It’s exceptionally difficult to watch helplessly as the events in Japan unfold following the earthquake, tsunami and the aftershocks. For most of us there is very little we can do – except for sending prayers or loving thoughts to the affected population of this stunningly beautiful country, and charity in the form of donations to the likes of the Red Cross.
On a human level the devastation is incomprehensible, and on an environmental level we still have no idea how far the nuclear threat will develop. The uncertainty and fear has rocked the global stock markets, and any expat who has money invested offshore may very well be personally panicking about how low the value of their portfolios could fall.
Against a backdrop of such tragedy it’s hard to gain any perspective, but expats with offshore investments are being urged not to panic by financial experts – and we would like to pass on this message today.
Unforeseen catastrophes such as the recent earthquakes in New Zealand and Japan send panic through all of us – they remind us how we are not genuinely in control of anything significant in life. Because the panic affects all of us it causes wobbles in the likes of the global stock markets – and then negative data and the unfavourable analysis of news and information further compounds this situation, and it can result in nose-diving share prices.
Anyone who has any form of investment – from an onshore invested ISA to a globally diversified, multi-asset portfolio – may be negatively affected by plunging markets.
The knock on effect of this is more panic…and so a negative and very undermining cycle begins.
To be able to step back and see a bigger picture is perhaps not personally possible – and so we asked a number of experts for their take on whether expats invested offshore should now be panicking.
According to the expat financial advisers we spoke to, there is positivity to be found, and a bigger picture to take comfort from…also, there are ways to protect your portfolio.
Please note, Expatra is not authorised to give financial advice, nor does the content of this report constitute advice.
On the one hand Japan is an incredibly well organised and developed nation with a great capacity to deal with a catastrophe of this level. This can been seen in the very way the majority of Japanese people are acting with calm dignity in the face of such great loss.
What’s more, the nation enjoys exceptionally positive, strong and far reaching relationships with most well-developed nations globally. They have been quick to formally reach out and ask for expert help – and where countries can offer support, they are doing so.
The Bank of Japan was also very quick to step in to provide short-term liquidity and expand an asset-purchase program in an attempt to retain some confidence…and whilst clearly there will be a drop off in terms of the value of many commodities and companies related to or affected by Japan, over the much longer-term when calm returns, prices may well once again rise.
Anyone who takes out any form of investment needs to know that they are taking a risk – but that with a long-term approach to the development of their portfolio, they stand the best chance of developing a successful strategy.
With a long-term approach, diversification across asset classes, countries, currencies, stocks and commodities is required for maximum balance.
Yes, with plunging markets the panic reaction is one that leads us to want to close our positions and get out. But if your assets have already been knocked, should you instead stay calm and leave them where they are and wait for however long it takes for calm to be restored?
Such a question can only be answered on a case-by-case basis. A great deal will depend on your exposure levels, your investment goals – even your age (because if you’re close to retirement for example, your situation may be different to that of someone in their twenties or thirties.) So, expats are being urged to review their offshore investments and financial position with their financial adviser before panicking or taking any drastic action which could negatively impact their fiscal status.