I’ve received an interesting question a few times now.
It goes along the lines of whether or not I’ll suddenly decide to invest in the Thai stock market now that I’m indefinitely living in Thailand as a dividend expat.
The short answer is no.
The long answer is a bit more detailed, as I’ll go over.
But the overarching point I want to make here is that retiring/moving/living abroad doesn’t somehow all of the sudden necessitate investing wherever you move to.
There’s nothing inherently or automatically logical about this.
Likewise, traveling the world, or living in a different country every few years, doesn’t mean you should necessarily be investing in local stock markets in all of these places.
It’s important to keep in mind that the best place to live might not necessarily be the best place to invest, nor does the former require the latter.
Moreover, keeping your assets/money in a different place than the (likely foreign) country you’re living in might actually be the more sensible approach to managing your finances. This is especially true for a US citizen. Keeping your assets in US accounts, in US stocks, in US dollars is probably the safest thing you can possibly do. And it further diversifies you, hedging your bets.
Fortunately, as a US citizen who has accumulated equity in some of the finest US-based multinational companies, I can invest in almost every country out there, simultaneously, without buying a single stock from their respective exchanges.
And that’s all while largely exposing me to one of the largest and most dynamic economies that has ever existed.
That’s the very nature of investing in world-class, global businesses. It’s part of the appeal. It’s part of what makes dividend growth investing (at least for a US investor) so wonderful in the first place.
And so I’ll answer this question with a bit more depth through two narratives.
Keep in mind, however, that this perspective is from and for a US investor considering the idea of moving abroad to take advantage of geographic arbitrage. I cannot speak for all investors in all countries.
Retiring Abroad Does Not Require Investing In A Local Stock Market
This is, perhaps, the most obvious way to answer this question.
Living here in Thailand indefinitely doesn’t give me some kind of incentive or advantage to buying Thai stocks that I didn’t have when I still lived in the US.
Buying Thai stocks is no more appealing to me today than it was a year ago, before I moved here.
And the same should more or less be true for anyone else who decides to retire abroad, especially if we’re talking about countries that operate very differently from the one you came from.
I discussed the drawbacks and pitfalls of buying foreign-domiciled dividend growth stocks back in late 2014.
My thoughts are mostly the same today.
It’s not easy from a number of standpoints (reading foreign financial statements, no GAAP standards, taxation considerations, etc.) to buy up stock on some exchange that operates very differently from a US exchange.
And there’s no reason to go through the rigmarole. There are literally hundreds of high-quality dividend growth stocks available in the US, for US investors.
David Fish’s Dividend Champions, Contenders, and Challengers list contains invaluable information on more than 800 US-listed dividend growth stocks.
If you can’t find what you like from that, you’re not looking hard enough.
Through my FIRE Fund, I own equity in more than 100 of the world’s best businesses.
And almost every single one of these companies has a longstanding track record of paying big and growing dividends to their shareholders – typically for decades.
These companies collectively pay me more than $12,000 per year in dividend income.
And this number will surely grow year after year – exponentially, no less – as the snowball picks up speed.
The US stock market is the most robust in the world. And it’s filled with companies that have the wherewithal and desire to pay their shareholders regular and reliable growing dividends – something that can’t always be said for foreign markets.
What more could I want?
To each their own, but this is good enough for me.
These companies are complying with US standards, printing their paperwork in English, and producing financial statements I can easily understand.
I like to keep it simple. That goes for investing and life. Attempting to clear a bunch of additional hurdles to invest in a foreign company that might (or might not) do better is totally counterproductive to that.
Now, I do own a select group of foreign-domiciled stocks.
Royal Dutch Shell PLC (RDS.B), Unilever PLC (UL), and Bank of Nova Scotia (BNS) are a few examples.
But these are stocks that are readily available on a US exchange. There’s almost no extra paperwork involved. The financial statements are easy to understand. And the taxation is generally favorable to me. In addition, these are companies that pay out big (and usually growing) dividends. These stocks fit my goals as an investor.
I thoroughly enjoy living in Thailand. It’s an incredible place. And it’s far exceeded my expectations in almost every conceivable manner.
But being a great place to live doesn’t automatically make it a great place to invest. At least for me.
I mean, moving to Fiji might be someone’s dream. It doesn’t mean you then have to (or even should) buy stock on the SPSE.
You’re Likely Greatly Exposed To Foreign Markets Already
Factoring out the rigmarole that might be involved with buying stock in foreign companies, it’s also not necessary from the standpoint of what dividend growth investing is at its core.
When you buy shares in a US-based, high-quality, global company that has paid an increasing dividend to its shareholders for years – or decades – on end, the odds are pretty good that you’re already investing in the market in which you live in, almost regardless of where you go choose to live.
See, I’m reminded of my investments almost every single day here in Thailand.
I see many of the US companies I’m invested in doing business everywhere over here.
And so I’m already invested in the future and growth of the Thai economy – without actually buying a single Thai stock.
But I’ll let the visuals tell that story.
There are multiple McDonald’s Corp. (MCD) locations throughout Chiang Mai. Most are open 24 hours.
I don’t eat here too often, but they’re usually fairly busy every time I do pop in. And that’s saying a lot considering the fact that the food is priced at a healthy premium relative to local options.
Coca-Cola Co. (KO) is absolutely dominating the soda scene here. It’s honestly not even close.
I’ll order a soda with lunch and dinner. And Coca-Cola products are all that’s available most of the time.
When I want to buy a soda for consumption at home, a fair guess would be that Coca-Cola products are 75% of the available options.
I would go so far as to say Coca-Cola is ubiquitous in Chiang Mai.
Brushing your teeth with toothpaste is difficult over this way if you’re not using toothpaste manufactured by Colgate-Palmolive Co. (CL).
I don’t think it’s a stretch to say they own 75% of the shelf space whenever I’m looking for personal dental cleansing products.
Fashion is always tough.
Seasonal changes, personal tastes, value, quality, and brand recognition are difficult to nail in sync.
But VF Corp. (VFC) is making its presence felt here.
I routinely see Thai people shopping and wearing brands like Lee.
Domination of shelf space and consumer mind share is a recurring theme here.
And The Hershey Co. (HSY) is doing it just as well in Chiang Mai as any other business I’m invested in with exposure to this market.
I enjoy an occasional chocolate bar as much as the next guy. When I indulge, it’s a Hershey product. Based on what I’ve seen, I’m far from alone on that one.
As much as Coca-Cola is crushing the soda competition, PepsiCo Inc. (PEP) is doing so on the snack front.
When I square up on any grocery store’s snack aisle, Pepsi’s products are front and center.
The same could even be said when I pop into a local 7-11 store (they’re on every street).
It’s pretty simple: if you want a bag of chips, the odds are pretty good you’re going to buy a Pepsi product.
What’s super interesting (and perhaps less known) about Chaing Mai is that the coffee scene here is incredible.
There are beautiful independent coffee shops serving up some amazing products all over the city. There must be 30 coffee shops within one kilometer of my apartment. Serious.
However, Starbucks Corp. (SBUX) is more than holding their own over here.
I find this to be a bit strange because their coffee is something like twice as much as the local stuff. I think this really speaks to their brand cachet.
Retiring abroad to take advantage of geographic arbitrage is advantageous and exciting due to a number of reasons.
Moving to Thailand has honestly been one of the best decisions I’ve ever made, from both financial and non-financial perspectives.
But I don’t necessarily see investing in the local market (regardless of where you go) as something that’s advantageous. If anything, I’d argue that might be something disadvantageous.
A place can be a phenomenal location for living, but it doesn’t have to be great for investing in order for that to happen.
And the wonderful thing about dividend growth investing is that it’s highly likely a diversified portfolio of high-quality dividend growth stocks from the US will already give an investor a great degree of exposure to whatever market they find themselves in at any particular time.
I’ll gladly raise a crisp, cold, classic Coca-Cola to that!
Full disclosure: I’m long all aforementioned stocks.
What do you think? Do you ever plan to invest in a foreign market simply because you plan to retire there? Why or why not?
Thanks for reading.
Image courtesy of: bplanet at FreeDigitalPhotos.net.
P.S. If you’re interested in becoming financially independent, which would potentially allow you to relocate and retire anywhere in the world, check out a fantastic list of resources that helped me become financially independent in my 30s.