YOU'RE settling into a task at work. The phone suddenly rings. On the other end, is a smooth talking gentleman, offering you an investment opportunity in an offshore pension. Think twice before agreeing to a free consultation. Malaysians and expats are easy pickings for offshore pension sellers. And it's easy to see why. The sales pitches promise strong, virtually tax free investment returns. It's enticing. But such products usually violate the most basic rules of investing. First, investors need to know what they're buying. Offshore pensions are layered with complexities that few clients understand. And because commissions are so lucrative for the sales reps, there's plenty that the advisers won't reveal. Investors are often kept in the dark about early redemption penalties. Offshore pension contracts usually have term dates. Those selling before the contract ends (which could be 20 or 25 years from the signing date) get slapped with an early withdrawal penalty. In some cases, it can cost investors 80% or more of the account's total proceeds. Offshore pensions are also expensive. They cost investors 3.5% or more each year, in total fees. Economic Nobel Prize winner, William F. Sharpe published a paper called the Arithmetic of Active Management. In it, he states that the typical investor will underperform the stock market in direct proportion to the fees charged. In other words, if global stocks average 7%, and the typical investor pays 3.5% in fees, odds are high that they will only average a 3.5% annual return. So they could end up giving 50% of their profits to the pension company each year. Instead, investors are better off building low cost portfolios of exchange traded index funds. It's something Warren Buffett recommends. A slew of Nobel Prize winners in Economics agree. The less you pay in investment costs, the more you generally earn. Many people recognize that they can build these portfolios themselves. Instead of paying investment fees of 3.5%, Malaysians and expats can build responsible portfolios for 0.27% or less. Those doing so will first need to open a brokerage account. And they must ensure that they sidestep ETFs that are domiciled in the United States. Otherwise, when they die, their heirs could get slapped with an unwelcome notice. US estate taxes can hammer non-American investors in US stocks or ETFs, if their proceeds exceed US$60,000 (RM200,700). That doesn't mean you can't build a globally diversified portfolio, including a component representing the US market. If a global or US stock market ETF trades on a non-American exchange, the investors' heirs won't have to pay US estate taxes. Here's how Malaysians could build a low cost, globally diversified portfolio. They could open an account with a brokerage, such as Saxo Capital Markets. Doing so provides access to a variety of exchanges. A globally diversified portfolio would include exposure to Malaysian stocks, global stocks, and an Asian bond index for stability. It's easy to do with just three ETFs. Malaysians could start with the XIE Shares Malaysia. It trades on the Hong Kong exchange and costs a paltry 0.39% per year. Vanguard's FTSE All-World UCITS ETF contains global stock exposure. It includes developed and emerging market stocks. And it costs just 0.25% per year. The ABF Pan Asia Bond Index comprises Asian government bonds. Its hidden fee is just 0.19% per year. Expats could build similar portfolios, replacing both Asian indexes for two that represent their home country market. So if a cold-calling investment adviser tries selling you an offshore pension, politely say, "No thank you." Andrew Hallam is the author of "The Global Expatriate's Guide To Investing", a guide specifically for those with an appetite for investments on a global scale. He also penned "Millionaire teacher: The nine rules of wealth you should have learned in school".