Investment makeover for 35 year old living abroad

If you choose a different base currency, aren't you just going to have to convert your money on the way to the account. (I've just opened a Saxo account, and that's my understanding). So you've got the currency issue one way or another.
 
Perhaps. Although I do get paid in a dollar-pegged currency right now. However, I plan to invest for 30+ years; for that reason, I chose euro as I don't expect to continue to be paid in a dollar-pegged currency for that length of time.
 
You are over thinking it.

For 20k thinking about putting in a single fund, say an MSCI world index. Here is one registered in LUX since you seem to prefer non Irish. And here is a EURO hedged version of the same.

You are investing in MNCs, so they will have more less the same exposure to the world economy and FX risks in the long term!
 
He-Man said:
OP here again. So, at long last I'm about to make my investments during the coming week and I'm suddenly paralyzed with the following doubts:

  • I chose euro as my base brokerage currency. But it seems most of the ETFs I'm interested in have their base currency as dollar; i.e., the ETFs can be bought in euros from European stock exchanges, but the underlying currency is dollar. My concern is that in choosing euro as my brokerage currency, I have chosen inefficiently.
  • I had intended to buy two equity ETFs: VUSA (for US exposure) and VEUR (for European exposure). VUSA, when bought in euros, does not track the same as its NYSE equivalent, VOO. So, I am now thinking to buy VWRL instead of those two. VWRL is an all-world stock ETF which I can buy in euros; but again, the ETFs base currency is US dollar.

    I doubt anyone can forecast currency changes over 2 months never mind your 30 years. Surely if you keep investing in a regular way it will average out over the long term

  • Another nagging doubt is that all the ETFs are domiciled in Ireland, and although I am a non-resident Irish national, I have discovered that I would fall into the category of "ordinarily resident" for another 12 months. Therefore, I'm concerned I have tax exposure.

    [B]es I have looked this up and I think you do but I am not an accountant. But think you only pay tax on interest of around 3000 euro so you would need a big investment pot

    I have not yet deposited funds to my broker account, though I'm sitting on 20k ear-marked for it. Would appreciate some opinions regarding the base currency of my brokerage account, the base currency and domicility of the ETFs I should buy, and whether the account should be in my name or my wife's name only, or whether it's OK to have it in both our names.
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  • I think the clever answer here is it depends on marriage!! I suspect some high profile developers are very very worried about keeping their wives happy!!
 
Jim2007 said:
You are over thinking it.

For 20k thinking about putting in a single fund, say an MSCI world index. Here is one registered in LUX since you seem to prefer non Irish.

You are investing in MNCs, so they will have more less the same exposure to the world economy and FX risks in the long term!
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Jim two questions
1 can you access the LUX fund through saxo or other online brokers?

2 what is an MNC Please ?
 
Jim2007 said:
You are over thinking it.

For 20k thinking about putting in a single fund, say an MSCI world index. Here is one registered in LUX since you seem to prefer non Irish. And here is a EURO hedged version of the same.

You are investing in MNCs, so they will have more less the same exposure to the world economy and FX risks in the long term!
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Fair enough -- and I get that. However, if I invest in, say, VWRL (euro-denominated) and it performs at +15% in 2013 versus VT (which is the very same ETF in the US) which performs at +18%, aren't I better off investing in VT - or, rather VWRL bought with US dollars?

I have a euro-denominated Saxo account into which I have not yet deposited any funds.

Right now, I know that I want to buy VWRL. The question is whether I buy VWRL with dollars from London or euros from Amsterdam . In any event, the base currency of VWRL is USD. However, as you pointed out, the ETF tracks businesses in the US, the Eurozone, Switzerland, UK, Japan, China, India, Russia, Brazil, UAE, Egypt, Chile, Philippines, etc.....so there is indeed an underlying currency diversification.

I am highly confused. I just rang Saxo and they tell me that I can change the base currency of my Saxo account to dollar if I wish. But only prior to depositing funds. Euros or dollars...that is the question...

drrkpd said:
I think the clever answer here is it depends on marriage!! I suspect some high profile developers are very very worried about keeping their wives happy!!
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I have no fears there :)
 
Bond ETF

So, as per the above, I've decided on VWRL for my stocks.
Per The Intelligent Investor, I'll also buy a short-term first world government bond ETF and try to maintain my portfolio as follows 70:30 stocks:bonds.

I have several questions about bond ETFs.

  1. If I buy a eurozone bond ETF like IEGE or CBE3 (both iShares), is this riskier than a multiple currency bond ETF like ISHG? After all, eurozone countries cannot print money to pay their debts. Would I be better off going for an ETF that contained bonds from the US, UK, Japan, Australia and the eurozone, or should I stick to the eurozone only?
  2. If I have a choice, should I buy an inflation-linked bond ETF over a non-inflation-linked government bond ETF? Again, iShares have several inflation-linked government bond ETFs on offer.
 
thanks

Thanks for answering my questions and I am delighted to know the healthy state of He-Mans marriage!!!
 
Jim2007 said:
Why? Keep the 6K in cash with no transaction or depo fees the return should end up about the same.
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The why of it is that this is the approach favored by John Bogle, Ben Graham and, most recently, Warren Buffet (although he recommends 90:10 stocks:bonds).

That said, at the moment I can see more merit in your suggestion of just quarantining the cash! I may well do this.

But, please humor me for a minute: If you were to recommend a bond ETF, how would you respond to my questions above RE:
  • If I buy a eurozone bond ETF like IEGE or CBE3 (both iShares), is this riskier than a multiple currency bond ETF like ISHG? After all, eurozone countries cannot print money to pay their debts. Would I be better off going for an ETF that contained bonds from the US, UK, Japan, Australia and the eurozone, or should I stick to the eurozone only?
  • If I have a choice, should I buy an inflation-linked bond ETF over a non-inflation-linked government bond ETF? Again, iShares have several inflation-linked government bond ETFs on offer.
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Finally, does anyone have counsel regarding the base currency of the Saxo account? I know, Jim, you said that the underlying MNCs are diversified enough currency-wise as it is; but is there a persuasive argument for buying the ETF in dollars rather than euros?
 
I am not by any means an expert in investment strategies but a couple of things strike me from your post. You say that

He-Man said:
I have a feeling that my job here won't last much beyond another 2 or 3 years. If that happens, my plan would be to seek a similar role in Singapore or another Middle East country. Only as a last resort would I move back to Europe for work.
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yet you are assuming as part of your investment strategy that you will have 1k a month to invest on an ongoing basis. Surely you can only be confident of this for the next 2 - 3 years?


Right now I have 22k euros sitting in a bank and it's doing nothing but wasting away slowly .... In a worst-case scenario, wifey and me would have to move back to Ireland in two years' time ... my net earnings would drop from 71k euro per year to 38k euro per year.

If there is any possibility at all of you having to live in Ireland on 38k a year, I disagree that your 22k is 'doing nothing but wasting away slowly'. Even if you are lucky and get to move to Singapore or another ME destination, you'll inevitably incur costs from the move. Perhapsd you don't need as much as 22k in cash but I wouldn't go below 15k if I were you.

WRT Belize, I had that more in a mind as a place where I'd buy a little house when 60 years old or so.

Have you ever been to Belize? It currently has one of the highest homicide rates in the world. Of all the LatAm countries I have ever visited, it is the last place I'd plan to retire!

Final question - are you considering having children? It is a less nosy question than it seems, as it will (or should) affect your investment outlook. A 30 year time frame for your investment strategy to mature is all very well if you don't plan of having a family - but your savings and expenditure priorities could change quickly if, say in 5 years time, you find yourself with 2 or 3 extra mouths to feed, clothe and educate!
 
He-Man said:
I should point out that another book I'm reading carefully at the moment is Millionaire Next Door. It does emphasize that homes should be modest, not in the most upmarket areas, and not costing more than double one's annual realized income. These are precepts I will follow if I do eventually buy a home.
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Sorry, one more point. Whoever wrote Millionaire Next Door has clearly never been to Ireland. You estimate that if you moved back to Ireland, your net income would be 38k. Never mind the most upmarket areas and modest or immodest houses, 76k wouldn't get you a hovel anywhere in Ireland, never mind anywhere you or your wife would be likely to find employment (essentially Dublin, Cork, Galway and surrounds). I applaud your advance financial planning for your future but I think you need to be realistic. You are currently earning an excellent salary, tax free and you should certainly save while you can, but, in a sense, you are currently living in a bubble when it comes to extra disposable income, and it is one that may not last, even if you don't end up moving back to Ireland. I am really not sure that your reliance on books written by US authors for your life investment strategy is very realistic.
 
mammyof2 said:
I am not by any means an expert in investment strategies but a couple of things strike me from your post. You say that you are assuming as part of your investment strategy that you will have 1k a month to invest on an ongoing basis. Surely you can only be confident of this for the next 2 - 3 years?
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Well, for the next 2 years I can be confident of being able to invest on average in the region of 40k per annum. If I repatriate, the amount I can spare each month would very probably fall below 1k per month. But I probably won't have to repatriate to Ireland as there is nothing in particular pulling me back there. You are, however, correct that I cannot predict what exactly my financial situation will be in 5-10 years -- but I would assume that this is true for most people.

If I had to repatriate, I would either cash in before repatriation, or I would simply maintain my investments and pay tax on the dividends; but I would hope that the principal (which by then should be at least 100k euro) will be sufficient to ensure that a nice bit of compounding is occurring over 20-30 years.

If there is any possibility at all of you having to live in Ireland on 38k a year, I disagree that your 22k is 'doing nothing but wasting away slowly'. Even if you are lucky and get to move to Singapore or another ME destination, you'll inevitably incur costs from the move. Perhaps you don't need as much as 22k in cash but I wouldn't go below 15k if I were you.
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. Noted. I am following this advise and am maintaining around 22k in cash just in case.

Have you ever been to Belize? It currently has one of the highest homicide rates in the world. Of all the LatAm countries I have ever visited, it is the last place I'd plan to retire!
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Hehe, fair point! To be honest, my wife and I would consider any tropical place to retire. Granted, Belize isn't a good bet right now. Perhaps things will have improved by 2044. If not, there's Panama, Palawan, places like that. Pure speculation at this stage, though.

Final question - are you considering having children? It is a less nosy question than it seems, as it will (or should) affect your investment outlook. A 30 year time frame for your investment strategy to mature is all very well if you don't plan of having a family - but your savings and expenditure priorities could change quickly if, say in 5 years time, you find yourself with 2 or 3 extra mouths to feed, clothe and educate!
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Answer is yes. One child only. We're at an age and at stages in our careers where 2 children seem unlikely given the timelines and in any case, neither of us want more than one. We are adamant about that. They're certainly expensive, and we're even running budget simulations at the moment on how costly a child would be.

mammyof2 said:
Sorry, one more point. Whoever wrote Millionaire Next Door has clearly never been to Ireland. You estimate that if you moved back to Ireland, your net income would be 38k. Never mind the most upmarket areas and modest or immodest houses, 76k wouldn't get you a hovel anywhere in Ireland, never mind anywhere you or your wife would be likely to find employment (essentially Dublin, Cork, Galway and surrounds). I applaud your advance financial planning for your future but I think you need to be realistic. You are currently earning an excellent salary, tax free and you should certainly save while you can, but, in a sense, you are currently living in a bubble when it comes to extra disposable income, and it is one that may not last, even if you don't end up moving back to Ireland. I am really not sure that your reliance on books written by US authors for your life investment strategy is very realistic.
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True about the cost of a house. Now, this gets us back to Jim2007's point about property being a millstone around one's financial neck. I'm sympathetic to his view. We have no intention of buying a property anywhere for the forseeable future. But when/if we do buy one, it will be modest and we will ensure we don't pay an inflated price for it.

But it's not an option right now as we don't know where we will end up.

I'm painfully aware that we're in a bubble. We are on-course to net 100k euros from September 14 to September 15 with zero debts of any kind. This cannot continue forever.

I should say, however, that if we were to repatriate to Ireland tomorrow, I would net 38k and my wife would probably net a similar amount.
 
Jim2007 said:
Why? Keep the 6K in cash with no transaction or depo fees the return should end up about the same.
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Actually Jim, for the sake of teasing this out, I'll pursue you on this.
Here's a quote I got from an advocate of a bond/stock index mixture:

When stocks rise, bonds often fall in price. Cash won’t. You will want to sell stocks (after they have risen) to buy the cheaper bonds when rebalancing. Also, have a look at the following charts. Here’s Canada’s short term government bond index.
In the past five years, $10,000 grew to roughly $11,500. You would have had no such luck with cash. A broader Canadian bond market index would have done even better: turning $10,000 into $12,657 over the past five years. Check out the iShares ticker, XBB.

If you’re American, and you invested in Vanguard’s broad bond market index five years ago, you would have turned $10,000 into $12,367: [broken link removed] With cash, you would have made nothing.

If you are British you would have turned 10,000 pounds into roughly 12,600 pounds in the past five years with the iShares UK government ETF. Again, with cash, you would have made nothing.
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Did you decide which government bond ETF to buy yet he-man? I assume by the lack of response that your last post of bonds being negatively correlated with equity makes sense.

Jim did you advise him to leave his 8k in the bank because it is a low amount? My total portfolio is about 500k so would you advise me to buy bonds with this rather than in a deposit account (paying DIRT)?
 
Hi He-Man,

This thread is the closest thing I’ve found to my own situation. I’m Irish and living in Singapore. Unfortunately I got nabbed by Zurich International in one of those expense ridden product and I’m tied in for a long term. It also lead me to Hallam’s book. I’m married with kids and the likelihood is to return to Ireland within 3-5 years. I was interested to hear how you’ve been getting on with your portfolio.

I am at the stage now deciding whether to invest in Vanguard or iShares ETFs via the Amsterdam exchange, using a nest egg of Euro’s as opposed to converting into another currency. It doesn’t look like Vanguard will be listing in the Singapore Exchange any time soon.

Hope to hear back from you!


Regards,
Si.
 
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