27 year old non-resident with €500,000 to invest

Jim2007,
I notice you're very good at telling people, including me, of how their particular advice is sooooo bad in the investment sense, but you yourself don't attempt to answer the question which was posted originally. I do hope you're not one of those tut tutting financial advisors who think they're very special when it comes to investments, et all that twaddle. I simply answered the question posed, I asked others to come up with better, but all I see is blah blah about how inferior my advice is. Once again, without the mouthing off about inflation, index's , etc, etc, come up with better please if you're able to. Most reasonable people know full well the bunkers that are out there in every sense of the word, we don't need a sermon from those on high. Very simply, give a better return that what I've given, guaranteed. Thank you. We're waiting.

In relation to my tax efficiency, I don’t “live” anywhere. I travel the world at my own pace but have never stayed in a country long enough in the past few years to fulfill their requirements to be a tax resident.

Is it wise or foolish to contact the revenue directly, explain my situation to them and get clarification that I won’t be charged CGT until/if I return to being Irish resident?

It does seem like, in the long run, having all of my wealth invested in ETFs will maximize my wealth, and it’s very encouraging that Buffet also said this. I agree that atoning to the exposure of the stock market might be tough but using some type of dollar cost averaging would certainly help this.

I was working remotely for an Irish company that payed me a minimal amount and I was taxed by revenue for this. However at the moment I’m unemployed but make money from online poker. I’ve made pretty much all of my wealth since I started traveling.

Noproblem, as for a better guaranteed return, if you read the thread linked in my original post these all offer better returns. I thought that if I keep below the deposit insurance in each country it’s a risk free investment (apart from the conversion of my EUR to their potentially worthless currency if the countries banking system fails) but users on this and other forums have slated this idea. It doesn’t seem to be something that many people do.

Jim, I was an Australian tax resident in 2010. I’ve just used their “determination of residency tool” on their official website and it tells me I am not resident any more.

have half a million Euro and it’s only making me about €5,000 a year

Above is what I picked out from your original post and can't see how you're earning more than what I showed you. Going on what you have shown your interest per yr is €5k, on my deposits you would earn €15k per yr tax free. Each to their own I guess.

I'm in a similar situation but am an Irish residents , not at your savings level yet and a few years older , there is no real agreed advice what to do with your cash , I read forums like this (which is great) and other forums a lot of conflicting advice. I was fully set on ETF's openned an online trading account to buy them , read up about currency transfer to transfer my euros to dollars and send it to TDwaterhouse , but then did nothing else after reading that the tax on them is a grey area , nothing seems straight forward in Ireland , i've friends in England and they all use these ISA things to invest in shares ,Ireland is so backward when it comes to actually getting proper information or things done.

I really want to invest in ETF's but might just pay an advisor to tell me how to get them the cheapest way with least comission and what to do with the tax implications. It really is true more money more problems , all the banks are cutting the deposit rates so I feel my hand is been forced.

If you do invest in ETF's please post how you got on because I would love to follow cheers, I think I'd like to go with Vanguard myself

investing

It is difficult to find advice you can trust. There are any number of advisers out there with perhaps conflicts of interest. There are thousands of high return get quick rich schemes promoted by people looking for high commissions.

It is true the biggest problem with investments is your own emotion. If you think making money is hard, try keeping it for any length of time. You have to detach yourself from it and not try too hard to make it increase fast. Don't do anything too risky with the potential of a wipe out. Put it in the right place relax leave it alone and give it time to generate a return. Eventually (for you in 20 years ) move capital to stuff that generates an income and spend that.

For any amount of money the advice of 10 shares is a pretty good one. Make sure there are huge companies with a very long history of generating value, there are quite a few of these, look at their long term charts. They can also often pay a 2-3% dividend. It can be useful that they throw some cash in your direction every now and then. Perhaps re-balance every year of so. Over the longer term you should make 6-10% per year, perhaps double your money every 7-8 years. Every now and then they will drop 10-20% or perhaps more, but keep them and they should recover to new highs - you have time.

Buffets advice is also pretty good to the young guy with his first 1M$ - buy a low cost ETF that tracks the S&P500 and then get back to work.

Just my 2c. I have been there and yes it is a nightmare to try find your way... before it's all gone....

Buy 10 good shares, hold them for a while, then every now and again switch into different ones, etc, etc, etc. Typical financial advice with no certainty of anything, not even a mention of what the shares should be in but then telling a person they should double their money every few years. Now, where did I hear all this bull before? Try finding a needle in a haystack, because that's what you and others are advising.

After months of research, I've finally come up with the following.
What do you guys think?


INVESTMENT THEORY:

I am an Irish citizen but a resident of nowhere so only have to deal with withholding tax. I am certain of this and have been advised so by 3 separate tax specialists, so no need to discuss this part.

For my equity side, I will invest in VWRL (an all world ETF), using Interactive Brokers. VWRL is domiciled in Ireland and traded on the Amsterdam Exchange, so I avoid the USA estate tax and avail of Irish tax treaty rates. The TER is 0.25% and IB charge a maximum of €28 per transaction, or 0.1%. VWRL is denominated in EUR but underlying currency is USD and so interest payments are made in USD to a separate USD account. I will then reinvest the dividends in VWRD (the same ETF but based in USD) to avoid paying to change my currency.

My total equity amount is €300,000 but I have €72,000 tied up in equity like investments which will be treated as equity and transferred to VWRL when possible (May 2015). I will DCA investing €98,000 by the end of October, €76,000 by the end of November, and €54,000 by the end of December. The final €72,000 will be invested in May when my P2P lending has been repaid including interest.

I am still unsure on my fixed income side and will leave this where it currently is, in Irish and UK bonds and bank accounts earning a net of 1% interest. When I have had time to educate myself on investing in the fixed income side of my portfolio I will make a one time change here. Total amount here is €200,000.

MY BACKGROUND AND ASSET ALLOCATION

Net worth is currently €600,000.

I am a 27 year old professional gambler and the very maximum I can see myself losing in one year is €80,000. As my average expected profit per bet is positive and I have lots of bets per year it is unlikely for a losing streak like this to happen, let alone continue. I spend €40,000 per year.

For my AA, I will knock €100,000 from my net worth and go 60/40 in favour of equities with the remainder. The €100,000 is an emergency fund (it covers 2.5 years of expenses or a maximum loss year plus 6 months expenses).
When I cash out over €10,000 from a gambling account, I will invest it accordingly, bringing my AA back to 60/40 and if I need to withdraw on rebalancing day to take my short term reserves back to €100,000 I will also withdraw accordingly, keeping my AA at 60/40. I will do this regardless of the market.

I will rebalance on the second Tuesday of January, beginning in 2016. If I have between 55% and 65% stocks, I will do nothing. If my portfolio is out of this bound, I will rebalance to 60% stocks 40% bonds. I will also re-evaluate how much the higher bound of 2.5 years of spending money or 6 months of spending money plus maximum possible loss in a year is, as I would expect this to increase with inflation.

INVESTMENT PRINCIPLES
1. Keep costs low, preferably by holding low cost index funds for the long term.
2. Stay out of the CGT tax net as long as possible. If it is unavoidable, sell everything before and reassess.
3. Never try to time the market.
4. Hold the cheapest well diversified ETF that tracks the world holding the assets physically.
5. Portfolio will never go above 60% stocks until I have fixed income (outside of this portfolio) of over €40k per year.
6.. I may change the above dependent on any tax changes relevant to the portfolio
7. Changes to expense ratios and available funds may lead to switching to a cheaper fund.

A hell of a lot of paperwork for "exactly" what? There's a lot of assumption in there also. As per your question, that's what I think.

Hi Jim,

Are you sure you're not mixing up residence with domicile? AFAIK the Revenue will pay back PAYE deducted once you declare (/prove?) you are leaving the country for a defined period - you do not have to declare residency elsewhere.

Tina T et al. move to Switzerland and base themselves there. The OP chooses not to base himself anywhere. So far, he is doing okay - but with 'tie-breaker' clauses becoming a feature of tax treaties - he is likely to find himself resident somewhere, whether he likes it or not !

Jim2007 said:

If you have not statisfied the residency requirements in any other country, then you remain Irish resident. The legislation and tax treaties are written in the opposite direction - you become resident somewhere by meeting certain criteria there and be definition you are no longer resident in the previous country where you were considered resident.

Think about it for a minute... people like Tina Turner, James Galway and Phil Collins all have access to the best tax advice going and if there was a way to be 'not resident anywhere' they'd have figured it out. But all three have established residence in Switzerland because they were able to do a special deal there - lump sum taxation: They pay a fixed amount (usually a couple of million) every year regardless of how much they earn. They would not be paying it, unless they had to.

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noproblem I don't understand your reply at all, was there another post below mine that your replied to that has since been deleted?

I should assume that the lack of replies in the past 24 hours are a positive thing, ie there are not many obvious flaws with my investment policy?

alwaysonit said:

I am a 27 year old professional gambler and the very maximum I can see myself losing in one year is €80,000.

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Oh my goodness.

My advice to you is to buy a couple of properties in Ireland before year end and hang onto them. No CGT if you hold onto them for 7 years. At least you'll still have the properties in 7 years time as you might have nothing at all left otherwise.

Winning steaks don't last forever.

alwaysonit said:

noproblem I don't understand your reply at all, was there another post below mine that your replied to that has since been deleted?

I should assume that the lack of replies in the past 24 hours are a positive thing, ie there are not many obvious flaws with my investment policy?

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I'm really sorry you take my reply in such a manner. If you can't understand my reply, that's your problem, no, it wasn't aimed at anyone else, just yourself. I really wish you luck with what you seem to have chosen and hope that in a few years you still have the sum you have now.

Bronte said:

Oh my goodness.

My advice to you is to buy a couple of properties in Ireland before year end and hang onto them. No CGT if you hold onto them for 7 years. At least you'll still have the properties in 7 years time as you might have nothing at all left otherwise.

Winning steaks don't last forever.

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Losing streaks don't happen forever either, once your getting a positive expected value on your bets your more likely to win than lose long term.

I find it strange attitude if you tell people you trade markets and make your living people look at you different compared to saying you gamble on sports even though I make 6 figures every year from it people tell me I'll lose it all soon

I posted here months ago actually about saving 12k a month and just checked and I've saved 140k this caalender year. I would say property carries a lot more risk most successful gamblers have good bank roll management and would only bet a tiny percentage on each value bet not a large percentage on property which could do anything price wise.

I put money into msci world etf ( dividends reinvested ) emerging markets etf , 3-5 year government bonds all with saxo , I'm doing similar with DCA investing an extra 10-20k per quarter , been looking at a few more etf's also that I'll probably add to it and a few individual stocks that I'll have a gamble on. Next on my list is trying to understand this 8 year deemed disposal rule fully but I'll worry about that in a few years.

Congrats on your investments it's very similar to my own, keep updated how you get on .

Wow alwaysonit

I think your analysis is genuinely incredibly impressive. Actually, amazingly so! - then again, frankly, you don't beat the markets as successfully as Fella and yourself do without having superior numerical/analytical ability.

I, too, am struggling to comprehend noproblem's comments.

I think you have produced a magnificent template and it would be great if others could add constructive comments as to how your template could be improved upon and why.

From my perspective,

1. You have a sensible initial asset allocation. I'm taking it that your equity allocation is intended as the growth element of your investment so I'd be interested to hear if others have an added value comments in relation to a 40% allocation to bonds. In particular, whether there are better defensive, hedging strategies available. <Personally, I just can’t get excited about bonds at current levels.>

2. You have addressed the following very well:

- Taxation
- Diversification of equity investments
- Market access charges
- Timing of investments
- Rebalancing of investments
- Provider risk (by using a few brokers)
- Inflation risk
- Liquidity risk

Well done again!

alwaysonit said:

Can you provide a link to the legislation that states "you have to be resident somewhere"?
I have certainly not satisfied residency requirements anywhere in the past few years.

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Well you have been told this before and I'm aware you found so called tax advisers who confirmed you're not resident anywhere, but here is a clause from the Irish-Swiss tax agreement that says otherwise:

if he has an habitual abode in both States or in neither of them, he shall be deemed to be resident of the State of which he is a national.

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So as far as the Swiss tax authorities are concerned when you come to try and claim back withholding taxes from them, they will treat you as being resident in Ireland for tax purposes and apply the terms of the treaty accordingly.

Now here again is the same clause from the Irish-Austrian agreement:

if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national;

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And again from the agreement with Canada:

if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national;

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So I would expect that you will find similar clauses in all the double taxation agreements. Meaning that if you can't meet the residency requirements of another state you are Irish resident for tax purposes!

So depending on when the Revenue catch up with you, this could be a very expensive mistake!

Bronte said:

Oh my goodness.

My advice to you is to buy a couple of properties in Ireland before year end and hang onto them. No CGT if you hold onto them for 7 years. At least you'll still have the properties in 7 years time as you might have nothing at all left otherwise.

Winning steaks don't last forever.

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That is exactly why we diversify our investments and not concentrate in a single asset class in the first place as you are suggesting!

Kildavin said:

Hi Jim,

Are you sure you're not mixing up residence with domicile? AFAIK the Revenue will pay back PAYE deducted once you declare (/prove?) you are leaving the country for a defined period - you do not have to declare residency elsewhere.

Tina T et al. move to Switzerland and base themselves there. The OP chooses not to base himself anywhere. So far, he is doing okay - but with 'tie-breaker' clauses becoming a feature of tax treaties - he is likely to find himself resident somewhere, whether he likes it or not !

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See my most recent post

Jim2007 said:

Well you have been told this before and I'm aware you found so called tax advisers who confirmed you're not resident anywhere,

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He has not one but 3 tax advisors tell him so, but he has not given us their qualification nor their confirmation in writing. And in writing from a country in which it can be relied.

Jim2007 said:

That is exactly why we diversify our investments and not concentrate in a single asset class in the first place as you are suggesting!

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I agree with you, but I'm diversified enough for myself in relation to cash and pensions and property in two locations to be happy with my choices.

And you and I are never going to agree in relation to the Irish obsession with property, and I have to stick with what I know.

Asset Class Returns & The Diversified Portfolio

Here is an interesting chart on asset class returns from BlackRock.

Clearly the diversified portfolio reduces very acceptable results over the long term. The portfolio did take a big hit in the most recent recession, but had fully recovered by 2009 and has produced positive results thereafter. This is in contrast to many Irish investors who concentrated their investments in property and are still waiting for a return to positive figures...

People advocating fixed income & cash instruments should not that they rarely perform as well as other asset classes and thus there is a a very significant price to be paid for that guaranteed income and minimal risk offering. In fact when converted to real returns it is not unfair to say that in most cases investors in such products would have been luck to break even.