Question : I am an American Citizen living in Asia. My question is am I prohibited by US law from investing foreign stocks,or mutual funds other type of financial investments. I have been told that as an American there are certain types of foreign investments that are prohibited but I have no definition of which.

Answer: There is no law prohibiting investment in foreign stocks or mutual funds (as long as you report them properly), but there are several rules which make it disadvantageous for US citizens (especially for mutual funds), and the reporting requirements are pretty confusing, with large penalties for getting it wrong. I’ve written an article I wrote on the subject that might be useful for you, which can be found on our web site (

My general conclusion is that for most expats it is better to invest via a US broker (e.g. E*Trade, TD Ameritrade, ScottTrade, etc.), where you can be assured that you are in compliance with US laws, have a wide selection of international stocks and mutual funds, and have a much lower fee structure and open reporting environment. Unfortunately it can be difficult to open new accounts when not living in the US and some brokers prohibit mutual funds for people living outside of the US. In this case, an alternative can be (Exchange Traded Funds (ETF’s), which are similar to mutual funds, and I am not aware of any brokers who restrict purchases of ETF’s, even for those living outside of the US.

Another option is using a US-based “discretionary” money manager (such as my wealth management firm, Maxim Global Wealth Advisors, The main restriction for selling US mutual funds to non-US residents has to do with the mutual fund companies not being allowed to solicit clients outside of the US (since they may then have issues with regulators in the foreign countries). Using a discretionary advisor based in the US is acceptable for most mutual funds since the investment decisions are made in the US.

David Colvin is a CPA and CFP® based in Amsterdam, Netherlands since 1998. His niche focus is serving high-net-wealth individuals with cross-border tax and financial issues. In addition to his activities at CLVN, he is a major shareholder of Taxpat BV and an advisor to Maxim Global Wealth Advisors.