL YOUR CAPITAL! Fees are literally like taking money and putting it in the toilet. Take the time to find the cheapest method. If your job doesn't have a deal with a bank find a company that does and get a part time job there. Do what it takes to get the advantage. If your bank back home is charging you fees show them the middle finger and sign up with a bank that won't. It's more work up front, yes, but worth it in the long run.
Step 2: Open a brokerage account
So you have a stable method for sending money home and you've paid off your debt! Well like I said you are now 90% of the way there! Next you need to open a brokerage account. First before you do anything open a Vanguard account. Personally I used my parents address in the states and signed up for online statements. They don't need to know you are living over seas. As long as you are giving them money. Next I also have a brokerage account with optionsxpress.com. I went with them as they were offering $100 to sign up. They charge $8.95 a trade. There are cheaper places out there but I'm happy with OX so far. I might one day open an account with another broker but for now I'm okay. Go to Google and google "online brokerage account" and choose a company. Your trades should never cost more than what I am paying.
I think this is where a lot of people get held up. My only advice is to just do it! Be like Neil Armstrong and just take that first step. It can be a hassle but again in the long run it pays off.
Step 3: Buy Stocks
Once your account is open now it's time to buy stocks right? Wrong. Yep more hoops. Once you have some money in your bank account in the US your brokerage account will verify it by putting in small deposits. Then taking them out. After that is verified you transfer some funds to them, say $1,000. They will hold that money for three or so business days to make sure your not trying to pull a fast one on them and then you can trade. Whew! After a while once you've built up a relationship your brokerage might start letting you use your funds earlier. OX now lets me trade with funds almost the next business day. I wouldn't be surprised if this has something to do with your credit score as well so just FYI.
Step 4: Sit back and keep the conveyer belt going.
Well that's about it. You've found a cheap way to send money home, you've linked yourself to a brokerage account, and your ready to start trading. What should you buy? Heck! That's a whole different blog post. Frankly I like diversify so I take a dividend growth stocks/Jim Collins index trading approach. It is with that that I would also like to reveal my portfolio. This was suggested to me a while back that I should put it up but I was a bit concerned. I think I've gotten over that now and will try to keep it updated. As you can see I hold about half of my money in index funds at Vangard and the other half in individual stocks. This is in now way financial advice.
Really, investing from overseas just adds one step which is sending money to an account back in the states. It can be an expensive step however so be careful and look for good deals. In addition if your paying debts off already just keep living the same lifestyle and putting money into investments. The seems to take care of itself.
Please share any experiences you have in the comments with sending money home from overseas or any other investing stories.
