Stable Baht investments

[WorkingTourist]

Yes, I see your point and accept your argument. I too have no time for "the world going to hell " argument. Agreed, there is no interim return. Agreed, that as an investment, the return could be low (or even negative).

Yet previously you said “I like to see growth of 10% pa or thereabouts”. So why are you wasting your time on gold?

On the plus side, purchase is straightforward (and in small amounts if required) at most high street gold retailers (in Thailand). Likewise for the sale, small amounts can be cashed as and when a need arises. No broker or bank has to be used or paid to assist.

Using “it’s easy to buy” as an argument for why it’s a good investment is damn laughable, not to mention that going to a physical shop is certainly not easier than using an online broker/bank to trade securities, and the fees I pay for trading are definitely lower than the margin on buying/selling gold.

Iv included a graph showing the last 40 years of performance, you have to agree, it's an impressive return o/a but clearly it's a roller coaster. Much the same as any investments .. Substantial losses as well as gains can be made.

This is amateur hour! You can’t look at a graph and think the trend will continue, nor can you look at the price of gold in isolation and conclude it has historically been a good investment, you need to compare it with something else to see how it performs. As mentioned previously, compared to the S&P 500, it has underperformed significantly.

The one thing I don't hear much of is alternate options to investments. I would be very interested to hear of something worthwhile.

My advice is generally to buy ETFs that follow indexes representing sectors that are considered to have growth potential, for example both the technology sector and pharmaceutical industry are good candidates.

Buying individual stocks can give you a better return than buying into an index, but the risk is higher. So before buying individual stocks, at a minimum learn about the price/earnings ratio and understand the market the company serves, and do read their quarterly financial statements which generally include guidance about the future.

[billphillips]

Yes, I see your point and accept your argument. I too have no time for "the world going to hell " argument. Agreed, there is no interim return. Agreed, that as an investment, the return could be low (or even negative).

Yet previously you said “I like to see growth of 10% pa or thereabouts”. So why are you wasting your time on gold?

On the plus side, purchase is straightforward (and in small amounts if required) at most high street gold retailers (in Thailand). Likewise for the sale, small amounts can be cashed as and when a need arises. No broker or bank has to be used or paid to assist.

Using “it’s easy to buy” as an argument for why it’s a good investment is damn laughable, not to mention that going to a physical shop is certainly not easier than using an online broker/bank to trade securities, and the fees I pay for trading are definitely lower than the margin on buying/selling gold.

Iv included a graph showing the last 40 years of performance, you have to agree, it's an impressive return o/a but clearly it's a roller coaster. Much the same as any investments .. Substantial losses as well as gains can be made.

This is amateur hour! You can’t look at a graph and think the trend will continue, nor can you look at the price of gold in isolation and conclude it has historically been a good investment, you need to compare it with something else to see how it performs. As mentioned previously, compared to the S&P 500, it has underperformed significantly.

The one thing I don't hear much of is alternate options to investments. I would be very interested to hear of something worthwhile.

My advice is generally to buy ETFs that follow indexes representing sectors that are considered to have growth potential, for example both the technology sector and pharmaceutical industry are good candidates.

Buying individual stocks can give you a better return than buying into an index, but the risk is higher. So before buying individual stocks, at a minimum learn about the price/earnings ratio and understand the market the company serves, and do read their quarterly financial statements which generally include guidance about the future.

Oh dear so many big words. Without actually making any clear point. You sir, are waffling. Also, your arguments are selective and unclear. I am certainly capable of reading a graph and understanding it. I'm so sorry for you that the simple skill escapes you.

Is your investment in Thailand as the op requested info on? If so, how do you communicate?

Why don't you just say that ; for you gold is not the preferred investment and that you much prefer stocks. Everyone can accept that, as I do.

[SheungWan]

Ahhhh. and there we have it! Don't have much money and need or depend on a regular return / income.

Yes, I understand now. Don't buy gold, or anything else. Investments are not really for people on a shoestring budget. Put your money in a fixed term deposit that will pay interest at set periods, it's safer. Tax free government bonds are out too.

By the way ... I never suggested that gold is a safe haven. That must have been someone else. Who's blind now?

Enjoy your donkey.

There you don't seem to have it at all, though a predilection for Aunt Sallies seems to be a forte. Nobody is arguing here for fixed term deposits or against making investments outside of that. What some of us are saying is that gold is not a one-way bet and those who suggest that it is are deluding themselves. Somehow the proponents of the buy and hold strategy always get antsy when others point out the inconsistencies of their position. I guess when you have discovered the holy grail the last thing you want is to find that it is potentially a lead balloon.

[paddyjenkins]

I would suggest, once the USD has been brought into Thailand and you hold THB the first thing is to open a local brokerage account that offers international funds. Then you put a third of the funds you brought in into a US equity fund as they've been doing well, then put a further third into US bond funds, as they are the safest, i think these can all be bought via Siam Commercial Bank. Then put a third into physical Gold rings and necklaces which I would suggest keeping at home in the toilet cistern as thieves don't usually look there. Or you could wear it all on your person as then at least if your apartment is robbed the thief wont get the Gold as you'll be out most of the time. Then put a further third into a timeshare condo, and use the remainder for spending money. If there is any left after that then diversify into other currencies, such as Hong Kong Dollars, as it isn't safe to hold too much THB.

Edited February 16, 2015 by paddyjenkins

[WorkingTourist]

Oh dear so many big words. Without actually making any clear point. You sir, are waffling. Also, your arguments are selective and unclear. I am certainly capable of reading a graph and understanding it. I'm so sorry for you that the simple skill escapes you.

Is your investment in Thailand as the op requested info on? If so, how do you communicate?

Why don't you just say that ; for you gold is not the preferred investment and that you much prefer stocks. Everyone can accept that, as I do.

I mentioned ETFs and stocks because you asked for alternatives, it was not meant for the OP.

And I participated in this thread, not to give advice about investments, but to debunk gold as a good investment.

As has already been said, the long-term appreciation of gold only keeps up with (US) inflation with no interim dividends, and the volatility means that as a short-term investment it has a very high risk.

If you are a short-term investor, you do not want high risk, if you are long in a security, you want something that does better than keep up with inflation.

So gold is neither appropriate for long or short-term portfolios.

This is not to say that you can’t make good money on gold, but it’s a gamble, not an investment! If you think otherwise, then please share with us the model you use to estimate if gold is under or overpriced (underpriced = buy, overpriced = sell).

Anyway, from your previous replies, I get the feeling that you have close to no experience with actual investments, which is why you have descended into personal insults rather than engage in actual discussion about what determines the price of gold, gold compared to other securities, or maybe just retreat from the discussion. As they say, if you don’t have anything intelligent to say…

[billphillips]

More ridiculous statements from this poster ... Gold only keeps up with US inflation ... S+P 500 is a good investment ....

Keep going, your a good source of entertainment.

[billphillips]

Ahhhh. and there we have it! Don't have much money and need or depend on a regular return / income.

Yes, I understand now. Don't buy gold, or anything else. Investments are not really for people on a shoestring budget. Put your money in a fixed term deposit that will pay interest at set periods, it's safer. Tax free government bonds are out too.

By the way ... I never suggested that gold is a safe haven. That must have been someone else. Who's blind now?

Enjoy your donkey.

There you don't seem to have it at all, though a predilection for Aunt Sallies seems to be a forte. Nobody is arguing here for fixed term deposits or against making investments outside of that. What some of us are saying is that gold is not a one-way bet and those who suggest that it is are deluding themselves. Somehow the proponents of the buy and hold strategy always get antsy when others point out the inconsistencies of their position. I guess when you have discovered the holy grail the last thing you want is to find that it is potentially a lead balloon.

And your alternative for stable baht investments is ........

[billphillips]

Ahhhh. and there we have it! Don't have much money and need or depend on a regular return / income.

Yes, I understand now. Don't buy gold, or anything else. Investments are not really for people on a shoestring budget. Put your money in a fixed term deposit that will pay interest at set periods, it's safer. Tax free government bonds are out too.

By the way ... I never suggested that gold is a safe haven. That must have been someone else. Who's blind now?

Enjoy your donkey.

There you don't seem to have it at all, though a predilection for Aunt Sallies seems to be a forte. Nobody is arguing here for fixed term deposits or against making investments outside of that. What some of us are saying is that gold is not a one-way bet and those who suggest that it is are deluding themselves. Somehow the proponents of the buy and hold strategy always get antsy when others point out the inconsistencies of their position. I guess when you have discovered the holy grail the last thing you want is to find that it is potentially a lead balloon.

And your alternative for stable baht investments is ........ ?

Take into account the following factors please

1, the political situation

2, the unmentionable forthcoming situation

3, the over inflated and long term Baht situation

4, the language problem situation

5, the spouse / partner failure rate situation

It's difficult to recommend an investment that can quickly be realised and / or removed, with knowledge of the above, in Thailand. It may be considered that to escape with your investment intact, albeit at a reduced value, is preferable to a total, or near total, loss situation. At least an opportunity exists to recoup the initial investment at some point in the future, in a place and time of your choice.

Thai recent history would include floods, political unrest, political takeover, reduced tourism, reduced exports, low growth and the potential for future instability. Yet the Baht remains a strong currency. Ask yourself why?

Thai long term history would include extortion, scams, swindles, deception and other forms of skulduggery against non Thais. If you were a professional currency trader, would you invest in Baht right now?

And that returns us to the op .... Stable Baht investments?

Gold is not a ..... one way bet .... by any means, it's a switchback ride of uncertainty. Much the same as life in general. Particularly if you happen to live in Thailand. But I can't think of a better option and, as yet, have not seen anything posted here to convince me otherwise. Until I do I will maintain my position on the subject unlike the fool that suggested S+P 500 as a stable Baht investment.

Regards

Aunt Sally with the fly away lead (gold) ballon.

[WorkingTourist]

But I can't think of a better option and, as yet, have not seen anything posted here to convince me otherwise. Until I do I will maintain my position on the subject unlike the fool that suggested S+P 500 as a stable Baht investment.

I know you do not like to quote my actual statements and challenge these, but just for the records, this is what was written: the S&P 500 […] grew 13.5 times faster than gold (since 1979).

So no-one was recommending it as a stable baht investment, just saying that gold has a poor return compared to it, after you posted a graph of gold in isolation and said: it's an impressive return o/a.

And if you want to split hairs about “stable baht investment”; gold is traded internationally in USD and furthermore, the OP asked for “moderate risk investments” as he considers the stock market too volatile. He is planning on spending 10-20 years in Thailand, so he doesn’t want a hedge against the baht collapsing, he wants to move 25% of his assets to THB to hedge against the THB growing stronger.

Bonds or term deposits sound appropriate for the risk profile of the OP, but given his long horizon, I think he should increase risk, at least for a portion of his portfolio, although without seeing his budget and knowing the size of his assets, it’s hard to give general advice beyond “don’t buy gold”.

[SheungWan]

Ahhhh. and there we have it! Don't have much money and need or depend on a regular return / income.

Yes, I understand now. Don't buy gold, or anything else. Investments are not really for people on a shoestring budget. Put your money in a fixed term deposit that will pay interest at set periods, it's safer. Tax free government bonds are out too.

By the way ... I never suggested that gold is a safe haven. That must have been someone else. Who's blind now?

Enjoy your donkey.

There you don't seem to have it at all, though a predilection for Aunt Sallies seems to be a forte. Nobody is arguing here for fixed term deposits or against making investments outside of that. What some of us are saying is that gold is not a one-way bet and those who suggest that it is are deluding themselves. Somehow the proponents of the buy and hold strategy always get antsy when others point out the inconsistencies of their position. I guess when you have discovered the holy grail the last thing you want is to find that it is potentially a lead balloon.

And your alternative for stable baht investments is ........ ?

Take into account the following factors please

1, the political situation

2, the unmentionable forthcoming situation

3, the over inflated and long term Baht situation

4, the language problem situation

5, the spouse / partner failure rate situation

It's difficult to recommend an investment that can quickly be realised and / or removed, with knowledge of the above, in Thailand. It may be considered that to escape with your investment intact, albeit at a reduced value, is preferable to a total, or near total, loss situation. At least an opportunity exists to recoup the initial investment at some point in the future, in a place and time of your choice.

Thai recent history would include floods, political unrest, political takeover, reduced tourism, reduced exports, low growth and the potential for future instability. Yet the Baht remains a strong currency. Ask yourself why?

Thai long term history would include extortion, scams, swindles, deception and other forms of skulduggery against non Thais. If you were a professional currency trader, would you invest in Baht right now?

And that returns us to the op .... Stable Baht investments?

Gold is not a ..... one way bet .... by any means, it's a switchback ride of uncertainty. Much the same as life in general. Particularly if you happen to live in Thailand. But I can't think of a better option and, as yet, have not seen anything posted here to convince me otherwise. Until I do I will maintain my position on the subject unlike the fool that suggested S+P 500 as a stable Baht investment.

Regards

Aunt Sally with the fly away lead (gold) ballon.

The smart guy who recommended gold the last 5 years:

The fool who recommended the S+P last 5 years:

Another fool who recommended the SET the last 5 years:

[kanwisher]

@workingtourist thanks that hits the nail on the end, I'm hedging against a stronger baht. I have roughly 1 million usd, but I'm in my mid 30s and still working. I came to Thailand to work less, that hasn't actually happened yet. I expect my main salary to decrease over the years and I have less contracts with the US. My first child will be born in Thailand this year, and I plan on spending at least the next 5-10 years here, and work like to live here permanently. A rising baht will really eat into my long term lifestyle, so I'm kind of hedging my bets. I'm considering owning some property (absent of the wife taking it, which wouldn't be horrible since it would still help my children). I would prefer assets that create value over time, some things like art/gold can be good stores of value however they are more like another fiat currency. I'm not hedging against gold getting more expensive, I'm hedging that Bangkok is still a cheap city in south east asia. I meet a lot of rich asians that live in HongKong, Singapore, Tokyo and are happy with the value that Bangkok gives them, as ASEAN opens up more opportunities for people to open businesses here you may see more of an influx of people.

But I can't think of a better option and, as yet, have not seen anything posted here to convince me otherwise. Until I do I will maintain my position on the subject unlike the fool that suggested S+P 500 as a stable Baht investment.

I know you do not like to quote my actual statements and challenge these, but just for the records, this is what was written: the S&P 500 […] grew 13.5 times faster than gold (since 1979).

So no-one was recommending it as a stable baht investment, just saying that gold has a poor return compared to it, after you posted a graph of gold in isolation and said: it's an impressive return o/a.

And if you want to split hairs about “stable baht investment”; gold is traded internationally in USD and furthermore, the OP asked for “moderate risk investments” as he considers the stock market too volatile. He is planning on spending 10-20 years in Thailand, so he doesn’t want a hedge against the baht collapsing, he wants to move 25% of his assets to THB to hedge against the THB growing stronger.

Bonds or term deposits sound appropriate for the risk profile of the OP, but given his long horizon, I think he should increase risk, at least for a portion of his portfolio, although without seeing his budget and knowing the size of his assets, it’s hard to give general advice beyond “don’t buy gold”.

[ChaangNoi]

Some of you guys are picking odd price dates for gold to make your points.

I hope you understand it was illegal to own gold in the USA from like 1932? to 1972?

When the government sets the price for the gold and it does not float on the free market he price is not real. that is why as soon as it was legal again it went to the moon.

gold is something everyone should have at least 5 to 10% of their wealth in. it is something you can have if shit really gets bad. gold will always have value where in some times of chaos nothing else will.

[fletchsmile]

Firstly I'd say to OP that it's a sensible move to think about diversifying his assets a little from US investments and USD currency if he plans to stay here longer term. If you're going to stay here longer term it makes sense to build some THB assets to reduce currency risk in particular.

Two key thoughts:

(1) The first decade of this century was a lost one financially for many westerners and US citizens. Particularly those in Thailand:

- The S&P/Dow/Nasdaq all finished the decade lower than they started it on 1 Jan 2000

- THB significantly appreciated vs USD during the period

So many US citizens not only lost money on their equity investments, they also had to deal with what they had left being worth less in THB terms too

The USD currency devaluation carried on for a couple of years after that too

(2) Markets go in cycles. While the US markets have done relatively well in some of the years since then, and gained value, and the USD has strengthened a bit, it's only a matter of time before USD equities fall again and USD weakens again. US markets are hitting all time highs, and USD is an favour for many people for now. It's only a matter of time though.

On the other hand, someone with some THB equities and THB assets would have made money in the first decade of this century, and living in Thailand holding some THB assets has eliminated some of the currency risk. These could have been relied on while the US recovered.

Sure people can cherry pick dates and markets. But the above 2 key points highlight the issue OP and many of us face here.

Thailand is also a very different place in terms of economics than it was in the 20th century, particularly pre-1997. The currency is no longer pegged, the banking system is healthier etc etc, so relying on things coming full circle needs a rethink.

To rely on overseas assets/ income only and subject yourself completely to currency risk is asking for trouble if living in Thailand.

Cheers

Fletch

[fletchsmile]

So as for solutions. My suggestions would include (although not limited to ):

1) Build some THB cash. It's not the sexiest of investments and not the highest return. But it removes some of the currency risk. You can then use this during times of emergencies, or when your other assets elsewhere are not doing so well, to tide you over until the cycle recovers. 2% to 3% is easily achievable, and will eliminate currency risk.

2) Consider buying your own home. This fixes some expenses - again in THB terms. Plus ensures your wife and kids have a roof over their head if anything happens to you. All this adds stability. If relying on overseas income and paying rent, you're always at the mercy of exchange rates, landlords, rent increases etc. Always nice to have your own place too.

After that I wouldn't personally buy any more property here. You never know what you might be able to sell it for, and sod's law if you need to sell it, it will be the wrong time. Also you can't sell part of a property.

3) Put some money into Thai equities. Probably best for most people via some sort of fund, as the Thai stock market isn't the easiest to time or navigate, and most people just don't have the skills to go it alone.

OK equities are volatile. So taken in isolation they may not be "stable". On the other hand they should grow over time and return above inflation, and they're in THB. While you are now assuming some Thai equity risk, you're actually reducing other risks:

- Currency risk

- Inflation risk etc

Plus you should look at investments as a portfolio not in isolation. While alone Thai equities may be "more risky" than US equities, a combination of Thai equities + US equities/investments will likely be less risky than 100% US investments or 100% Thai investments. Diversification and portfolio theory are important. It's not just the investment itself how risk it is, but also how it changes the shape of your entire portfolio. eg may make money when US equities don't or are struggling

So if OP is looking to put 25% here, I see no harm in some of that in Thai equities, providing he also builds some cash, and is prepared to look longer term, and not panic sell or need it in emergencies.

$100k of THB equities out of $1mio portfolio, will likely do a lot more good than harm

Another word of caution, don't make large sum investments in one go, particularly at the moment. Like the US markets, Thailand equities don't look cheap at the moment. Better to baht cost average over a couple of years to reduce the risk of putting your money in and it tanks not long after.

4) Thai bonds aren't particularly attractive. In the future they may be though, and could be somewhere between cash and equity risk. There are the odd corporate issues made available to retail investors, where you can get more than cash. Just don't put too much in any one issue. eg a year or so back I bought some yielding over 4% for 3 years. Better than cash rates, for a bit more risk

5) You could look at REITs. If looking for property exposure I'd consider these. They are more stable than equities and yields of around 6% - 7% possible, with some chance of capital gain. Unfortunately they aren't always that transparent. They are much more liquid than an actual property, and you can sell part or all of your investment at any time.

I actually prefer Singapore REITs, to Thai REITS, because:

- They still give liquid property exposure

- They yield a bit less - around 6% possible - with some capital growth possible. Not capital guaranteed, but more stable than equities

- More transparent regulatory environment

- Because they are in SGD, the currency exposure is less than USD assets if measuring vs THB. While USD lost quite a lot of value last decade, SGD has generally appreciated vs THB over time, and because of being another Asian currency, is more likely to move in a similar direction to THB than USD. i.e. sort of half way between USD and THB

6) Should you really want to, you could consider a few % in gold. I'm not a big fan myself. I like my assets to generate income, like equities, cash, REITs, or at least reduce liabilities/outgoings like buying a property instead of renting. I hold a couple of % in gold. My view is it might be worth something in times where other assets are struggling - with the emphasis on might. Wouldn't want more than 5% though.

All the above could form a a part of your portfolio. The key is not being dependent on just one type of asset, and certainly not backing one currency that's not THB. Rather than looking at one particular investment, it's the portfolio as a whole in combination that counts.

So when looking at "stable investments", don't just look at the investments individually are they stable are not, but think more in terms of whether it makes your overall portfolio and financial situation safer by adding some of it.

I used to aim for 1/3 my money in Thailand, 1/3 where I come from and 1/3 elsewhere. So if you're starting out with a Thai wife and kids, bringing 25% here is a decent move until you get more comfortable. Leaving 100% where you come from in a non-THB currency is asking for trouble like the first decade of this century.

Cheers

Fletch

Edited February 23, 2015 by fletchsmile

[umbanda]

i d rather buy king bhumipol gold and silver coins, for example 5000 bath 1974 abouut 30 gr. , 3 years ago would sell for 40.000 thb now 60.000.

if the king dies then his coins go ballistic.

so mote it be.

roobaa01

Can you send me info where I can buy those gold coins? Thank you.

[billphillips]

I think I would avoid buying any stock that is at an all time high, especially one that is paying a dividend of less than 2%, such as S+P 500. Also the need to factor in that a non US resident will have to pay capital gains tax on investments there. That I believe includes US citizens living abroad. I don't know how much that is exactly but it may be as much as 30%. Does anybody know for sure and is the tax deducted at source?

[kanwisher]

@fletchsmile good advice, have you run into much issue with capital gains on foreign stocks? I see there is a lot of additional paper work you have to send to the IRS. Any issues with possible double taxation? I assume your american?

So as for solutions. My suggestions would include (although not limited to ):

1) Build some THB cash. It's not the sexiest of investments and not the highest return. But it removes some of the currency risk. You can then use this during times of emergencies, or when your other assets elsewhere are not doing so well, to tide you over until the cycle recovers. 2% to 3% is easily achievable, and will eliminate currency risk.

2) Consider buying your own home. This fixes some expenses - again in THB terms. Plus ensures your wife and kids have a roof over their head if anything happens to you. All this adds stability. If relying on overseas income and paying rent, you're always at the mercy of exchange rates, landlords, rent increases etc. Always nice to have your own place too.

After that I wouldn't personally buy any more property here. You never know what you might be able to sell it for, and sod's law if you need to sell it, it will be the wrong time. Also you can't sell part of a property.

3) Put some money into Thai equities. Probably best for most people via some sort of fund, as the Thai stock market isn't the easiest to time or navigate, and most people just don't have the skills to go it alone.

OK equities are volatile. So taken in isolation they may not be "stable". On the other hand they should grow over time and return above inflation, and they're in THB. While you are now assuming some Thai equity risk, you're actually reducing other risks:

- Currency risk

- Inflation risk etc

Plus you should look at investments as a portfolio not in isolation. While alone Thai equities may be "more risky" than US equities, a combination of Thai equities + US equities/investments will likely be less risky than 100% US investments or 100% Thai investments. Diversification and portfolio theory are important. It's not just the investment itself how risk it is, but also how it changes the shape of your entire portfolio. eg may make money when US equities don't or are struggling

So if OP is looking to put 25% here, I see no harm in some of that in Thai equities, providing he also builds some cash, and is prepared to look longer term, and not panic sell or need it in emergencies.

$100k of THB equities out of $1mio portfolio, will likely do a lot more good than harm

Another word of caution, don't make large sum investments in one go, particularly at the moment. Like the US markets, Thailand equities don't look cheap at the moment. Better to baht cost average over a couple of years to reduce the risk of putting your money in and it tanks not long after.

4) Thai bonds aren't particularly attractive. In the future they may be though, and could be somewhere between cash and equity risk. There are the odd corporate issues made available to retail investors, where you can get more than cash. Just don't put too much in any one issue. eg a year or so back I bought some yielding over 4% for 3 years. Better than cash rates, for a bit more risk

5) You could look at REITs. If looking for property exposure I'd consider these. They are more stable than equities and yields of around 6% - 7% possible, with some chance of capital gain. Unfortunately they aren't always that transparent. They are much more liquid than an actual property, and you can sell part or all of your investment at any time.

I actually prefer Singapore REITs, to Thai REITS, because:

- They still give liquid property exposure

- They yield a bit less - around 6% possible - with some capital growth possible. Not capital guaranteed, but more stable than equities

- More transparent regulatory environment

- Because they are in SGD, the currency exposure is less than USD assets if measuring vs THB. While USD lost quite a lot of value last decade, SGD has generally appreciated vs THB over time, and because of being another Asian currency, is more likely to move in a similar direction to THB than USD. i.e. sort of half way between USD and THB

6) Should you really want to, you could consider a few % in gold. I'm not a big fan myself. I like my assets to generate income, like equities, cash, REITs, or at least reduce liabilities/outgoings like buying a property instead of renting. I hold a couple of % in gold. My view is it might be worth something in times where other assets are struggling - with the emphasis on might. Wouldn't want more than 5% though.

All the above could form a a part of your portfolio. The key is not being dependent on just one type of asset, and certainly not backing one currency that's not THB. Rather than looking at one particular investment, it's the portfolio as a whole in combination that counts.

So when looking at "stable investments", don't just look at the investments individually are they stable are not, but think more in terms of whether it makes your overall portfolio and financial situation safer by adding some of it.

I used to aim for 1/3 my money in Thailand, 1/3 where I come from and 1/3 elsewhere. So if you're starting out with a Thai wife and kids, bringing 25% here is a decent move until you get more comfortable. Leaving 100% where you come from in a non-THB currency is asking for trouble like the first decade of this century.

Cheers

Fletch

[Naam]

@fletchsmile good advice, have you run into much issue with capital gains on foreign stocks? I see there is a lot of additional paper work you have to send to the IRS. Any issues with possible double taxation? I assume your american?

wrong assumption

[fletchsmile]

No I'm not American, and yes American's may find it more difficult than other nationalities to invest in non-US investments . Not only from a tax perspective which needs to be considered, particularly on the amounts you're talking, but also because of many places not wanting to deal with Americans for investments, as it's often administratively too much hassle. So for American specific advice on tax on funds you're best asking fellow American expats. While I'm aware of some of the pitfalls, it's not my area of expertise, and other people will be better placed to help you on specifics.

As you asked about capital gains on Thai stocks...

The most likely way for you to gain access to Thai equities is via collective investment schemes, whether that's mutual funds, unit trusts, ETFs etc. Key generic things to bear in mind, that may be part of your solutions:

1) It actually doesn't matter much what currency an equity fund is denominated in for what you're looking for. The key is what the underlying investments are. Many people get lost by the red herrings on exchange rates here.

Basically if you invest in Thai equities you have exposure to the Thai stockmarket and THB regardless of which currency the fund is in. What will drive your fund returns in THB terms is the value of the underlying Thai investments. If they don't move, your investments in THB terms don't move. as an example:

Say you invest USD 1,000 in a Thai equity fund and the THB exhange rate is THB 30. That means you get THB 30,000 of Thai equity exposure. Now if the investments in THB don't change in value, your Thai fund in THB terms doesn't either. If the rate goes to 60. Your Thai investments are still worth THB 30,000. All it means is that if you convert back to USD you now have only USD 500. Similarly if the rate goes to 15 you would have USD 2,000.

So while the USD value fluctuates the THB value remains stable (unless the underlying investments move).

Originally you had THB 30,000 worth USD 1,000. In the other scenarios, you have:

THB 30,000 worth USD 500 or THB 30,000 worth USD 2,000.

If you're looking for stability in THB terms, the USD value isn't important, and nor is the exchange rate. It's the underlying investment that counts. That will go up and down according to the value of the investments, and the equity risk of Thai equities. So if the Thai stockmarket goes up and your fund is linked to the Thai stock market, likely your fund goes up too. This will still give you Thai equity exposure and still reduce your THB volatility in THB terms. Your USD values will fluctuate more, but if your objective is to reduce THB volatility that's OK

The implication of this is actually it doesn't matter what currency your funds are in.

In turn what that means is you could invest in Thai equity funds from the US, and play by the tax rules you understand. i.e leave your money in the US and buy Thai based funds from there.

This may affect your choice of funds/ type of fund, but is still an option to achieve your goals. The best returns from the Thai stock market come from Thai based active fund managers. So it may push you more towards low cost index trackers/ ETFs to minimise fees and accept average based returns. It's still a valid strategy though if Thai based funds don't make sense for you.

2) Another option is to buy in a family member's name. You mentioned your wife is Thai and you have kids. That presents 2 obvious options. I can't comment on your wife's US tax situation, or on rules of moving money between US and non-US spouses.

What I would say is that for a Thai spouse they have no capital gains on Thai equity funds. Given you pay tax in the US on investments and she doesn't pay Thai tax in Thailand that's something to look into anyway.

As mentioned I wouldn't stick a large lump sum into the Thai stock market just now anyway. What could make sense though is putting some of your earnings each month into Thai equity funds in your wife's name, which are tax free in Thailand for her. You then build your (as a partnership) THB assets and Thai equity month by month.

So similar to not looking at investments in isolation, don't look into ownership in isolation either. There are some assets better held in your name and some better in hers. Thailand adds its own twist for this.

I'm quite happy buying Thai funds in my Thai wife's name. For me I also don't pay Thai income tax and capital gains on Thai funds (unlike probably you), but if I go back to the UK I might need to. So it avoids capital gains tax and income tax should I ever go back to the UK, and be then taxed on worldwide income, it also keeps it out of the UK inheritance tax loop as well.

So makes sense to have high growth, high yield assets in the name of the most tax efficient spouse. Also may be convenient for her to buy in Thailand, and she may have access to products you don't

Another option is monthly savings in your children's name. We have investments and accounts in our kids name by me, and our kids name by their mum. You're likely going to be spending money on education one way or another. Their education. So can make sense having the money for their education in their name.

There may be US tax rules around gifts/ spouses etc, but if it's coming out of monthly income and going to your wife, rather than large lump sums it's more likely to be an option.

Sounds like you've done well building some reserves already. That's your initial security. Putting some in cash in your name, and buying a home in your wife's may be less complicated than other options for now. But regardless of what you do with that as a lump sum, it makes sense though for new income/ new money to look at new ways. Build it up gradually. At your age you've also got time on you side.

You get the naysayers saying don't do it. But realistically if you've got your head screwed on, as you seem to, you realise life's a partnership. Technically your wife is entitled to half of any assets acquired after marriage if you divorce without a pre-nup, anyway. All you're doing is putting some of her entitlement in her name to start with, and as you say there's the kids to think about anyway. I see no harm in doing that each month, from income earned after marriage.

3) There are products like Thai Long Term Equity Funds, where if you're earning in THB, you can get tax relief from the Thai government. The favourable tax treatment here may offset the unfavourable hassle from the US

Again you're only talking part of your money. You can balance it by keeping your originally 75% elsewhere. Also low yielding assets like cash are OK in your name in Thailand.

Cheers

Fletch

Edited February 24, 2015 by fletchsmile

[billphillips]

Good post thank you but I'm really interested to know how non resident US citizens stand with capital gains tax for investments on the US stock exchanges. In fact, how does any non US resident stand with tax for US investments?

I'm sure there are "workarounds" but of corse these would be illegal and the penalties would be severe. What do you suggest?

[kanwisher]

Fletch, despite working in finance for years, and even understanding about that holding instruments in other currencies doesn't matter it never really sank in. You have a very clear understandable explanation of the concept. I really do like the idea of putting money into my wife's name long term, cause she won't have US tax implications. Our kids will sadly cause of dual citizenship. Even in the event of a divorce its fine cause it will cover my children, which is one of the primary goals anyways. Might do that slowly over time to do time weighted investing.

No I'm not American, and yes American's may find it more difficult than other nationalities to invest in non-US investments . Not only from a tax perspective which needs to be considered, particularly on the amounts you're talking, but also because of many places not wanting to deal with Americans for investments, as it's often administratively too much hassle. So for American specific advice on tax on funds you're best asking fellow American expats. While I'm aware of some of the pitfalls, it's not my area of expertise, and other people will be better placed to help you on specifics.

As you asked about capital gains on Thai stocks...

The most likely way for you to gain access to Thai equities is via collective investment schemes, whether that's mutual funds, unit trusts, ETFs etc. Key generic things to bear in mind, that may be part of your solutions:

1) It actually doesn't matter much what currency an equity fund is denominated in for what you're looking for. The key is what the underlying investments are. Many people get lost by the red herrings on exchange rates here.

Basically if you invest in Thai equities you have exposure to the Thai stockmarket and THB regardless of which currency the fund is in. What will drive your fund returns in THB terms is the value of the underlying Thai investments. If they don't move, your investments in THB terms don't move. as an example:

Say you invest USD 1,000 in a Thai equity fund and the THB exhange rate is THB 30. That means you get THB 30,000 of Thai equity exposure. Now if the investments in THB don't change in value, your Thai fund in THB terms doesn't either. If the rate goes to 60. Your Thai investments are still worth THB 30,000. All it means is that if you convert back to USD you now have only USD 500. Similarly if the rate goes to 15 you would have USD 2,000.

So while the USD value fluctuates the THB value remains stable (unless the underlying investments move).

Originally you had THB 30,000 worth USD 1,000. In the other scenarios, you have:

THB 30,000 worth USD 500 or THB 30,000 worth USD 2,000.

If you're looking for stability in THB terms, the USD value isn't important, and nor is the exchange rate. It's the underlying investment that counts. That will go up and down according to the value of the investments, and the equity risk of Thai equities. So if the Thai stockmarket goes up and your fund is linked to the Thai stock market, likely your fund goes up too. This will still give you Thai equity exposure and still reduce your THB volatility in THB terms. Your USD values will fluctuate more, but if your objective is to reduce THB volatility that's OK

The implication of this is actually it doesn't matter what currency your funds are in.

In turn what that means is you could invest in Thai equity funds from the US, and play by the tax rules you understand. i.e leave your money in the US and buy Thai based funds from there.

This may affect your choice of funds/ type of fund, but is still an option to achieve your goals. The best returns from the Thai stock market come from Thai based active fund managers. So it may push you more towards low cost index trackers/ ETFs to minimise fees and accept average based returns. It's still a valid strategy though if Thai based funds don't make sense for you.

2) Another option is to buy in a family member's name. You mentioned your wife is Thai and you have kids. That presents 2 obvious options. I can't comment on your wife's US tax situation, or on rules of moving money between US and non-US spouses.

What I would say is that for a Thai spouse they have no capital gains on Thai equity funds. Given you pay tax in the US on investments and she doesn't pay Thai tax in Thailand that's something to look into anyway.

As mentioned I wouldn't stick a large lump sum into the Thai stock market just now anyway. What could make sense though is putting some of your earnings each month into Thai equity funds in your wife's name, which are tax free in Thailand for her. You then build your (as a partnership) THB assets and Thai equity month by month.

So similar to not looking at investments in isolation, don't look into ownership in isolation either. There are some assets better held in your name and some better in hers. Thailand adds its own twist for this.

I'm quite happy buying Thai funds in my Thai wife's name. For me I also don't pay Thai income tax and capital gains on Thai funds (unlike probably you), but if I go back to the UK I might need to. So it avoids capital gains tax and income tax should I ever go back to the UK, and be then taxed on worldwide income, it also keeps it out of the UK inheritance tax loop as well.

So makes sense to have high growth, high yield assets in the name of the most tax efficient spouse. Also may be convenient for her to buy in Thailand, and she may have access to products you don't

Another option is monthly savings in your children's name. We have investments and accounts in our kids name by me, and our kids name by their mum. You're likely going to be spending money on education one way or another. Their education. So can make sense having the money for their education in their name.

There may be US tax rules around gifts/ spouses etc, but if it's coming out of monthly income and going to your wife, rather than large lump sums it's more likely to be an option.

Sounds like you've done well building some reserves already. That's your initial security. Putting some in cash in your name, and buying a home in your wife's may be less complicated than other options for now. But regardless of what you do with that as a lump sum, it makes sense though for new income/ new money to look at new ways. Build it up gradually. At your age you've also got time on you side.

You get the naysayers saying don't do it. But realistically if you've got your head screwed on, as you seem to, you realise life's a partnership. Technically your wife is entitled to half of any assets acquired after marriage if you divorce without a pre-nup, anyway. All you're doing is putting some of her entitlement in her name to start with, and as you say there's the kids to think about anyway. I see no harm in doing that each month, from income earned after marriage.

3) There are products like Thai Long Term Equity Funds, where if you're earning in THB, you can get tax relief from the Thai government. The favourable tax treatment here may offset the unfavourable hassle from the US

Again you're only talking part of your money. You can balance it by keeping your originally 75% elsewhere. Also low yielding assets like cash are OK in your name in Thailand.

Cheers

Fletch

[paddyjenkins]

"Fletch, despite working in finance for years, and even understanding about that holding instruments in other currencies doesn't matter it never really sank in. You have a very clear understandable explanation of the concept. I really do like the idea of putting money into my wife's name long term, cause she won't have US tax implications. Our kids will sadly cause of dual citizenship. Even in the event of a divorce its fine cause it will cover my children, which is one of the primary goals anyways. Might do that slowly over time to do time weighted investing."

You worked in finance for years, actually in finance? I hadn't quite realized until i read the above quite how much trouble the financial industry must be in. What exactly did you do in finance?

[paddyjenkins]

http://www.businessinsider.com/why-thailand-is-falling-behind-its-peers-2015-2?platform=bi-ipad

This is an excellent article that highlights the many reasons to invest in Thailand and why anyone who expresses negative sentiments towards the THB or Thai equities are just silly naysayers. After all, look at how well Thai equities have done, how much their property has gone up and how strong the THB has been....past performance surely suggests the future must be very bright.

Thailand number one ! Double thumbs up!

Edited February 25, 2015 by paddyjenkins

[kanwisher]

chillout dude, I build software for finance firms. I'm well aware of this, I was simply trying to give a compliment. Something rarely seen on this messageboard.

"Fletch, despite working in finance for years, and even understanding about that holding instruments in other currencies doesn't matter it never really sank in. You have a very clear understandable explanation of the concept. I really do like the idea of putting money into my wife's name long term, cause she won't have US tax implications. Our kids will sadly cause of dual citizenship. Even in the event of a divorce its fine cause it will cover my children, which is one of the primary goals anyways. Might do that slowly over time to do time weighted investing."

You worked in finance for years, actually in finance? I hadn't quite realized until i read the above quite how much trouble the financial industry must be in. What exactly did you do in finance?

[fletchsmile]

Good post thank you but I'm really interested to know how non resident US citizens stand with capital gains tax for investments on the US stock exchanges. In fact, how does any non US resident stand with tax for US investments?

I'm sure there are "workarounds" but of corse these would be illegal and the penalties would be severe. What do you suggest?

Starts getting complicated based on various factors, including

- type of investment, eg shares or mutual funds/unit trusts

- if it's a fund/ETF where the fund itself is domiciled, and what countries its underlying investments are in

- your nationality (whether worldwide income applies), where you are tax resident, where you buy from

- double tax treaties or not between countries

- vehicle you use to buy it thru, eg pension fund, normal share fund/dealing account, other

and so on

Key taxes to watch for:

- Dividends withheld

- Capital gains

- Inheritance tax (IHT) if you die

Examples:

As a Brit who is living and tax resident in Thailand, I prefer to buy US shares from Singapore. I filled in a W8BEN form, which reduces witholding tax (WHT) on dividends to 15% (from the standard 30%), and pay no capital gains tax (in any of US, UK, Thailand or Singapore). It would be part of my estate for IHT.

But If I go back to live in the UK, and become tax resident again it gets captured as worldwide income and becomes taxable

My Thai wife, tax resident in Thailand, buying US shares with a W8BEN form would also pay reduced 15% WHT on dividends and no capital gains tax. It would likely be outside Thai IHT as it's offshore. So tax free all round except the 15% WHT on divs

A Singaporean is stuck with 30% WHT on divs on shares, even with a W8BEN form in place, as there is no agreement in place between the countries to reduce tax on dividends below the standard rate

Going back to OP's situation:

- Thailand itself is favourable for investments (often no capital gains tax on listed investments or unit trusts/mutual funds), but unfortunately US nationality can negate that, so buying from US may be simpler and easier

- A Thai spouse comes in very useful too, as 1) not only is Thailand favourable for investments (onshore), but 2) Thailand also tends not to tax its people on money they keep outside of Thailand (offshore)

Cheers

Fletch

Edited February 25, 2015 by fletchsmile

[AyG]

1) It actually doesn't matter much what currency an equity fund is denominated in for what you're looking for. The key is what the underlying investments are. Many people get lost by the red herrings on exchange rates here.

That's almost true. There are some (a small proportion) of equity funds that are hedged to a particular currency to reduce exchange rate risk. (This is a strategy that has proved particularly successful with some Japanese equity funds over the past few years.) In other words, you need to read the small print to discover whether the fund does (or can) use currency hedging. If it doesn't then you get direct exposure to the currency of the underlying equities. If it does then you get a hybrid combination of equity and currency exposure.

Conversely, for bond funds they usually are currency hedged and you have to look a bit harder to find one which gives the FX exposure if that's what you want.

Another factor to take into account which is tangentially related to currency of denomination is fees. The fees on a UK-based fund or investment trust (denominated in sterling and investing in Thai equities) are likely to be significantly lower than those for Thailand-based funds. I suspect that that is even more true of US-based funds where charges tend to be cheaper than in the UK (though for a non-American the tax situation may well make US funds unattractive).

[fletchsmile]

Yes there's almost always exceptions to almost everything

As mentioned though for what OP is looking for, it wont come up much.

Funds that hedge currencies tend to do so mainly for the majors hence the examples for JPY and Japan. EUR etc.

Hedging currencies like Thailand and THB isn't as common for equity funds in US / UK tho there may be one or two out there. Reasons being the greater difficulty due to less liquid derivatives markets compared to the majors and increases in costs. Also for Thailand you have to consider offshore rates so often THO instead of THB.

Hedging is probably a bit more common also for bonds and commodity funds rather than equities.

Another exception is funds that hold large cash elements in their home country currency rather than currency of investment. eg holds a large % of univested USD cash alongside THB equities. Again rare.

Cheers

Fletch

Edited March 2, 2015 by fletchsmile