European Expat – seeking feedback on Portfolio allocation

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justdoitetf
Posts: 8
Joined: Sun Feb 18, 2018 5:35 am

European Expat – seeking feedback on Portfolio allocation

Post by justdoitetf » Sun Feb 18, 2018 8:41 am

Dear Bogleheads,

I am fairly new to this forum and I am seeking your valued feedback on my portfolio proposal.

I am 38 years old, originally from Germany, however have lived for past 8 years in Australia, then Singapore and now in the UAE.
I am not sure if I will go back to Europe (Germany) for retirement or settle somewhere else. I am planning to stay in the UAE for another 5-10 years at least and after that I am not sure where I might go. I have just opened an account with Interactive Brokers and are ready to invest.

Here are my details:

Emergency Funds: 1 year emergency fund
Debt: zero
Tax status: offshore with zero tax on all income
Tax location on return = EU or anywhere else
Current residence: Middle East (tax free)
Age: 38 - Working full-time
No kids/not married (but might be married / kids within next 5 years)
Desired asset allocation: 70% Stocks / 30% Bonds

My interpretation of more detailed allocation is as follows for a European:

70% EQUITIES

IWDA - iShares Core MSCI World UCITS ETF USD (Acc) -USD (TER 0.20) 50%
EIMI - iShares Core MSCI EM IMI UCITS ETF (acc) - USD (TER 0.25) 10%
VERX - Vanguard FTSE Developed Europe ex UK UCITS ETF- GBP (TER 0.12) 10%

30% BONDS

IBTA - iShares $ Treasury Bond 1-3yr UCITS ETF - USD (TER 0.20) 10%
IBGS - iShares € Govt Bond 1-3yr UCITS ETF - EUR (TER 0.20) 20%


Current assets for investment purposes:

Cash: 500,000 USD (after converting AUD / SGD into USD through IB)
Yearly Investment: 75,000 USD

Questions:
1. General: For someone without a real home-bias I thought since my salary is in AED (which is pegged to USD) it is easier to just choose the ETF’s which are priced in USD (even so I understand that the underlying currency of the assets is what is relevant) -> Does this make sense or anything I could optimise here; Currently I am still holding cash in SGD and AUD, however plan to convert to USD for simplicity (using Interactive Brokers);

2. Bonds:
- If I knew for sure I go back to Germany/Europe I would put 100% of the fixed income into Euro denominated bonds, however at the moment I don’t know that, might be another country as well (South East Asia or Australia). Therefore I would chose 20 % in Europe and 10% in US bonds; Does this make sense?

- I have chosen short term bonds because I expect interest rates to go up in mid term. However the yield is very close to zero or even negative and when interest rates rise it will even become worse. I have checked fixed term deposits and they are around 1.5 % (for 12 months) for USD in Singapore. Why would I go for short term bonds if I have more risk and then also have to pay the 0.20 % TER. Any thoughts on that point and points why I stick with bonds right now ?

3. Stocks:
- I have selected IWDA / EIMI instead of VWRD since it is accrued. Good choice? Anything that I can optimise?
- Is there any alternative for VERX since it is in GBP and I would prefer priced in USD (again for simplicity ) but wasn’t able to find this in LSE
- Stock allocation is ok or should I add more in VERX?

Thanks for your feedback!!!
M.

justdoitetf
Posts: 8
Joined: Sun Feb 18, 2018 5:35 am

Re: European Expat – seeking feedback on Portfolio allocation

Post by justdoitetf » Tue Feb 20, 2018 1:03 pm

Any feedback ? :sharebeer

TedSwippet
Posts: 1663
Joined: Mon Jun 04, 2007 4:19 pm

Re: European Expat – seeking feedback on Portfolio allocation

Post by TedSwippet » Tue Feb 20, 2018 1:24 pm

justdoitetf wrote:
Tue Feb 20, 2018 1:03 pm
Any feedback ?
Only that this looks pretty good to me. I could certainly live with it.

No US estate tax risks. Minimised US withholding tax on dividends. Use of UCITS ETFs should mean that they are not punitively taxed if/when you return to the EU; no idea about Australia or other countries, but as you are in the UAE you can of course easily sell and then buy something else without any tax considerations. Decent stock/bond balance with good global coverage. Your logic on currencies is correct. On bond returns, nobody knows.

It seems to me that you are done planning. :-)

User avatar
BeBH65
Posts: 1063
Joined: Sat Jul 04, 2015 7:28 am

Re: European Expat – seeking feedback on Portfolio allocation

Post by BeBH65 » Tue Feb 20, 2018 1:27 pm

Hello JustdoitETF,

Welcome to the forum.
justdoitetf wrote:
Sun Feb 18, 2018 8:41 am
Dear Bogleheads,

I am fairly new to this forum and I am seeking your valued feedback on my portfolio proposal.

I am 38 years old, originally from Germany, however have lived for past 8 years in Australia, then Singapore and now in the UAE.
I am not sure if I will go back to Europe (Germany) for retirement or settle somewhere else. I am planning to stay in the UAE for another 5-10 years at least and after that I am not sure where I might go. I have just opened an account with Interactive Brokers and are ready to invest.

Here are my details:

Emergency Funds: 1 year emergency fund
Debt: zero
Tax status: offshore with zero tax on all income
Tax location on return = EU or anywhere else
Current residence: Middle East (tax free)
Age: 38 - Working full-time
No kids/not married (but might be married / kids within next 5 years)
Desired asset allocation: 70% Stocks / 30% Bonds Seems sensible for your age.

My interpretation of more detailed allocation is as follows for a European:

70% EQUITIES

IWDA - iShares Core MSCI World UCITS ETF USD (Acc) -USD (TER 0.20) 50%
EIMI - iShares Core MSCI EM IMI UCITS ETF (acc) - USD (TER 0.25) 10%
VERX - Vanguard FTSE Developed Europe ex UK UCITS ETF- GBP (TER 0.12) 10%
So you are slightly overweighting Developped Europe ex UK

30% BONDS
you are focussing on short term, many do this as pretection against future increases, some investors remain in intermediate duration

IBTA - iShares $ Treasury Bond 1-3yr UCITS ETF - USD (TER 0.20) 10%
IBGS - iShares € Govt Bond 1-3yr UCITS ETF - EUR (TER 0.20) 20%
Please have a look at the content of this last ETF. Only 6 bonds and majority Spain and Italy with BBB status. This might not be as stable as you desire. Please check the forum, there are multiple threads on how to best fill the stable assets of your portfolio.


Current assets for investment purposes:

Cash: 500,000 USD (after converting AUD / SGD into USD through IB)
Yearly Investment: 75,000 USD

Questions:
1. General: For someone without a real home-bias I thought since my salary is in AED (which is pegged to USD) it is easier to just choose the ETF’s which are priced in USD (even so I understand that the underlying currency of the assets is what is relevant) -> Does this make sense or anything I could optimise here; Currently I am still holding cash in SGD and AUD, however plan to convert to USD for simplicity (using Interactive Brokers);
The performance depends on the currency of the underlying asset, independent on the currency of the fund. Currency conversion will cost you money, so best to avoid it.

2. Bonds:
- If I knew for sure I go back to Germany/Europe I would put 100% of the fixed income into Euro denominated bonds, however at the moment I don’t know that, might be another country as well (South East Asia or Australia). Therefore I would chose 20 % in Europe and 10% in US bonds; Does this make sense?
Some of the threads on this forum suggest that even Europeans could diversify their bond holdings globally, possibly EUR hedged< have a look at the posts of ValueThinker.
- I have chosen short term bonds because I expect interest rates to go up in mid term. However the yield is very close to zero or even negative and when interest rates rise it will even become worse. I have checked fixed term deposits and they are around 1.5 % (for 12 months) for USD in Singapore. Why would I go for short term bonds if I have more risk and then also have to pay the 0.20 % TER. Any thoughts on that point and points why I stick with bonds right now ?
Indeed, if you have access to government ?guaranteed? @1.5% they would be an excellent alternative

3. Stocks:
- I have selected IWDA / EIMI instead of VWRD since it is accrued. Good choice? Anything that I can optimise?
In some countries have accumulating (reinvesting dividends) fonds avoids divident witholding taxes. not sure if this is valide for you.
You could use VWRL/VWRD and that gives you the option to use the dividends for rebalancing

- Is there any alternative for VERX since it is in GBP and I would prefer priced in USD (again for simplicity ) but wasn’t able to find this in LSE
- Stock allocation is ok or should I add more in VERX? Why are you overweigting Europe?

Thanks for your feedback!!!
M.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

halfnine
Posts: 856
Joined: Tue Dec 21, 2010 1:48 pm

Re: European Expat – seeking feedback on Portfolio allocation

Post by halfnine » Tue Feb 20, 2018 4:35 pm

justdoitetf wrote:
Sun Feb 18, 2018 8:41 am
.............
2. Bonds:
- If I knew for sure I go back to Germany/Europe I would put 100% of the fixed income into Euro denominated bonds, however at the moment I don’t know that, might be another country as well (South East Asia or Australia). Therefore I would chose 20 % in Europe and 10% in US bonds; Does this make sense?

- I have chosen short term bonds because I expect interest rates to go up in mid term. However the yield is very close to zero or even negative and when interest rates rise it will even become worse. I have checked fixed term deposits and they are around 1.5 % (for 12 months) for USD in Singapore. Why would I go for short term bonds if I have more risk and then also have to pay the 0.20 % TER. Any thoughts on that point and points why I stick with bonds right now ?
.........
For someone who is truly global without a home bias and has taxable accounts, I see no problem in this current environment not to have fixed income accounts that are either cash or fixed term deposits instead of bonds. The are plenty of decent currencies out there with favorable carry trades relevant to the USD where you can get good yields. It'd probably lean 20% that way and then 10% in US bonds for the benefits during flight to safety.

Overall, though, I don't see any major issues with your original allocations. It's certainly good enough.

justdoitetf
Posts: 8
Joined: Sun Feb 18, 2018 5:35 am

Re: European Expat – seeking feedback on Portfolio allocation

Post by justdoitetf » Tue Feb 20, 2018 10:57 pm

TedSwippet wrote:
Tue Feb 20, 2018 1:24 pm
justdoitetf wrote:
Tue Feb 20, 2018 1:03 pm
Any feedback ?
Only that this looks pretty good to me. I could certainly live with it.

No US estate tax risks. Minimised US withholding tax on dividends. Use of UCITS ETFs should mean that they are not punitively taxed if/when you return to the EU; no idea about Australia or other countries, but as you are in the UAE you can of course easily sell and then buy something else without any tax considerations. Decent stock/bond balance with good global coverage. Your logic on currencies is correct. On bond returns, nobody knows.

It seems to me that you are done planning. :-)
Thanks a lot for your feedback !! Good to know I am on the right track

justdoitetf
Posts: 8
Joined: Sun Feb 18, 2018 5:35 am

Re: European Expat – seeking feedback on Portfolio allocation

Post by justdoitetf » Tue Feb 20, 2018 11:13 pm

Thanks a lot BeBH65 for your detailed feedback ! Below my replies:
BeBH65 wrote:
Tue Feb 20, 2018 1:27 pm
Hello JustdoitETF,

Welcome to the forum.
justdoitetf wrote:
Sun Feb 18, 2018 8:41 am
Dear Bogleheads,

I am fairly new to this forum and I am seeking your valued feedback on my portfolio proposal.

I am 38 years old, originally from Germany, however have lived for past 8 years in Australia, then Singapore and now in the UAE.
I am not sure if I will go back to Europe (Germany) for retirement or settle somewhere else. I am planning to stay in the UAE for another 5-10 years at least and after that I am not sure where I might go. I have just opened an account with Interactive Brokers and are ready to invest.

Here are my details:

Emergency Funds: 1 year emergency fund
Debt: zero
Tax status: offshore with zero tax on all income
Tax location on return = EU or anywhere else
Current residence: Middle East (tax free)
Age: 38 - Working full-time
No kids/not married (but might be married / kids within next 5 years)
Desired asset allocation: 70% Stocks / 30% Bonds Seems sensible for your age.

My interpretation of more detailed allocation is as follows for a European:

70% EQUITIES

IWDA - iShares Core MSCI World UCITS ETF USD (Acc) -USD (TER 0.20) 50%
EIMI - iShares Core MSCI EM IMI UCITS ETF (acc) - USD (TER 0.25) 10%
VERX - Vanguard FTSE Developed Europe ex UK UCITS ETF- GBP (TER 0.12) 10%
So you are slightly overweighting Developped Europe ex UK

I am overweighting Europe since I might be living in Europe at least for some time in the future, so I thought a small overweight would help for reducing currency risk since it is tracking European dev index

30% BONDS
you are focussing on short term, many do this as pretection against future increases, some investors remain in intermediate duration

IBTA - iShares $ Treasury Bond 1-3yr UCITS ETF - USD (TER 0.20) 10%
IBGS - iShares € Govt Bond 1-3yr UCITS ETF - EUR (TER 0.20) 20%
Please have a look at the content of this last ETF. Only 6 bonds and majority Spain and Italy with BBB status. This might not be as stable as you desire. Please check the forum, there are multiple threads on how to best fill the stable assets of your portfolio.

Thanks a lot, you are right. I will certainly not choose IBGS.

Current assets for investment purposes:

Cash: 500,000 USD (after converting AUD / SGD into USD through IB)
Yearly Investment: 75,000 USD

Questions:
1. General: For someone without a real home-bias I thought since my salary is in AED (which is pegged to USD) it is easier to just choose the ETF’s which are priced in USD (even so I understand that the underlying currency of the assets is what is relevant) -> Does this make sense or anything I could optimise here; Currently I am still holding cash in SGD and AUD, however plan to convert to USD for simplicity (using Interactive Brokers);
The performance depends on the currency of the underlying asset, independent on the currency of the fund. Currency conversion will cost you money, so best to avoid it.


2. Bonds:
- If I knew for sure I go back to Germany/Europe I would put 100% of the fixed income into Euro denominated bonds, however at the moment I don’t know that, might be another country as well (South East Asia or Australia). Therefore I would chose 20 % in Europe and 10% in US bonds; Does this make sense?
Some of the threads on this forum suggest that even Europeans could diversify their bond holdings globally, possibly EUR hedged< have a look at the posts of ValueThinker.
- I have chosen short term bonds because I expect interest rates to go up in mid term. However the yield is very close to zero or even negative and when interest rates rise it will even become worse. I have checked fixed term deposits and they are around 1.5 % (for 12 months) for USD in Singapore. Why would I go for short term bonds if I have more risk and then also have to pay the 0.20 % TER. Any thoughts on that point and points why I stick with bonds right now ?
Indeed, if you have access to government ?guaranteed? @1.5% they would be an excellent alternative
Thanks for confirming my thoughts, I think I will go with 20% in fixed deposit and 10% US bonds (IBTA)

3. Stocks:
- I have selected IWDA / EIMI instead of VWRD since it is accrued. Good choice? Anything that I can optimise?
In some countries have accumulating (reinvesting dividends) fonds avoids divident witholding taxes. not sure if this is valide for you.
You could use VWRL/VWRD and that gives you the option to use the dividends for rebalancing

- Is there any alternative for VERX since it is in GBP and I would prefer priced in USD (again for simplicity ) but wasn’t able to find this in LSE
- Stock allocation is ok or should I add more in VERX? Why are you overweigting Europe?
I am just overweighting Europe (Germany) as it is some kind of home for me and might live there for some time, or you think it doesn't make much of a difference. Also, I actually read about this approach (i.e. Total Stock Market ETF, Home Stock Market ETF + Home-Bias Bond ETF in Andrew Hallem's book, that is why I thought of adding two ETF's (VWRD/IEUX) in the equity part rather than just Total Stock Market Index (VWRD); However, maybe I just go with VWRD for simplicity, then I also don't need the EIMI for developed countries?

Thanks for your feedback!!!
M.

justdoitetf
Posts: 8
Joined: Sun Feb 18, 2018 5:35 am

Re: European Expat – seeking feedback on Portfolio allocation

Post by justdoitetf » Tue Feb 20, 2018 11:16 pm

Thanks halfnine, I think as per your suggestion, I will go with 20% fixed deposit in USD for 12 months and then 10% in US bonds.
halfnine wrote:
Tue Feb 20, 2018 4:35 pm
justdoitetf wrote:
Sun Feb 18, 2018 8:41 am
.............
2. Bonds:
- If I knew for sure I go back to Germany/Europe I would put 100% of the fixed income into Euro denominated bonds, however at the moment I don’t know that, might be another country as well (South East Asia or Australia). Therefore I would chose 20 % in Europe and 10% in US bonds; Does this make sense?

- I have chosen short term bonds because I expect interest rates to go up in mid term. However the yield is very close to zero or even negative and when interest rates rise it will even become worse. I have checked fixed term deposits and they are around 1.5 % (for 12 months) for USD in Singapore. Why would I go for short term bonds if I have more risk and then also have to pay the 0.20 % TER. Any thoughts on that point and points why I stick with bonds right now ?
.........
For someone who is truly global without a home bias and has taxable accounts, I see no problem in this current environment not to have fixed income accounts that are either cash or fixed term deposits instead of bonds. The are plenty of decent currencies out there with favorable carry trades relevant to the USD where you can get good yields. It'd probably lean 20% that way and then 10% in US bonds for the benefits during flight to safety.

Overall, though, I don't see any major issues with your original allocations. It's certainly good enough.

justdoitetf
Posts: 8
Joined: Sun Feb 18, 2018 5:35 am

Re: European Expat – seeking feedback on Portfolio allocation

Post by justdoitetf » Tue Feb 20, 2018 11:19 pm

Thanks all for your feedback.

I think I will go with below to start with and then just see how it goes after a few years.

70% EQUITIES

VWRD - iShares Core MSCI World UCITS ETF USD -USD (TER 0.20) 60%
VERX - Vanguard FTSE Developed Europe ex UK UCITS ETF- GBP (TER 0.12) 10%

30% FIXED INCOME

IBTA - iShares $ Treasury Bond 1-3yr UCITS ETF - USD (TER 0.20) 20%
Fixed Deposit with 1.5 % (in USD) 10%

Thanks
M.

justdoitetf
Posts: 8
Joined: Sun Feb 18, 2018 5:35 am

Re: European Expat – seeking feedback on Portfolio allocation

Post by justdoitetf » Thu Feb 22, 2018 8:22 am

Hi Bogleheads,

One last question I have, which is bothering me for a while.

As initially stated, since I worked in Australia, Singapore, Germany and now Middle east I still have cash in AUD, SGD, EUR and AED (=USD) and I also don't know where I will retire (might be Europe, but don't really know).

My question is, what should I do with AUD and SGD.

I see two options:

1. I can either exchange all cash from AUD and SGD into USD (since the USD is a bit weak right now) and then buy the Global Stocks All World ETF (e.g. VWRD) priced in USD.
2. I could buy the Global Stocks All World ETF priced in AUD and SGD and then whenever I have decided where I will retire and the FX rate is good I will sell and buy a corresponding Global Stocks All World ETF in the currency I am planning to retire (maybe i know in 10 years where I want to retire, but right now I don't know).

I am just confused with keeping different currencies vs. waiting for a good time in next 10 years to exchange (or are both options actually the same due to the underlying assets being the same)?

Hope someone can help on which option makes more sense.

Thanks,
M.

Valuethinker
Posts: 34876
Joined: Fri May 11, 2007 11:07 am

Re: European Expat – seeking feedback on Portfolio allocation

Post by Valuethinker » Thu Feb 22, 2018 9:21 am

justdoitetf wrote:
Sun Feb 18, 2018 8:41 am
Dear Bogleheads,

I am fairly new to this forum and I am seeking your valued feedback on my portfolio proposal.

I am 38 years old, originally from Germany, however have lived for past 8 years in Australia, then Singapore and now in the UAE.
I am not sure if I will go back to Europe (Germany) for retirement or settle somewhere else. I am planning to stay in the UAE for another 5-10 years at least and after that I am not sure where I might go. I have just opened an account with Interactive Brokers and are ready to invest.

Here are my details:

Emergency Funds: 1 year emergency fund
Debt: zero
Tax status: offshore with zero tax on all income
Tax location on return = EU or anywhere else
Current residence: Middle East (tax free)
Age: 38 - Working full-time
No kids/not married (but might be married / kids within next 5 years)
Desired asset allocation: 70% Stocks / 30% Bonds

My interpretation of more detailed allocation is as follows for a European:

70% EQUITIES

IWDA - iShares Core MSCI World UCITS ETF USD (Acc) -USD (TER 0.20) 50%
EIMI - iShares Core MSCI EM IMI UCITS ETF (acc) - USD (TER 0.25) 10%

VERX - Vanguard FTSE Developed Europe ex UK UCITS ETF- GBP (TER 0.12) 10%
Why do you need a separate Europe fund? Why not just hold the global developed market fund? Makes it easier to rebalance, as well.
30% BONDS

IBTA - iShares $ Treasury Bond 1-3yr UCITS ETF - USD (TER 0.20) 10%
IBGS - iShares € Govt Bond 1-3yr UCITS ETF - EUR (TER 0.20) 20%


Current assets for investment purposes:

Cash: 500,000 USD (after converting AUD / SGD into USD through IB)
Yearly Investment: 75,000 USD

Questions:
1. General: For someone without a real home-bias I thought since my salary is in AED (which is pegged to USD) it is easier to just choose the ETF’s which are priced in USD (even so I understand that the underlying currency of the assets is what is relevant) -> Does this make sense or anything I could optimise here; Currently I am still holding cash in SGD and AUD, however plan to convert to USD for simplicity (using Interactive Brokers);
Yes, as long as you won't pay currency fees twice-- when the dividends are paid into your account in the wrong currency (ie not the home currency of the account).

There's no reason to hold SGD and AUD unless you need to spend that money for holidays, retirement etc.

2. Bonds:
- If I knew for sure I go back to Germany/Europe I would put 100% of the fixed income into Euro denominated bonds, however at the moment I don’t know that, might be another country as well (South East Asia or Australia). Therefore I would chose 20 % in Europe and 10% in US bonds; Does this make sense?
Or 15/15. Which one will probably not make much difference, long term.
- I have chosen short term bonds because I expect interest rates to go up in mid term. However the yield is very close to zero or even negative and when interest rates rise it will even become worse. I have checked fixed term deposits and they are around 1.5 % (for 12 months) for USD in Singapore. Why would I go for short term bonds if I have more risk and then also have to pay the 0.20 % TER. Any thoughts on that point and points why I stick with bonds right now ?
Stay within the deposit insurance limits for Singapore financial institutions. Your credit risk is then just that the Singapore government won't make good on the deposit insurance (they'd probably impose exchange controls, a la Iceland, in that case). It's a nightmare scenario - not impossible given Singapore real estate prices (residential RE in Sing is among the world's most overvalued, on some measures; alongside Vancouver, Sydney, Melbourne, Toronto, Stockholm and maybe Hong Kong). But one has to assume that the Singapore govt would make good on the deposit insurance.

Otherwise there is nothing wrong with this, but note that US Treasury bonds (10 year) are paying c. 2.9%? That's quite a lot of return, long run, to give up (1.4% pa compounded for 10 years).

The other reason to stick with a bond fund (besides tax) is because it's easier to rebalance if all in one account.
3. Stocks:
- I have selected IWDA / EIMI instead of VWRD since it is accrued. Good choice? Anything that I can optimise?
You mean Accumulating v. Distributing? The main reason one v. the other is the investor's tax position.
- Is there any alternative for VERX since it is in GBP and I would prefer priced in USD (again for simplicity ) but wasn’t able to find this in LSE
You don't like Her Majesty's money? ;-). She is Elizabeth of the House of Hanover (Saxe Coborg Gotha) ;-).

I don't think you need this fund. As above.
- Stock allocation is ok or should I add more in VERX?

As above.

Valuethinker
Posts: 34876
Joined: Fri May 11, 2007 11:07 am

Re: European Expat – seeking feedback on Portfolio allocation

Post by Valuethinker » Thu Feb 22, 2018 9:24 am

justdoitetf wrote:
Thu Feb 22, 2018 8:22 am
Hi Bogleheads,

One last question I have, which is bothering me for a while.

As initially stated, since I worked in Australia, Singapore, Germany and now Middle east I still have cash in AUD, SGD, EUR and AED (=USD) and I also don't know where I will retire (might be Europe, but don't really know).

My question is, what should I do with AUD and SGD.

I see two options:

1. I can either exchange all cash from AUD and SGD into USD (since the USD is a bit weak right now) and then buy the Global Stocks All World ETF (e.g. VWRD) priced in USD.
2. I could buy the Global Stocks All World ETF priced in AUD and SGD and then whenever I have decided where I will retire and the FX rate is good I will sell and buy a corresponding Global Stocks All World ETF in the currency I am planning to retire (maybe i know in 10 years where I want to retire, but right now I don't know).
I'd do the first. Simpler. More countries use the USD.
I am just confused with keeping different currencies vs. waiting for a good time in next 10 years to exchange (or are both options actually the same due to the underlying assets being the same)?
Yes. Unless the fund currency hedges its investments into its reporting currency. That's making its current of account/ reporting also its currency of economic exposure (which is what really matters for an investor). For European ETFs I find they often don't make that clear, but as a general rule, equity funds usually do not, and bond funds usually do. You have to read around the material on the fund (key features document, prospectus, annual report) and it is often buried in risk factors OR in the definition of the benchmark (which is 3rd party provided, then you have to go and check that, sigh).

Valuethinker
Posts: 34876
Joined: Fri May 11, 2007 11:07 am

Re: European Expat – seeking feedback on Portfolio allocation

Post by Valuethinker » Thu Feb 22, 2018 9:28 am

justdoitetf wrote:
Tue Feb 20, 2018 11:19 pm
Thanks all for your feedback.

I think I will go with below to start with and then just see how it goes after a few years.

70% EQUITIES

VWRD - iShares Core MSCI World UCITS ETF USD -USD (TER 0.20) 60%
VERX - Vanguard FTSE Developed Europe ex UK UCITS ETF- GBP (TER 0.12) 10%

30% FIXED INCOME

IBTA - iShares $ Treasury Bond 1-3yr UCITS ETF - USD (TER 0.20) 20%
Fixed Deposit with 1.5 % (in USD) 10%

Thanks
M.
This is admirably simple. If you don't expect to need the money for more than say 5-7 years, I would consider an Intermediate Term US Treasury Bond fund.

US 10 year Treasuries are now at 2.9% yield. Say vs. 1-1.5% at the short end, that's a lot of return to give up- -compound 1.5% pa by 10 years. Yes you will have more volatility in the short term, but we are not likely to forecast the direction of interest rates any better than current market expectations.

halfnine
Posts: 856
Joined: Tue Dec 21, 2010 1:48 pm

Re: European Expat – seeking feedback on Portfolio allocation

Post by halfnine » Thu Feb 22, 2018 6:12 pm

justdoitetf wrote:
Thu Feb 22, 2018 8:22 am
...My question is, what should I do with AUD and SGD.....
If you're truly global and expenses in future currency are unknown I would potentially keep the existing currencies provided the amounts are within deposit insurance amounts or are within a strong banking jurisdiction. I'd even consider adding additional currencies. But first I'd figure out what maturity I am looking at for my overall fixed income. Then I would compare the yield curves for each currency across cash accounts, fixed term accounts and bonds. I'd personally want some US bonds (flight to safety) in my portfolio and would buy some US treasuries of a duration that provided the best yield relative to the other currency options. For instance in a two currency scenario and I wanted keep the maturity short, I might own some cash and/or 1-2 year fixed term in AUD where one could get maybe 2.5% (?) then possibly couple that with 5 year US treasuries at 2.7%.

Then, crudely, during accrual phase one would invest in whatever is the weaker currency at the time. And during the spending phase one would spend out of the currency that is stronger at the time. This will provide you currency diversification.

justdoitetf
Posts: 8
Joined: Sun Feb 18, 2018 5:35 am

Re: European Expat – seeking feedback on Portfolio allocation

Post by justdoitetf » Mon Feb 26, 2018 7:00 am

Thanks a lot also for the latest feedback.

Interesting approach regarding keeping the different currencies but I think it will get too complicated for me, so for simplicity, I think I will just maintain EUR/USD going forward.

Also I have found a fixed deposit option for 12 months which gives me 2.5% per year which is least risk at the moment.

Regarding VERX, I agree, no need to have this in my portfolio since it is already covered through IWDA/EIMI (decided that from a re balancing point of view it might be better than VWRD).
Now I am actually thinking of adding small caps ETF into the equation, so my final portfolio will look like that:

70% EQUITIES

IWDA - iShares Core MSCI World UCITS ETF USD (Acc) -USD (TER 0.20) 52%
EIMI - iShares Core MSCI EM IMI UCITS ETF (acc) - USD (TER 0.25) 8%
WDSC – SPRD MSCI World Small Cap UCITS ETF (Acc) – USD – 10%

30% FIXED INCOME

Fixed Deposit with 2.5 % (in USD) 30% (for 12 months)

Thanks,
M.

Valuethinker
Posts: 34876
Joined: Fri May 11, 2007 11:07 am

Re: European Expat – seeking feedback on Portfolio allocation

Post by Valuethinker » Mon Feb 26, 2018 7:28 am

justdoitetf wrote:
Mon Feb 26, 2018 7:00 am
Thanks a lot also for the latest feedback.

Interesting approach regarding keeping the different currencies but I think it will get too complicated for me, so for simplicity, I think I will just maintain EUR/USD going forward.

Also I have found a fixed deposit option for 12 months which gives me 2.5% per year which is least risk at the moment.

Regarding VERX, I agree, no need to have this in my portfolio since it is already covered through IWDA/EIMI (decided that from a re balancing point of view it might be better than VWRD).
Now I am actually thinking of adding small caps ETF into the equation, so my final portfolio will look like that:

70% EQUITIES

IWDA - iShares Core MSCI World UCITS ETF USD (Acc) -USD (TER 0.20) 52%
EIMI - iShares Core MSCI EM IMI UCITS ETF (acc) - USD (TER 0.25) 8%
WDSC – SPRD MSCI World Small Cap UCITS ETF (Acc) – USD – 10%

30% FIXED INCOME

Fixed Deposit with 2.5 % (in USD) 30% (for 12 months)

Thanks,
M.
What is your credit risk against the USD deposits? Does it fall within a government compensation scheme?

In the financial crash, Dubai needed a bailout from Abu Dhabi. Granted, this is a small risk. But it's a risk.

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