What is the best investment opportunity in Canada?
In previous articles I have spoken about investment options for American, British and other expats. How about for Canadian expats looking for the best investment options in Canada?
Before beginning this article I should mention that I am not a tax-advisor, merely I am familiar with tax-efficient investing vehicles.
This article is long. For the time poor that are looking for advice as an expat, you can email me — firstname.lastname@example.org.
For people that have the time to read on I am going to introduce two of the best investments in Canada in terms of investment options you might want to consider for 2023.
Option 1: a local solution in your country of residency
Canadian expats living overseas looking for investment options in Canada might want to invest with a local brokerage and focus on real estate in the local area. In other words a Dubai broker if you live in the UAE, or a UK broker if you live in London.
This has several advantages and disadvantages. For Canadians living in the United States, this is probably the most tax-efficient option.
The US tax authorities, the IRS, make it much more tax efficient to invest inside the country for American residents, and most overseas brokers (whether in Canada or beyond) will not want to take American residents for legal reasons.
Another reason to take this option is if you are very “close” to your second home. In other words, if you have lived in another country for 30 years and know the place well, often with a family that is from that country, a local solution might make sense.
This is because you have become more of an immigrant, rather than an expat, and aren’t planning to move around every 3–4 years.
In the main though, a local solution in your new country of residency has many negatives, including:
- It often isn’t the most tax-efficient option, with the exceptions mentioned above.
- Many developing countries have weak investor protections and less investment choices. If there is a financial crisis, for example, you are more exposed in a developing country in particular.
- If you are moving every 3–4 years, it is important to have an expat focused account which is portable.
- Many expats can get seduced by what I call “the growth story” in emerging markets. I have seen countless expats purchase local property, or buy into local stock markets, only to get their fingers burned. This is often because they are chasing previous returns, so have bought into a hot market.
- Some local brokers and solutions will make you sell the investment, if you move to another country. This is very tax inefficient as you need to pay capital gains taxes on selling.
- If you take advantage of a tax-efficient structure in your country of residency, that will only be available to you for the short-term, unless you permanently settle there. For example, if you are a Canadian in the UK, you can invest in stocks and shares through an ISA. This is a good route if you want to settle in the UK for decades. However, if you leave the UK, ISAs aren’t available to non-residents.
Option 2: A Canadian-solution — Canadian Brokers and Real Estate
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