When Your Country Becomes a Global Outcast

Last time I shared with you a story from my new book Pathfinders from a reader in Ukraine, Roman Koshovskyi, titled Staying the Course in War-Time.

Today we hear from Artem Voronov, a reader in central Russia, on what staying the course looks like when your country has become a global outcast .

Last May, when I announced I had inked a deal with Harriman House to publish my new book, Pathfinders, I invited those of you who had embraced The Simple Path to Wealth to share your stories.

The response was amazing and, unfortunately, there were simply too many to include them all.

Those that we have included comprise a wonderful collection of stories from all over the world, from people of all ages, background and walks of life. Each at a different point and with a different take on the path.

As you’ll see should you decide to read the book, they are organized into nine different sections. To give you a flavor of these stories I want to share these two from Russia and Ukraine with you.

Both come from the section titled…

Staying the Course

Pulling two from the same section is probably not the best marketing strategy, but I chose these as they are quite literally ripped from today’s headlines: The war in Ukraine.

Hopefully, as we enter this New Year we are looking at the year that will bring peace to that part of the world.

*Pre-ordering for Pathfinders is now available all around the world. Click on the link and/or see the note after the post for details.

Now, here’s Artem…

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When Your Country Becomes a Global Outcast

Artem Voronov

Naberezhnye Chelny, Tatarstan, Russia

http://www.voronov.net

I live in the center of Russia with my wife and nine-year-old daughter. When I was in elementary school in 1991 the Soviet Union, where I was born, broke up into several countries. In the decade that followed, my new country, Russia, went through a painful transition to a market economy and integration into the world community. 

Democratic momentum and political reforms, as well as the first economic collapse in my memory in 1998, eventually led to an unprecedented economic recovery in all sectors. International companies opened local industries, wages rose, ordinary people could afford to buy previously inaccessible commodities, a new car and more comfortable housing. During this golden era, I graduated from university and began my professional career in the automotive industry.

Although my income never grew as quickly as when I started out, my spendings were always less than my income. I remembered the example of my parents, whose bank accounts were devalued by hyperinflation after the collapse of the USSR; all subsequent financial opportunities passed them by. Today they live on a social pension and are completely dependent on the state. Compared to them, in my old age, I always wanted to have wider choices: the opportunity to move to a warmer climate with F-You Money, for instance. $250,000–$350,000 would be enough for me. I began to think about ways to invest my savings.

At the beginning, I had no clear plans and continued to spend a little more than I should have, and save a little less than I could. I have long been acquainted with the stock market, and tried active trading and investing in individual stocks. Without a strategy, I was afraid to invest a large amount, so I did not achieve any results—except to waste my time.

Meanwhile, the government of my country has taken a number of adventurous geopolitical steps, accompanied by a continuous depreciation of my income from increased inflation and a falling national currency. The more my lifestyle deteriorated, the more active the propaganda. I saw how dissenting mouths are shut up, and democratic institutions are methodically dismantled. In such an environment, it became obvious that investing requires global diversification into assets supported by economic freedom and property rights. My current life in Russia was still comfortable, I loved my homeland, but my view of the future became rather gloomy. Sooner or later I expected a failure of economic policy. I could not imagine the reality of the military catastrophe before that.

Around 2014, I came across JL’s Simple Path. That’s how I became an index investor. Whenever I tried to be smarter, I got worse results. Possibly my biggest mistake was taking lightly the recommendation to invest in Vanguard funds—instead, I opted for the UCITS ETF on the broad US stock market, domiciled in Ireland and available for purchase through a Russian broker.

My choice to invest through the Russian stock market was justified, among other things, by tax benefits for Russian residents, as well as by the fact that a significant amount is needed to open an account with a foreign broker. We also have investment accounts like IRAs with a tax deduction on deposits and the ability to sell stocks tax-free after three years. As long as the tax benefits exceeded my fund’s fees (TER=0.9%), I planned to accumulate about $150,000 in it over several years, and then transfer these funds to a foreign broker and buy a low-cost Vanguard index fund. 

But this was not destined to happen.

The outbreak of armed conflict between Russia and Ukraine was unexpected by most people, myself included. The severe international backlash that followed led to a halt in communications between stock markets and the continued disruption of economic interconnections. This caused processes that neither I nor the FI community could have imagined. Hopefully humanity will pass these times with as few casualties as possible, lessons will be learned, and the perpetrators will be punished.

At the moment, the trading of my ETF from Russia is completely frozen, as is the access of foreign investors to Russian stocks. True cross-border risk has materialized for me. Can I get my capital back one day? I hope so. Meanwhile I have to leave my $47,000 portfolio alone—almost all of my personal savings. Currently my asset allocation is nearly in line with Warren Buffett’s famous recommendation of 90% S&P 500 and 10% US government bonds. Who knows, maybe after retirement, my daughter or I will regain access to assets worth millions. Certainly this will not happen until the authoritarian government of my country changes.

It was probably a mistake to strictly follow the rule of not panicking or selling. It works well to overcome psychological handicaps during financial panics—it helped me stay on course during the Covid sell-off in March 2020. But it kept me from being able to maintain control of my capital before the bridges were raised.

After such a blow, it took time to pull myself together. But now I have started collecting emergency funds again and gradually investing in the remaining available index tools.

Today, foreign brands are closing production and leaving my country at an accelerated pace. Output in the automotive industry has collapsed by 80%. I still have a job, and my wife has her own small business, we live in our own house and we have no debts.

I have no doubt about humanity’s ability to cope and thrive, and that markets will recover. During the last 15 years I feel I have already experienced every threat possible: financial crises, climate disasters, pandemics, even war. I probably won’t raise an eyebrow when aliens arrive. The world is still out there, and the S&P 500 is higher than it was when I started out.

I am anxious about the future of my country and do not want my daughter to grow up with a sick ideology, isolated from the rest of the world without prospects of a decent standard of living. Recently, I have been thinking more and more about emigration, although I am still indecisive—today a Russian passport is unwelcome almost everywhere.

I keep walking, and I understand better that JL’s Simple Path to Wealth needs both the strong legs of the pathfinder and strong tarmac underfoot if you are to succeed.

I still hope the best lies ahead, and I believe I have time to see it one day.

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Addendum

Pathfinders is now available for preorder in hardcover and eBook all around the world. Pre-ordering a book is one of the biggest ways you can help support it, and I hope you’ll consider preordering Pathfinders. These are important stories from around the world that deserve to be heard and that can help those who hear them.

Bookshops monitor pre-orders closely, and good levels get them excited – and more likely to order and promote a title. It also guarantees you will get your copy at launch. The book will be available at your favourite online retailers and you can order it at any bookstore (including your favorite local independent). Here are some links to help:

Pre-order Pathfinders

Release date is Tuesday 31 October 2023.

Thanks for your support!

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Important Resources

  • Talent Stacker is a resource that I learned about through my work with Jonathan and Brad at ChooseFI, and first heard about Salesforce as a career option in an episode where they featured Bradley Rice on the Podcast. In that episode, Bradley shared how he reached FI quickly thanks to his huge paychecks and discipline in keeping his expenses low. Jonathan teamed up with Bradley to build Talent Stacker, and they have helped more than 1,000 students from all walks of life complete the program and land jobs like clockwork, earning double or even triple their old salaries using a Salesforce certification to break into a no-code tech career.
  • Credit Cards are like chain saws. Incredibly useful. Incredibly dangerous. Resolve to pay in full each month and never carry a balance. Do that and they can be great tools. Here are some of the very best for travel hacking, cash back and small business rewards.
  • Empower is a free tool to manage and evaluate your investments. With great visuals you can track your net worth, asset allocation, and portfolio performance, including costs. At a glance you'll see what's working and what you might want to change. Here's my full review.
  • Betterment is my recommendation for hands-off investors who prefer a DIFM (Do It For Me) approach. It is also a great tool for reaching short-term savings goals. Here is my Betterment Review
  • NewRetirement offers cool tools to help guide you in answering the question: Do I have enough money to retire? And getting started is free. Sign up and you will be offered two paths into their retirement planner. I was also on their podcast and you can check that out here:Video version, Podcast version.
  • Tuft & Needle (T&N) helps me sleep at night. They are a very cool company with a great product. Here’s my review of what we are currently sleeping on: Our Walnut Frame and Mint Mattress.
  • Vanguard.com

Comments

  1. Rob Diesel says

    It’s an interesting observations that nobody could see the war break out.

    Without turning into an ugly political back and forth, I do have a pretty massive issue with some things I see here in the US, which has made me explore moving abroad with increased interest.

    The shocker was to compare my Texas lifestyle with that in Sweden (amusingly, a friend there has the same job I did in Texas, so we could compare it fairly evenly) and it turns out that I’d very likely keep more money in my pocket at the end of the year compared to Texas.

    The main benefits from a 30 year perspective is clean water in the ground, clean water falling out of the sky, no major disasters (hurricanes/tornadoes/wildfires/earthquakes), excellent mass transit, low-cost healthcare, proximity to Europe for far more exploration of cultures and food, and a mild climate.

    Oh, and cheap housing!

    Either way, keeping on with the investing isn’t just a desire or a choice, I feel it’s a must. For a host of reasons.

  2. Paul K. says

    Congratulations JL for bringing both sides of the story. Something you never see in the western media which painted all Russians with the same brush. 90% of Russians as nice hard working citizens that only want to live in peace and prosper but that might be too much to ask in today’s world.
    Mr. Voronov, our hearts are with you and your people as well as of much of Ukrainians as well. May your fire plans materialize one day

  3. Geno says

    Another example of how socialism sucks. It’s destroys the quality of life. Yet, some people yearn for this in our country by wanting to see things like medicine socialized.

    We have so many examples such as this one why socialism does not work.

    The United States is still the only country people risk life and limb in hopes for a better life. Yet many are so blind to it. I don’t like the way things are headed and we need a change in leadership to get us back on track.

    • Gunther says

      Capitalism didn’t work for the working people for much of America’s labor history. It wasn’t until the Great Depression that the working people were finally able to enjoy the fruits of their labor thanks to FDR’s economic reforms. For the last 42 years, Capitalism sucks the quality of life out of America; yet, many people keep thinking that if you give corporations unlimited power and time, eventually, everyone will prosper. Well, it has never worked out that way. We have 4 major recessions/crashes in the first 20 years of this century due to Capitalism. Have you seen any economic recessions/depressions/crashes cause by socialism? The answer is no.

      Capitalism didn’t work well for the people in Central and South America which was long under the semi-rule of American corporations; otherwise, we wouldn’t have an immigration problem, drug problem, and criminal problem both in the USA and in those areas I had mention.

  4. aj says

    Hope all the best for you Artem and hope you and your family do good during theses times….
    O you not selling when the war started, I think you did the best thing: leave it and don’t touch it! You’ll be very happy with the outcomes of your portfolio, specially if you’ve got automatic reinvestment on those dividends ; )

    cheers, keep safe and don’t stop saying what’s in you mind!!!

    • Artem Voronov says

      Thanks for your kind words, AJ!
      Indeed that ETF is an accumulating type. The US broad market yields ~2% a year, and after charging 0.9% commission, more than a half is still being reinvested. Have I owned popular VTI or VOO instead, all dividend distributions would be suspended in depths of Euroclear depository due to imposed sanctions. Not bad 😉

  5. Daniel says

    I think a lot about the everyday russian and how badly they must be feeling with most of the world looking down on them. It must be very sad when it’s absolutely not your fault.
    I hope one day Russia will be back and be a super power again, under a real leader, pushing the world to develop itself. This is what everyone deserves!

    • Nataliya Lityuk says

      It’s quite the opposite. The non-Western countries are lining up to join BRICS to no longer be have to live under the boot of America and be free. All thanks to the US government and Europe—the vassals that they are.They ended up isolating themselves. The worst is yet to come. We are heading into a recession and Russia is getting stronger than it was before the beginning of the war.

  6. Artem Voronov says

    Hello!
    Thanks for reading my story. I am greatly honored to have it published in the upcoming “Pathfinders” book.
    As I was writing it, I thought maybe it could make an example of how not to do, be a warning message about powerful forces and circumstances beyond our control that can seriously affect or even destroy our dreams and lives. What if The Simple Path is not for everyone, or maybe it does not work for every place on Earth, and time in history? Why keep going against strong headwinds at all?
    But before I knew it would appear in the “Staying the course” chapter, I had realized what was that lesson about. In a critical moment like this the choice in essence boils down to just two options: surrender and obey to external will, OR keep fighting for personal freedom.
    Slavery or freedom. From that perspective, my choice was clear.
    Money is not just the single powerful tool we have for navigating this complex world. It can buy you freedom quite literally. It gives independence not only financially – sometimes it helps you avoid a terrible choice between conscience and safety – allows to call things by their real names, speak up when you see injustice in society, stand for values which you believe in, simply remain human, and move away if needs to.
    “Spend less than you earn – Invest the difference – Avoid debt.” Make this rule a habit and it pays off earlier than you think. No doubt it will deliver you to a better place than where you are now. Unexpected side effects are just part of the learning process. Life would be boring without its highs and lows.
    Stay on the path!
    BR
    Artem

  7. Kim Murphy says

    Hello JL,
    Thank you for sharing your wisdom with those of us less well informed about how to prepare for retirement. I have followed your advice since 2018, when I moved my investments from the brokerage side of Fidelity to the non-advisor side. I invested all those mutual funds into their total market index fund (FSKAX) in my IRA, and put everything else I could into the S&P 500 Index (FXAIX) . Both taken a beating recently, and I am wondering if it’s time to buy bonds! I am 60 years old, and hopefully 2-3 years away from retirement, when I will have 25 times more in my accounts than I need for my yearly expenses. I want to continue investing in my retirement accounts during this downturn, but I don’t know if I should start buying bonds or keep buying stocks. I have not been good about keeping cash because it won’t work for me at the local bank. How much would you recommend keeping in cash?
    Thank you for your guidance, it is very helpful when trying to avoid a financial advisor and the fees involved with them.

  8. Chris says

    Possibilities like this make me wonder if it is worth having a few thousand in gold and/or cryptocurrency. Definitely only a small proportion of total net worth, but enough to provide a small safety net if I were to lose access to the global financial system and need enough money for an emergency expense or to flee the country. The fact that I live in the US makes this much less of a consideration, at least for now, as much of that system is based here and major problems with the US would affect the whole global economy. But also good to not get complacent enough to think that my country is immune to a major disaster.

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