Managing your investments when living in Portugal

Moving to Portugal is the perfect opportunity to have a fresh look at your savings and investments. You need to adjust your tax planning and estate planning to take account of the Portuguese tax and succession regimes, and it makes perfect sense to review your investment capital at the same time. 

Besides the convenience of getting everything done at once, it is all interrelated. For example, how you hold your assets may affect your tax liabilities and how the assets are passed to your heirs.

If you made a good profit on selling your UK home or business when moving to Portugal, or if you received an inheritance, you may be wondering how best to invest the money to give you better income and growth prospects.

You probably have various investments too, made over the years. They may have been good decisions based on your objectives at the time but are they suitable for your life today in Portugal and do they work well together as an overall portfolio?

Start your review by asking yourself a few questions –

  • What are you looking to achieve? Do you need income to finance your retirement or treat yourself occasionally? Or are you looking for growth, to protect the long-term value of your savings? Or both?
  • What is your time horizon? Do you need your savings to last just your lifetime, or do you hope to pass on wealth to your children? Or are you looking to cash in investments within a few years? Short-term investors should usually consider different options to longer-term ones.
  • What are your circumstances? What are your monthly expenses? What pensions do you have? Do you have family to consider? Are you in good health? Do you expect to live here long-term? Are you expecting to buy or sell a property?
  • What currency? Converting Sterling funds into Euros for your expenses in Portugal puts your income at the mercy of exchange rate movements. British expatriates may wish to hold a mix of both currencies, and/or use investment structures that provide currency flexibility.
  • How much investment risk are you really comfortable with? And what level of risk does your current portfolio have?
  • How much tax are you paying on your investments? What was tax efficient in the UK may not be tax efficient here. Could you save by re-structuring your capital save you tax?

Your overall investment strategy should be designed around the answers to the above questions, and your portfolio created and managed to meet your circumstances and goals.   An ill-fitting portfolio may not work as hard as you need it to, or be eroded by inflation, or too risky for you or difficult to access.

Your appetite for risk

Establishing your objectives and determining your risk tolerance are the starting points for a successful investment strategy.

You need to pinpoint the right risk/return balance for your peace of mind, but it is extremely difficult to effectively assess your own risk profile. You will benefit from third party professional objective guidance – there are some sophisticated ways of evaluating your risk appetite, with some advisers using psychometric assessments. This gives them greater understanding of your attitude to risk and helps position your investments accordingly.

Asset allocation and diversification

 Diversification is key to managing risk within a portfolio. Different investments carry different levels of risk, so determine which balance works for your risk profile and objectives.

Your investments need to be suitably diversified to ensure you are not over-exposed to any given country, asset type, sector or stock. By spreading across different asset types and markets, you give your portfolio the chance to produce positive returns over time without being vulnerable to any single area or asset class under-performing.

Tax-efficient investment arrangements

A tax-efficient structure can keep most of your investments in one place, making them easier to manage, and provide protection to help you legitimately avoid paying too much tax.

Take wealth management advice to establish if you can improve your tax liabilities on your investment assets and income. For example, holding investments within an approved life assurance contract can provide tax advantages in Portugal.

Regular reviews

Even if you re-structured your capital investments after moving to Portugal, it’s important to review your portfolio around once a year to confirm it remains on track. Your personal circumstances may have changed or your risk weighting may have shifted.

To ensure your portfolio is both tax efficient and suitable for you, spend time with a professional financial adviser so they can get to know you and your objectives, and recommend personalised wealth management that covers investing, tax and estate planning.

This article should not be construed as providing any personalised taxation or investment advice. Summarised tax information is based upon our understanding of current laws and practices which may change. Individuals should seek personalised advice.

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By Adrian Hook
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Adrian Hook is a Partner of Blevins Franks in Portugal and has been providing holistic financial planning advice to UK nationals in the Algarve since 2008.  He holds the Diploma for Financial Advisers (DipFA) and is a member of the London Institute of Banking and Finance (LIBF). 

Portugal Resident