How do expats protect against exchange rates

[LeeUklondon]

Planning on retiring in Thailand in two years. I have just about started to understand how to invest in retirement in the uk. I will probably use stocks/bonds 50-50 and planned on investing in vanguard platform. 

 

The obvious problem is the strength of the bhatt. If it go’s back to 37 to the £ then that is very bad. 

 

An obvious solution is to move all my money to thailand and invest in a similar portfolio in bhatt. 

 

Is this feasible? I get the impression expats keep their money invested in their home countries and transfer when needed? 

 

 

 

[Kwasaki]

When retiring here 15 years ago I  plan my future pensions payments to enable me to have a comfortable life @35 to £.

Kept lump sum intact for 1 year extensions.

[LeeUklondon]

I suspect I will do the same. 

 

I am assuming at the time you thought the risk of transferring everything was too high? Political changes, relationship risks (not being able to get back if it went  bad).....I certainly don’t feel confident transferring everything as I don’t feel I understand thailand the same way I think I understand the uk.

[neytil]

The big boys do it with currency swap forward contracts.  For small fries, many funds and ETFs also hedge currency risk using forward contracts.

[LeeUklondon]

Many thanks. Do you now if there are good etf products in Thailand? Similar to vanguard in uk/us? 

 

I would be be interested in converting at least some of my money to bhatt and buying etfs in bhatt in Thailand, just for peace of mind on exchange rates. 

[kokesaat]

Food for thought on foreign exchange rates:  The dollar was trading at 25 Baht to $1 for many years until the financial crisis in 1997.  The exchange rate rose fairly rapidly to more than 50 to $1, then slowly dropped into the 40's, then 30's, and dipped into the 29 range here and there.  It's pretty much stayed in the 30-32 range for a few years.  I don't know of an expat who predicted such a dramatic rise in rates......nor dips to the current range.  

If you were to sink a chunk of change into the Baht now.........there's always a chance that rates will work against you....maybe not as spectacularly as they did in 1997......but I doubt anyone has a crystal ball that can predict that.  Likewise, if you opt out of putting money into Thai Baht, the rate can always go in the opposite direction.

For me, cost averaging works best........If you build up a reserve in Thailand over the years, the averaging may work in your favor.....or not.

Over the past 20 years, my advice to people considering a move to Thailand has been to plan for the worst (as in 20 Baht to $1 during GI daze in the 70's).  If you can survive on the worst, then you won't be sweating small dips in the exchange rate here and there.

Good luck with your plans

[Salerno]

48 minutes ago, kokesaat said:

The dollar was trading at 25 Baht to $1 for many years until the financial crisis in 1997.

 

Because it was pegged to the $ (from the mid-80s), the 1997 financial crisis caused it to be unpegged again hence the rapid change. Since then it's basically found it's "true" level. Nothing is impossible, but I think it would take a seriously major catastrophe to see such huge swings again.

 

48 minutes ago, kokesaat said:

Over the past 20 years, my advice to people considering a move to Thailand has been to plan for the worst (as in 20 Baht to $1 during GI daze in the 70's).

 

Always good advice to plan for the worst but I would have thought the figure a little conservative for the US$ (not saying that's a bad thing really). May just be I'm somewhat lacking in the risk-averse side of life but I use 20 Bht to the AU$. Perhaps I should be more conservative but it's only dipped below 20 for about two weeks in the past 20 years. Not sure, but I don't think US$ has gone below around 26-27 in the same period.

 

BTW, during Vietnam the Baht was also pegged to the US$ at just over 20 Bht to the $.

 

Edited January 25, 2021 by Salerno

[scubascuba3]

I wouldn't switch now, there is a risk you may leave Thailand then have trouble switching out, it's not easy to move money out. 

 

You will probably spend less money than you've estimated so exchange rate is less of a concern, money spent often goes down over time, but does depend what you sign up for I.e. Thai family

[davemos]

Gold ?

[DaLa]

You have to make the decision as to whether you want to retire or become a currency trader.  Look at the £/baht rate history and make a plan A for one end of the spectrum and plan B for the opposite end.

 

And stick to the old adage of never having all your eggs in one basket.  There are multiple opportunities that have opened up since the Thai baht hit 37 and those opportunities will cease if it ever gets back to 70.

[DaLa]

19 hours ago, neytil said:

The big boys do it with currency swap forward contracts.  For small fries, many funds and ETFs also hedge currency risk using forward contracts.

And the majority of them lose money.

[Pedrogaz]

I used to hedge with a UK company called World First the biggest currency traders in the world. I have small assets in the UK, but a lot in the US and when I retired a lot in Japan. For the few years before retiring I would buy other currencies eg Swiss franc, Canadian Loonie, Aussie dollar on the theory that not all currencies go down together. I was not trying to make money understand, but just to hedge and preserve purchasing power. It worked very well for a period until my account was moved from Britain to Australia where World First is not a deposit taking institution. I had to get rid of the money with in a month. Basically I changed it all into baht (which was the currency I was spending in). At the time the US dollar was 33 to the baht and is now 30. Other currencies were similar.....I built my house with Japanese yen that I earned at 120 to the $, it was about 80 to the dollar when I paid for the house. My advice is not the speculate but to try to conserve your purchasing power.

[Kwasaki]

22 hours ago, LeeUklondon said:

I suspect I will do the same. 

 

I am assuming at the time you thought the risk of transferring everything was too high? Political changes, relationship risks (not being able to get back if it went  bad).....I certainly don’t feel confident transferring everything as I don’t feel I understand thailand the same way I think I understand the uk.

I didn't transfer nearly everything until September 2005 when the pound went to 75 - £ , I thought at the time that can never last it didn't and has gone down everything since. 

When my bonds tied up in Nationwide finished I got the rest of my money over it was about 60 - £ then from memory.

By then it was about 5 years to go before my UK pension. 

My private pensions took a hit 2008 but by 2012 when they were due they recovered a bit and weren't as bad as I thought they gonna be. 

[dlclark97]

23 hours ago, LeeUklondon said:

Planning on retiring in Thailand in two years. I have just about started to understand how to invest in retirement in the uk. I will probably use stocks/bonds 50-50 and planned on investing in vanguard platform. 

 

The obvious problem is the strength of the bhatt. If it go’s back to 37 to the £ then that is very bad. 

 

An obvious solution is to move all my money to thailand and invest in a similar portfolio in bhatt. 

 

Is this feasible? I get the impression expats keep their money invested in their home countries and transfer when needed? 

 

 

 

I keep money in the USA.  Bring it here as need to a US dollar account at Bangkok Bank and exchange when the rate is favorable (not anytime recent).  I invest with Fidelity.  Excellent support, easy to use website and also Active Trader Pro that can show minute to minute action with options to buy/sell.  Good to watch if you are waiting for a particular price to buy.  Outstanding historical information and research.  The Thai SET as  have looked into it typically displays 30 days of history and little else in the way of research. 

[dlclark97]

13 hours ago, Salerno said:

 

Because it was pegged to the $ (from the mid-80s), the 1997 financial crisis caused it to be unpegged again hence the rapid change. Since then it's basically found it's "true" level. Nothing is impossible, but I think it would take a seriously major catastrophe to see such huge swings again.

 

 

Always good advice to plan for the worst but I would have thought the figure a little conservative for the US$ (not saying that's a bad thing really). May just be I'm somewhat lacking in the risk-averse side of life but I use 20 Bht to the AU$. Perhaps I should be more conservative but it's only dipped below 20 for about two weeks in the past 20 years. Not sure, but I don't think US$ has gone below around 26-27 in the same period.

 

BTW, during Vietnam the Baht was also pegged to the US$ at just over 20 Bht to the $.

 

In those days 20 baht would buy a lot.  Not so anymore.  Many prices even local merchandise higher than in USA.

[spidermike007]

If I were in a position, I would have as much cash over here as I could, converted into baht, in whatever interest bearing accounts I could find, that are relatively secure. I realize there is some loss of interest income, possibly. But, I see the baht holding steady, or rising significantly over Sterling, the Euro, and the dollar, over the next decade. Possible 18-20 baht to a dollar. 

[Stevemercer]

Leave the bulk of your capital invested in the UK. Make sure you have adequate liquidity to withdraw pounds and transfer when you need to. There should be tax-favourable retirement investment funds available.

 

Keep enough Baht in Thailand to live for up to a year if exchange rates take a dip (e.g. you can wait maybe 12 months before you have to transfer more funds across and, hopefully, the exchange rate may recover). It also serves the same purpose if the stock market dips and you want to avoid withdrawing any money for a year.

 

I used to use my 800,000 Baht kept in a Term Deposit for my 12 month retirement extension for this purpose. If the exchange rate (and market gains) were reasonable/stable, I would transfer a sum each month. But if the exchange rate dipped, I would draw on the 800,000 Baht until it improved. Unfortunately, they changed the rules a year or two back so it is no longer so easy.

 

I did change to a marriage extension (400,000 Baht) where there is more flexibility and figure I could draw it down (10 months at 40,000 Baht per month) if I had to. I started doing this early last year, when the Aussie dollar dipped, and the stock market also crashed due to Covid.

 

Fortunately both the Aussie and the stock market have recovered so I will shortly withdraw and transfer enough to replenish my 400,000 Baht (needs to sit for 2 months before renewing my extension).

 

 

[RocketDog]

1 hour ago, davemos said:

Gold ?

Actually, yes. Instead of converting a chunk of money to the baht and parking or investing it, metals provide a third option. Metals have historically been a hedge against unstable fiat currencies and still are. 

 

Thailand represents a particularly attractive opportunity in that respect. 

Jewelry is easy to purchase/sell, fungible, highly likely to be what it claims to be, easy to store and transport, and requires no identification to buy or sell. That eliminates the tax issues that most western countries impose on profitable sales and minimizes interactions with third parties (banks and authorities) almost completely. 

The key to financial security is asset diversity. 

[LeeUklondon]

2 hours ago, davemos said:

Gold ?

 Well the Thai gf definitely thinks I should invest in gold. But she has too many necklaces now. Too much for her to carry. 

Edited January 26, 2021 by LeeUklondon

[scubascuba3]

16 minutes ago, LeeUklondon said:

 Well the Thai gf definitely thinks I should invest in gold. But she has too many necklaces now. Too much for her to carry. 

She'll want gold, motorbike, pickup, house

[Golden Triangle]

What is this bhatt you speak of ? ????

[Jaxxper]

All I can say is budget on the worst you can envisage, that way your portfolio is not twitching every time there’s a small negative impact. Good luck with the retirement plan.

[LeeUklondon]

2 hours ago, Kwasaki said:

I didn't transfer nearly everything until September 2005 when the pound went to 75 - £ , I thought at the time that can never last it didn't and has gone down everything since. 

When my bonds tied up in Nationwide finished I got the rest of my money over it was about 60 - £ then from memory.

By then it was about 5 years to go before my UK pension. 

My private pensions took a hit 2008 but by 2012 when they were due they recovered a bit and weren't as bad as I thought they gonna be. 

I guess that sums up the problem pretty well. One of my uk pensions has gone up 250% since 2000, or about 10% a year. So I am pretty comfortable with uk trackers. Looks like the bhatt is up 50% over a similar time period. I think that means I have still earned a good return even after the bhatt rise. This is obviously past performance and who knows what will happen in future. 

 

I will I’ll have to get the calculator out

[donmuang37]

20 hours ago, LeeUklondon said:

Many thanks. Do you now if there are good etf products in Thailand? Similar to vanguard in uk/us? 

 

I would be be interested in converting at least some of my money to bhatt and buying etfs in bhatt in Thailand, just for peace of mind on exchange rates. 

Check out Aberdeen Asset Management, a UK company with an office in Bangkok and a regional HQ in Singapore. 

Cheers, Din

[oznomad]

5 hours ago, davemos said:

Gold ?

The only thing wrong with this comment is the question mark.

[Poet]

I use crypto as a hedge. I was alarmed by the dollar's drop, relative to THB, at the start of 2019 and moved everything into Bitcoin.

Although I expect the THB to strengthen greatly against the USD, GBP and, in particular, the EUR, I expect it, along with all fiat currencies, even the "strong" ones, to devalue massively relative to hard assets. So, I'm saying our dollars will buy us fewer baht, but our baht will also buy us fewer things.

I pay very little attention to the daily ups and downs of crypto. My simple goal is that, by the time I retire in a few years, the money I had saved to buy a house, a nice car, and a few rental income condos in Thailand will still be able to buy those things, regardless of how much the THB prices of those things may have inflated. So far, it is working out pretty well, even if, as I expect, prices double in Thailand within the next two or three years.

I expect metals will do very well this year, in particular silver, but crypto is where the real action will be this year.


 

Edited January 26, 2021 by Poet

[treetops]

3 hours ago, LeeUklondon said:

Looks like the bhatt is up 50% over a similar time period. I think that means I have still earned a good return even after the bhatt rise.

 

It's baht.

[timendres]

As many have said, you should plan for what you consider to be the worst possible expected rate over the time you expect to live here and be sure it works for you. The only step I took over the past 10 years (I was actually here for a month in 2003 when I was getting 45 THB to the USD - heaven), was when the rate hit 28.x THB to USD, I stopped moving money over, and spent the money I banked at a rate of 32 THB to USD. When the exchange hit 36 THB to the USD, I moved about 6 months worth of expenses in cash over here to lock in that nice rate. I put half in gold and the rest in the bank. Thus, if the rate were to drop to 28 again, I could just use what I transferred at 36 waiting for the rate to improve. Rates will go up and down, and averaging it out a little over time helps take the bite out of it. Aside from that, pray to the exchange rate gods.

[LeeUklondon]

4 hours ago, scubascuba3 said:

She'll want gold, motorbike, pickup, house

 

38 minutes ago, timendres said:

As many have said, you should plan for what you consider to be the worst possible expected rate over the time you expect to live here and be sure it works for you. The only step I took over the past 10 years (I was actually here for a month in 2003 when I was getting 45 THB to the USD - heaven), was when the rate hit 28.x THB to USD, I stopped moving money over, and spent the money I banked at a rate of 32 THB to USD. When the exchange hit 36 THB to the USD, I moved about 6 months worth of expenses in cash over here to lock in that nice rate. I put half in gold and the rest in the bank. Thus, if the rate were to drop to 28 again, I could just use what I transferred at 36 waiting for the rate to improve. Rates will go up and down, and averaging it out a little over time helps take the bite out of it. Aside from that, pray to the exchange rate gods.

One of the recommended approaches to retirement investing that makes sense to me is to have your money in “ boxes”. 2 years of expenses in cash. Next 4 years in less risky assets( 50% shares, 50% bonds). Anything you don’t need in the next 6 years, put 100% shares.  

 

The theory being the markets usually recover in 2 years. So your cash means you don’t need to sell assets at a loss. 

 

Sounds similar to your approach. Maybe just need to treAt exchange rate variation like stock market variation? 

[Pro1Expat]

On 1/25/2021 at 12:04 PM, LeeUklondon said:

Planning on retiring in Thailand in two years. I have just about started to understand how to invest in retirement in the uk. I will probably use stocks/bonds 50-50 and planned on investing in vanguard platform. 

 

The obvious problem is the strength of the bhatt. If it go’s back to 37 to the £ then that is very bad. 

 

An obvious solution is to move all my money to thailand and invest in a similar portfolio in bhatt. 

 

Is this feasible? I get the impression expats keep their money invested in their home countries and transfer when needed? 

 

 

 

I do keep the majority of my money out of Thailand not because of the exchange rate though. When I need money in Thailand  I transfer it in from my bank, again not in my country of birth.