5 questions expats need to ask before making investment changes

When it comes to investing, we always advocate starting with the end goal firmly in mind. Sticking with this position, it’s often best to create a tailored financial plan and position the investments for the long term without tinkering. However, it can be tempting to make adjustments when markets are volatile. Whilst this may be the right decision in some cases, it’s important to weigh up if it’s right for you.

Given the recent market volatility, you certainly wouldn’t be alone in wondering if you should make changes to your investments. If this sounds like you, it’s important to look at your motivations for wanting to make changes so you can understand if this will help you to achieve your objectives.

1. Why do you want to make changes now?

The first question to ask yourself is why you want to make changes. Is it due to current market conditions? It’s normal to be nervous when investment values fall, or markets experience a period of increased volatility.

However, you need to keep in mind that short-term volatility is normal. This is why you should only invest with longer-term goals in mind. Markets do go up and down and tend to trend upwards in the long term. Or put another way, markets do go up in the long term, but not in a straight line. Keeping this in mind can help put the recent market activity into perspective.

2. Have your long-term financial goals changed?

What you want to achieve when investing should be central to the decisions you make. When setting up an investment portfolio, you should have considered what your end goal was. Did you hope to supplement your pension by creating an additional income in retirement in 30 years? Or perhaps you wanted to build a nest egg for your children that they’ll have access to in 10 years?

We do know that as an international living in Europe, your situation and goals can change, which is why we always build flexibility into every plan. If your goals have changed, it’s wise to review your investments and wider plans. There may be cases where adjustments are necessary to align investments with goals. But if your goals have remained the same, it’s may be that your portfolio, which was built with these in mind, remains appropriate for you.

3. What is your investment time frame?

Even seasoned investors can worry after experiencing volatility. Keeping your time frame in mind is important throughout the investment process.

As short-term volatility is normal, it’s usually not advised if you have a time frame of fewer than five years because there’s less opportunity to recover from periods of downturn. When you look at investment performance over the long term, you should see an overall increase with the peaks and troughs balancing out. Generally speaking, the longer the investment time frame, the more risk you can afford to take, although the time frame isn’t the only area to consider when building a risk profile.

4. Is your situation different now?

It’s not just goals that affect financial decisions but your situation too. This is relevant for everyone and especially for expats and internationals living outside their home country.

Whilst it’s often advised to stick to a financial plan that’s set out, flexibility should be built in. If your situation does change, it’s wise to review the steps you’ve taken and the investments you have in place to see if they still suit you.

If you are an expat living in Europe and your situation is changing, whether from COVID-19, from new career opportunities or if your circumstances change for other reasons, this is good reason to review your plans and your investments and modify where necessary.

5. Has your risk profile changed?

Numerous factors affect your risk profile, and some of these will change throughout the investment period. For example, as you get closer to your goal it is common to reduce your risk profile for that investment moving towards preservation and keeping what you have.  It is a worthwhile exercise to review your risk profile with your investment goals periodically. However, this shouldn’t be done just because values have fallen. It’s important to keep in mind that all investments involve some level of risk, but by choosing an appropriate risk profile, you can match this to your circumstances and goals. Before you consider changing your investments, please get in touch with us at Black Swan Capital. We’ll be happy to review your current portfolio in line with your long-term goals to highlight where change may be necessary or advise you to stay the course with your current investment plan.