How expats can manage cross-border finances in the Netherlands
When you embark on life as an expat, the everyday can feel exciting, and what's usually mundane can suddenly feel new and fun. The downside is often the stress of not knowing how things are done in your new home country.
Managing your money is one area where not understanding how things work can have a material impact, and where the details matter.
Arisaig Wealth Management has deep knowledge of the financial complexities expats face in the EU and can guide you in navigating them. Here are three key areas where they can help you manage your finances and plan for your future.
1. Build a cross-border plan tailored to your life abroad
Creating and implementing a plan for where you are right now is an important first step. Whether you are adapting a well-thought-out plan to your life abroad or using this change to put objectives and structures in place for the first time, similar principles apply.
Arisaig Wealth Management suggests that you centre all actions around your objectives. Your financial plan needs to adapt to where you live now, consider the impact of your passport, where you intend to reside in the future and any other worldwide reporting or tax obligations you may have.
There are many other layers to consider, and most expats need flexibility and liquidity - the ability to make changes as life changes - without stress, access restrictions or penalties. Arisaig Wealth Management specialises in working with international professionals and is also made up of expats.
2. Filter out short-term market noise
Arisaig Wealth Management can also help you block out the constant noise surrounding your financial plan. Across the history of financial markets, there are always events that influence markets and short-term investment returns.
These events or factors are often described as extraordinary, but if we step back and look at the longer term, we see a consistent sequence of events, one after the other. Some are positive, some negative.
Investment markets go up over time, but not in a straight line. Another way to say this is that time reduces volatility and the likelihood of losses, and what looks like bumpy markets over a short period can smooth out over a longer period of 10 years. Within that timeframe, though, you still need to make many important tactical decisions and adaptations.
One way Arisaig Wealth Management adds value is by interpreting, distilling and applying relevant information while filtering out the noise, keeping you on track towards your financial goals.
3. Guard against the trap of "momentum bias"
Third, Arisaig Wealth Management can help you adapt and stay on track with your goals while avoiding investor biases like the momentum investor. When we shop, we often feel comfortable buying items when they are on sale rather than at full price. When it comes to investing, though, if we follow the momentum investor bias, we are much more inclined to wait until an investment has already gone up (increased in price) before investing.
The rationale is easy to understand. If we wait until something has increased in price, it feels like a proven and safer investment because it has a track record. However, what this often means is buying at the top of the market.
One of the most repeated phrases in financial advice is that past performance is no guarantee of future performance. Just because an investment has risen in value does not mean it will keep rising at the same rate.
Following this pattern, investor bias kicks in again when prices drop, meaning we may be less likely to buy, even though that asset may be considered "on sale". In fact, we may feel inclined to sell. The momentum investor gets increasingly worried as prices drop. The graph sets this out below:
It is not possible to time investment markets consistently and accurately. Arisaig Wealth Management believes that you can add much more value to your investment (at considerably lower risk) by consistently following a structured plan across market cycles, with intelligent, informed tactical adjustments, than by trying to time peaks and troughs.
Remember that the purpose of investing is to achieve your long-term objectives. Investing is a means to an end, not the end in itself. If your focus is the long term, keep it there.
Get advice from the experts
Seeking advice from qualified professionals can profoundly impact your life now and in the future. Arisaig Wealth Management do this every day and can help you achieve your goals. Learn more at www.arisaigwealth.eu or contact them directly for a no-cost initial discovery call by emailing info@arisaigwealth.eu.