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.
Conclusion
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.
Hey Jason,
I was living in Chiang Mai last week and saw you! I walked right past you, but didn’t say anything haha. Anyway, I appreciate reading your stuff. Like you, I’m financially independent and I “retired abroad” (at 27, now 30), although I tend to use the Philippines as a home base and travel around to all the countries in this region.
Question. Have you set up a Thai Bank account since you’ve been there? Was wondering about the process of doing so. Thanks and I wish you well with your freedom. I remember how great it was when I first moved abroad!
Mike
Mike,
Wow. No kidding? You should have said hello. I’ve met a lot of really great people over here. Always happy to have a chat with someone. 🙂
I haven’t opened a bank account over here. Not necessary at all. I keep my money in the States. That’s just fine for me.
Cheers!
Awesome article Jason! I loved going on that virtual shopping spree with you, and seeing all of those products / companies that I own / am benefitting from via dividends. It brought me back to when I was in Istanbul in 1995. Food was ridiculously cheap and abundant (we are talking $0.95 for a foot long freshly caught and grilled piece of fish with all of the fixings on the bosphorus river), and then one day, one of the Australians I was traveling with told me we were going to a special restaurant that night, which ended up being a beyond packed McDonalds by the Spice Market. Ummm… ok. That, and going into the historic square on Puerto Vallarta a couple of years ago to see the jam packed Starbucks told me that American companies, especially those with international expansion plans, are where it is at as far as my investment dollars are concerned.
The accounting principles, oversight agencies, historical accountings, predictability (roughly), etc etc dictate where I want my money parked and working, and while it doesn’t always work out 100% (I owned Enron), give me the american financial markets any day of the week (even if Trump and Jinping are playing whose $*&% is bigger, that too shall pass and we can continue building our freedom one payout at a time. In my mind, you switching markets would be like an olympic athlete switching sports just because of a geographical change. Wouldn’t make too much sense.
Hope you are well Jason. By the way, I am changing your last name to Fireber. Who would think that adding one little ‘r’ makes you Financially Independent and Retired Early ber.
Andrew,
Right. Exactly. You don’t need to invest locally to be invested locally. Moreover, you’re (most likely) usually better off if you’re not investing in local companies. I’m sure there are some find Thai brands/companies over here. But very, very few would be global. To go through the rigmarole for something like that is nonsensical, in my opinion. And it’s not like you can’t invest in very small companies in the States, if that’s your angle.
Fireber! I like it. I also like how Fieber = Be FIRE. It was meant to be. 🙂
Best regards!
Hi Jason!
Great to hear you have all of you financial ducks in a row. How do you get cash or dividend income from the U.S. to you? Do you use an ATM, or go to a local branch of a U.S. bank, or a Thai bank? Curious how it works…
Another reason for a U.S. citizen to sidestep investing directly in non-U.S. investments is the U.S. reporting requirements for tax purposes, as you likely know. The Foreign Account Tax Compliance Act requires you to disclose foreign financial accounts, to the IRS. This is an annual requirement. Since it complicates tax return filing, for simplicity (assuming it’s your goal, it would be mine), it is easy to avoid it altogether.
Best regards!
SIYD,
Great question. I simply go to an ATM and withdraw cash. No fees. Very easy. 🙂
And great point there about the rigmarole regarding foreign investments/accounts. I like to keep things simple. Others like to complicate their lives. I’ll never understand it!
Thanks for dropping by.
Cheers.
Thanks for writing this article Jason as I, too, have been wondering about this same question myself. I assumed you had a reason behind why you didn’t invest in the SET market, and thought you provided excellent reasoning as to why. You also answered my follow up question regarding purchasing foreign dividend stocks in a foreign market if the right opportunity presented itself. Guess I should have saw that coming…haha! Thank you for the DM link, and that explanation as well.
On a side note, a few years ago the asset management company I worked for did a presentation on US based stocks they had purchased for the company and their reasoning why. They had traveled to multiple Asian countries (although I don’t think Thailand was one of them unfortunately) and also provided a similar slide show of their findings. This article just reminded me of that slide show, and just found it fascinating how far these products stretch out globally.
Danny,
Glad this article provided you some value! 🙂
These are great businesses that are truly global. It’s one thing to write/talk about it. But that point really hits home when I’m walking around Chiang Mai and seeing these products/services everywhere I go.
Best wishes!
I think you will get a kick out of this: https://www.customink.com/designs/jasonfire/mea0-00bc-aeyu/share?pc=EMAIL-40778&utm_campaign=shared%20design&utm_source=share%20link&utm_medium=shared%20design&utm_content=shared%20desktop
Andrew,
I need to get into the t-shirt business! 🙂
Cheers.
All very good points, Jason. As you point out very well with those photos, investing in large multinational companies gives you plenty of foreign market exposure.
Did you at any point invest in foreign-domiciled stocks in order to plan your dividend payment schedule? I know a lot of European corporations issue dividends on a different interval than what is typical in the U.S.
Moose,
Never considered it. Doesn’t really matter to me when a dividend comes in. I tend to collect more dividend income in the last month of every quarter. It’s just excess capital that rolls over to the following months (when the dividend income is lower). A dividend payment schedule is more or less irrelevant, especially when you’re working with a fairly large, diversified portfolio. And as I pointed out before, I’m collecting a dividend a day (on average) anyway. 🙂
https://www.mrfreeat33.com/a-dividend-a-day-keeps-the-unwanted-job-away/
Best regards!
Got it, that’s good to know. Thanks for the reply, Jason,
Cheers!
its same in india ,and even i europe i see lot MCDs,starbucks
desidividend,
Absolutely. These are multinational businesses that are dominating. I’d rather think globally than locally. 🙂
Cheers!
Hey Jason,
thank’s for the insight and great pictures! Always interesting to see what products are consumed in foreign countries. I like to invest in companies and business models i understand. These global consumer stocks are solid dividend stocks for every portfolio. Right now i own VF Corp and PepsiCo but others will follow.
As a dividend growth investor US stocks are the first choice, but for diversification it’s smart to add some companies from different countries. You mentioned Royal Dutch Shell or Bank of Nova Scotia. I like both and hold RDS.
I just posted a watchlist series (Dividend stocks Germany, Part 1 – and Dividend stocks Switzerland)…
Greet’s from Germany,
DividendSolutions
DS,
Happy to share! You can even see prices here, which is kind of interesting. 🙂
I don’t necessarily buy up a foreign company (like a Shell) for diversification purposes. As I pointed out, you’re already widely diversified by buying up large US multinationals. That said, there are a few select foreign-domiciled companies out there that fit into the overarching story of who I am as an investor and what I want out of a business. In addition, US-based investors are very fortunate. This information is obviously targeted toward US investors. Investors from other countries will have different opportunities and challenges.
Best regards!
Good post, Jason. As you probably know from my website, I am invested in equities all via the US market but I hold real estate in Asia to hedge our cost of living here. Since rent or housing constitutes a large portion of one’s living costs, I felt important to hedge that while living abroad. Besides, real estate carrying costs (mainly property taxes) are very low here, and it appreciates also quite fast, hedging nicely against inflation and also, due to growing population density in Asian cities.
But Totally agree with you on equities – especially on the sheer cost efficiency, transparency and broad diversification achieved in US equity market.
TFR,
That’s really interesting, going after the local RE angle. I still vastly prefer my (domestically-listed) REITs for a variety of reasons – and that’s pretty much regardless of what international RE market we’re talking about. I’m very, very happy renting my beautiful apartment here in CM for less than $450/month. But I can understand the allure of physical real estate for some people. 🙂
Best wishes!
I understand Jason. I also rent our 2000 soft 3 bedroom + office single family house with 1000 sq.ft. terrace for a mere $550 a month! The concern in developing markets, however, is inflation. US REITs can hedge against US inflation, but inflation in countries like India can be 6-8%, or thrice the US inflation rates. That’s a big worry. Even in my rental contract here, there is built in 5% annual raises in rent, so hedging that becomes important for a long-stay retiree in Asia.
TFR,
I’m certainly glad I don’t have inflation like that here in CM. It’s around 0%. But even if it were in that ~7% range, I’d still not be terribly concerned. It’d be many decades before costs would catch up to US costs due to the much lower starting base, as I’ve noted before. And my dividend income should/will grow organically somewhere in that range anyway.
Cheers!
Good article. What about exchange rate risk and inflation though? What if inflation in Thailand continues to be higher than US inflation? Wouldn’t it be a good idea to have at least some assets in your local market? There’s also a Thailand ETF (THD) in the US market that might be worth looking into for someone who wants to keep most of their money out of Thailand.
Fit,
I addressed inflation in the article.
One can apply the same basic logic to the exchange rate. The only difference there is that there’s a natural hedging in place via DGI, meaning it’s even less of a concern than inflation. As the dollar loses strength, earnings reported in dollars for companies I own go up as they translate those foreign currencies back into dollars. That means stronger EPS and more dividends (more passive income). That offsets some of the loss that occurs when dollars are exchanged for baht for local spending. Of course, these ratios tend to even out over a longer period of time, so there’s little risk. It’s more of a concern if you’re spending a lot of money over a short period of time (so you may be looking at timing your exchange).
Cheers!