Expat in China - Investing from abroad (Schwab One International)

[ExpatChina]

A warm hello to everyone here, I have a few questions about investing from outside the USA as an american citizen.

Investing from China is a murky prospect, without straightforward information. Most companies and individuals push expats towards ILAS schemes. I narrowly avoided this trap thanks to the experience of everyone on this forum.

Mustachians advocate Vanguard Index Funds, if I had a US address I would follow this path with zero doubt! Living in China, my options are limited. After reviewing several alternatives I'm leaning towards opening a Charles Schwab One International Account.

This appeals to me for several reasons:
1. No commission Schwab ETF's
2. No fees to maintain or open the account (Not including trading or commision fees)
3. Easy access to dividends through Schwab Visa debit card
4. No ATM fees worldwide
5. Tax filing assistance
6. They cater to Expats. I can be honest about where I'm living and working.

Before I take the plunge and open an account with Schwab, I'm hoping to hear from Mustachians who;
A) Have experience with Charles Schwab or Schwab International.
- Pros / Cons?
- Investing in Schwab commission free ETF's or Vanguard ETF/index?
B) That live in China and can share their valuable experience.   

Finally, I'm interested in a passive investment strategy. Does anyone have experience creating a Schwab ETF portfolio that mimics a typical Vanguard 2 - 3 Fund portfolio?

For example:

-       40%   Vanguard Total Bond Market Index Fund   VBMFX (.20%)   
-       60%   Vanguard Total World Stock Index Fund   VTWSX (.30%)   
OR

-   Vanguard Total Bond Market Index Fund           VBMFX (.20%)   VBTLX (.07%)   
-   Vanguard Total Stock Market Index Fund           VTSMX (.17%)   VTSAX (.05%)   
-   Vanguard Total International Stock Index Fund   VGTSX (.22%)   VTIAX (.14%)   
 
Schwab Possibility

-       US Broad Market ETF (SCHB)
-       International Equity Index ETF (SCHF)
-       U. S. Aggregate Bond Index ETF (SCHZ)

Thank you all for your support!

[Maschinist]

Open Interactivebrokers account for US expats
https://www.interactivebrokers.com/en/index.php?f=13416
Buy Vanguard ETF funds at stock exchange for virtually no fees
Done

[ExpatChina]

Thank you both for your reply.

@ lhamo - Do you know if any of your grantees preferred a certain Chinese Bank? I'm looking into which bank might expedite the wire transfer process, or at least make it easier.

In my experience Chinese banks are all pretty much the same. Maybe your grantee stumbled onto a loop hole =p

[Bryan_in_Ger]

Hello ExpatChina,

I looked into both Schwab and IB when getting into investing from abroad.  I ended up going with Schwab and have been fine with that choice.  However, I have only been with them since the beginning of this year, so take my opinion with a grain of salt.

As for which funds to choose if you go with Schwab: I also wanted to go with Vanguard funds, but as you also noted Schwab has similar ETFs.  The Schwab ETFs are commission-free and offer competitive expense ratios.

Hope this helps, but if you have any further questions just let me know.

Cheers,
Bryan

[Shane]

Before leaving the US last year, about the best advice we got was to open brokerage and checking accounts with Schwab. Mainly we've been using the Schwab checking account to access cash via ATMs. The fact that Schwab both charges no fees for withdrawing money at overseas ATMs and also reimburses clients for any fees charged by foreign banks and ATM owners, has made accessing cash totally stress free for us. Our Schwab Visa debit cards worked perfectly in Japan, Hong Kong, Mainland China and now in Vietnam.

Before we left the US, I linked our Schwab account to our Capital One 360 savings and checking accounts. Mostly, we just transfer over a thousand or a couple of thousand dollars at a time into our Schwab checking account as we need to access cash. Then we pull $20 or $50 or $100 in local cash out of an ATM whenever we need it.

Twice so far, we've used Schwab to wire money overseas. The first time was just before we left the U.S.. We had to send $260 to a company in China to hire an interpreter. Luckily, we were still at home because Schwab said they had some weird issue with wiring money to China. IIRC, they said it had to do with US government regulations. Anyway, they asked me to come in to the local branch office to sign some sort of paper before they would agree to wire money to China. OP, seems like that might be something you may want to look into further and explicitly discuss with Schwab before you leave home if you haven't already.

The second time we wired money was just a few days ago. It was a little less than $3K that we sent to a school in Vietnam. That wire transfer I was able to do completely online without any issues. Actually, the school hasn't yet confirmed that they've received the money, but Schwab wrote back a couple of days ago to say they'd sent it. I'm assuming everything will go as planned, and the school should contact me next week to confirm receipt of the funds.

As far as investments through Schwab, I don't yet have any experiences to share. Our retirement accounts have all been at Vanguard for years, and since with the help of a relative we've maintained a U.S. address, we haven't had any issues with keeping them. Due to a new account sign up bonus TD Ameritrade offers, I opened a taxable brokerage account with them last year and am locked in to keeping our investments there for another month or so. TDA offers commission free trades on a bunch of ETFs, including VTI, which is the only one that really matters to me. After next month, I wouldn't mind moving the money over to Schwab. Seems like it might make things simpler for us.

OP, it would be nice if you or maybe somebody else who has already done it could post more details about Schwab's equivalent to VTI/VTSAX. Is it SCHB? If so, it looks like the ER is only .03%, which is pretty amazing. If it's equivalent to VTI, I'm definitely interested. Thanks for reminding me. I'm going to go check it out some more and maybe move some money into our Schwab brokerage account in May...

[NorCal]

I've invested with Schwab for a long time, although I don't have experience with the international aspects.

All of the Schwab funds are competitive with the Vanguard options.  There's no material difference between them.  Commission free ETF trades are nice. 

I highly recommend them.

[MustacheAndaHalf]

A bank with an American citizen's account risks being dropped from the global financial network (the SWIFT system) if they don't comply with U.S. regulations.  Without a legal team familiar with U.S. regulations, most foreign banks find it much easier to simply exclude American citizens.  Hopefully Congress will get in gear with the "same country exception" that would make it easier for expats, but just as hard for the major financial criminals.

Schwab is a good choice for withdrawing from ATMs worldwide.

Have you looked at banks like Citi or HSB?  Banks so large than span countries can make your money transfers easier.  Banks that size have branches throughout the world, and you can transfer from a U.S. location to a foreign location without as many fees involved (since it's two branches of the same bank transferring money).

[Shane]

Schwab charges $25 for international wire transfers. OP, if you're planning on wiring money often, that may be a concern, but if you'll only occasionally send a wire transfer, probably it won't matter much.

[ExpatChina]

Excellent information, thank you everyone.

@ Shane
Schwab charges $25 for international wire transfers. OP, if you're planning on wiring money often, that may be a concern, but if you'll only occasionally send a wire transfer, probably it won't matter much.

Thankfully, Schwab does not charge a fee for incoming wire transfers. I'll primarily be transferring money from my ICBC (Industrial and Commercial Bank of China) into Schwab. I didn't know about the $25 outgoing fee though, good to know.

MustacheAndaHalf
 Have you looked at banks like Citi or HSB?  Banks so large than span countries can make your money transfers easier.  Banks that size have branches throughout the world, and you can transfer from a U.S. location to a foreign location without as many fees involved (since it's two branches of the same bank transferring money).
 

I did look into HSBC and Citi for the reasons you stated above. After researching several options it looks like transferring money isn't such an issue. The bigger issue is exchanging RMB into USD.

As lhamo stated, you needall the necessary paperwork and an afternoon at the bank. For the past year I've used a local co-worker to help exchange 50K and wire it into my USAA account. This option while effective, is too inconsistent. I want to transfer once a month or at least once a quater. I'll have to bite the bullet and just make a monthly wiretransfer part of my routine. If only automatic exchange/transfers could be done!

@ Shane
OP, it would be nice if you or maybe somebody else who has already done it could post more details about Schwab's equivalent to VTI/VTSAX. Is it SCHB? If so, it looks like the ER is only .03%, which is pretty amazing. If it's equivalent to VTI, I'm definitely interested. Thanks for reminding me. I'm going to go check it out some more and maybe move some money into our Schwab brokerage account in May..

My thinking as well. As I delve further into this I'll share any information I find on Schwab's ETFs.

@ Bryan_in_Ger
As for which funds to choose if you go with Schwab: I also wanted to go with Vanguard funds, but as you also noted Schwab has similar ETFs.  The Schwab ETFs are commission-free and offer competitive expense ratios.

What did you end up choosing? The commission-free ETFs or something else? Also, are you in Mongolia? Not many people call them Gers, more often Yurt. I spent 2 years there from 2009 - 2012.


I have a skype session set up with Robert Wasilewski (rwinvestmentstrategies) next week.
He was recommended in Andrew Hallam's book 'Expatriate's Guide to Investing'. According to his philosophy, he advocates DIY investing through low cost Index Funds. He helps fledgling investors get started and then hands you the reigns. I'm not sure what to expect but at the very least I'll be able to ask specific questions about investing from abroad.

Has anyone dealt with / heard of this guy?

[James1]

Have you looked into transferwise? They are the cheapest way for us to transfer money out of Singapore. They use the real exchange rate to convert your money and charge a fee around .5%. This was much cheaper than what our bank charges to send money home.  And they don't need a swift #! Depending on banking regulations in your country, there might be some hoops to jump through. We barely had enough paperwork showing residency to set up the account, but now that it's open it's easy to use. Hopefully you can access them from China!

[ExpatChina]

Thank you James,

I'll take a look at them.

[Bryan_in_Ger]

Hey ExpatChina,

sorry about the late reply, been quite busy lately.

I went with SCHB (US broad market fund), SCHF (Global Developed ex-US), and SCHE (Emerging Markets).

As for your other question: I live in Germany, not in Mongolia.  I just didn't want my Forum-Handle to be super long.  :)

Cheers,
Bryan