Summary: Expats often inquire about their special needs as investors when they transfer their life abroad. This article by Thun Financial's David Kuenzi offers useful advice on how to approach the realities of international investment and more.

Problem: What special considerations apply to building an investment portfolio while living abroad?

Aside from adjusting the asset mix of an investment portfolio to reflect current and future residency plans, the fundamentals of successful investing fortunately apply to all investors no matter their location or nationality. To be successful in the long run, investors need to focus on four issues when making investment choices:

1) Diversification: Currency management strategy is a compliment to, but not a substitute for proper investment portfolio diversification. All investors, no matter where they live need to invest in a broad array of assets including US stocks, international stocks, bonds, emerging markets, real estate and commodities. Proper diversification can substantially mitigate losses incurred during a severe market downturn. This, in turn, helps sustain portfolio stability and reduces the risk that the investor will sell out near a market bottom as a result either of need or emotion. Decades of academic research and real world investor outcomes confirm that diversification is the only way of maximizing returns for a given level of risk.

2) Risk: Within a broadly diversified portfolio, the relative weight of higher return/higher risk investments (stocks, commodities) versus lower risk/lower return investments (bonds) needs to match the risk profile of the investor. Generally, as we move towards retirement we need to reduce our exposure to a large market downturn by steadily increasing the weight of bonds in our portfolio. Many other factors—job security, near-term spending plans, or expected college expenses for example—also impact this calculation.

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About the Author David Kuenzi is the founder of Thun Financial Advisors. He is a Certified Financial Planner® and has previously held positions with Chase Manhattan Bank, Deutsche Bank and Bank Austria. His financial industry career included postings in New York, London and Moscow. Kuenzi grew up in Wisconsin but spent most of his professional career in New York City and in Europe, before returning to the Midwest in 2005. He received his undergraduate degree from the University of Wisconsin and completed graduate work in politics and economics at Columbia University and Harvard University before launching a career in finance.

First Published: May 08, 2009