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Each situation is different, this article was written for informational purposes only and the opinions mentioned here do not constitute financial advice.
One of the differences between France and the US is the way we invest. While investing in France is mostly, but not only, focused on real estate; investing in the US is more focused on investing in the stock market, particularly via retirement accounts such as 401ks/403bs, IRAs, Roth IRAs, or other types of accounts.
Here is an overview of the investing landscape in the US.
A stock is like a piece of a company. When you buy stocks, you buy pieces of a company. Buying stock is cheap – you can buy hundreds of stocks of a specific company at once for less than $5. The return on investment can be high: think Amazon, Facebook, Google, Apple. But they can also declare bankruptcy: think Kodak, Enron, Blockbuster.
Investing in stocks requires research- is the company profitable? What is the earning history? What is the debt to income ratio? And multiple other questions.
You shouldn’t invest in a stock just because you have a “feeling.” Instead make sure you do research before investing in stocks.
ETFs and Mutual Funds
An ETF is a financial vehicle that contains multiple stocks. It trades like shares. You can buy and sell it during the day. It’s a cheap way to diversify your holdings. An ETF follows an index. A computer, not a human being, buys and sells the underlying shares. You can find ETFs with different themes: technology, healthcare, etc. You are guaranteed to have the same return on investment as the index (minus fees), but you won’t do better.
For reasons too long to explain here, ETFs are also a good vehicle tax-wise.
Mutual funds work similarly, but the price of a mutual fund is fixed once a day and a human being manages the fund. You can invest a specific dollar amount or buy shares of a Mutual fund. Mutual funds can have extra fees such as load fees. Make sure that you know all the costs when you buy one.
In my practice, I only trade a few ETFs. I don’t invest in individual stocks.
Here are some good ETFs:
- VTI: owns all the stocks in the US stock markets. It’s cheap and very liquid.
- VT: owns all the stocks in the world
- BND: owns all the bonds in the US
- BNDW: owns all the bonds in the world
You can create a portfolio with a combination of these ETFs. Keep it simple.
Many of my clients want to invest in real estate, particularly French real estate. Real estate is not as “mysterious” as the stock market and it feels more familiar therefore it feels less risky. You buy a house or an apartment, you find people to live in it, and you get paid.
While emotionally it can be an easier decision than investing in the stock market, financially it doesn’t always make sense. Here are things to think about before investing in real estate whether in the US or in France:
- Will I find tenants easily?
- How am I going to manage my property? Will it be myself or a relative? A real estate company? A real estate company will be expensive and lower your rentability.
- What are the tax consequences? Taxes in France for non-residents are very specific. Consult a professional.
- What are the rules if I need to evict my tenants? Rules in France are more restrictive than in the US.
- What amount can I borrow for a mortgage? In France, it’s harder to get a mortgage for non-residents and the down-payment is usually higher.
In my experience, you should always maximize what you can do here in the US to save on taxes by contributing to your 401k, IRA or Roth IRA before thinking of investing in real estate.
Each project is different – you should consult a professional before buying a property here or abroad and you should always diversify.
If you want to invest in France, you can also research SCPI (Sociétés Civiles de Placement Immobilier) which allows you to diversify while investing in real estate.
You can also invest in private equity, cryptocurrencies, or commodities via different vehicles (ETF, Futures etc.). While I don’t invest in this type of investments in my practice, I have clients who are very interested in these products. I always tell them to feel free to invest in them as long as it’s no more than 5% to 10% of their liquidity, so that if the investment loses all its value, they won’t go bankrupt.
Guillaume Decalf from Oui Financial – firstname.lastname@example.org
After a 15-year career in Tech, including 9 years in the United States, Guillaume switched careers by obtaining his Financial Advisor’s License and starting Oui Financial, a firm specialized in financial planning and investments for French people and French-americain families in the United States. He is based in San Francisco, California but serves clients throughout the US.