Bienvenidos again! Today we interview a lovely Spanish couple living in Germany, working on their path to FI through passive investing. We talk about the pillars of passive investing, what ETFs are really about and how to invest as an expat.
What we also talk about:
- How Will and Fog completed a masters in Finance
- The debate between active and passive investing
- What would happen if everyone invested in ETFs
- Tools to invest as an expat
What is passive investing?
When we talk about passive investing we’re talking about ETFs, index funds and using a buy and hold strategy. Will and Fog do not consider themselves professionals and so wanted to invest in the simplest way possible. This means buying the cheapest ETFs and only checking in once a month.
We both agree that passive investing is better than active simply because of the cost. Although active managers may manage a crash better, statistically it is shown that passive investing have higher returns over time and that as an individual investor, you are allowed to think long term and not stress about the same year. So as a person, you’re way better off #passiveinvestingftw. (ftw means For The Win #millennial)
Different passive investing approaches
Some people prefer to rely on regular dividends and others prefer withdrawing a certain amount by selling. Will and Fog have a Boglehead approach and follow this by buying and selling – they prefer to keep their dividends to increase the value. Both approaches work and depend on what your fears and preferences are.
Another common fear that many people have (especially Alvar 😉) is that if everyone does passive investing, at one point it will stop working. Will and Fog disagree with this point of view because they argue there are a lot of different possibilities when it comes to buying ETFs. You can have midcap or largecap, and you can choose between different indices and tons of different sectors. ETFs are simply instruments.
Investing as an expat
I (Araminta) was especially intrigued as to how Will and Fog managed to invest as a Spanish expat couple living in Germany.
First of all, they realised that focusing on one local economy can be very risky, and that they’re better of investing through several different brokers all over Europe. Thanks to the EU, the UCITS regulation and having a European passport, they are able to do this #loveyouEU. To put a few examples, they use brokers such as Degiro, Comdirect, Saxobank and ABN. They also mention some benefits of paying taxes in Spain, where dividend taxes are paid when you sell, whereas in Germany they are paid on every dividend. For more details listen in to the episode 😉
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