21, non-US citizen, best options for a lazy portfolio?

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cahn1996
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21, non-US citizen, best options for a lazy portfolio?

Post by cahn1996 » Tue May 22, 2018 6:08 pm

Bogleheads,

Thanks for all the information you have contributed.

I have just graduated from University here in the U.S., and will begin my full-time job later in June. After reading the introductory material, I have decided to invest in low-cost, passive indexed funds. Ideally, the three-fund "lazy portfolio" of 60% U.S. Stock Market + 20% International Stock Market + 20% U.S. Bond Market would be great for me. I have no intention of withdrawing the money within the next 30-40 years. I am still slightly confused on the options available to non-US citizens living (and working) in the US. Right now I am on an OPT visa (a 12 month visa you get after graduating) and would be applying for the H1B to stay (in case that fails, I can come back under an L1, which is the plan at the moment).

Question: Which brokers offer the lowest cost for investors like me that just wish to make monthly contributions and leave the money untouched? I've read that Vanguard is not an option and that IB is not great for passive investors. I have no idea where I will be in 5 years but my goal is to stay in the US for the foreseeable future. Which broker / institution can help me in opening a global account shaped like the three-fund portfolio mentioned above, which I will be able to keep making contributions to whether or not I am in the US?

TL;DR - Non-US (South American / European) citizen living and working in the US hoping to open a three-fund (US stocks, Int stocks, US bonds) account with a low-cost broker which allows me to keep making contributions to the account whether or not I am in the US (future residence is uncertain). Where should I go?

ExitStageLeft
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Joined: Sat Jan 20, 2018 4:02 pm

Re: 21, non-US citizen, best options for a lazy portfolio?

Post by ExitStageLeft » Tue May 22, 2018 10:17 pm

Welcome to the forum!

You might try digging into some threads by doing a search for "ex-pat" or "expat". Here's a couple that caught my eye.

viewtopic.php?t=229367

viewtopic.php?t=246745

manedark
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Re: 21, non-US citizen, best options for a lazy portfolio?

Post by manedark » Tue May 22, 2018 11:49 pm

cahn1996 wrote:
Tue May 22, 2018 6:08 pm
Question: Which brokers offer the lowest cost for investors like me that just wish to make monthly contributions and leave the money untouched? I've read that Vanguard is not an option and that IB is not great for passive investors.
Why Vanguard is not an option - you can make ETF purchases in small amounts without paying additional fee (atleast for Vanguard ETFs), isnt it?
cahn1996 wrote:
Tue May 22, 2018 6:08 pm
TL;DR - Non-US (South American / European) citizen living and working in the US hoping to open a three-fund (US stocks, Int stocks, US bonds) account with a low-cost broker which allows me to keep making contributions to the account whether or not I am in the US (future residence is uncertain). Where should I go?
I have a Vanguard account, and I asked them exactly that yesterday - the reply can be seen here - viewtopic.php?f=1&t=141211&p=3936816#p3938378
In short - yes you can continue to hold and contribute more into the funds since you opened the funds while you were in the US as a tax resident.

cahn1996
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Re: 21, non-US citizen, best options for a lazy portfolio?

Post by cahn1996 » Fri May 25, 2018 2:01 pm

manedark wrote:
Tue May 22, 2018 11:49 pm
cahn1996 wrote:
Tue May 22, 2018 6:08 pm
Question: Which brokers offer the lowest cost for investors like me that just wish to make monthly contributions and leave the money untouched? I've read that Vanguard is not an option and that IB is not great for passive investors.
Why Vanguard is not an option - you can make ETF purchases in small amounts without paying additional fee (atleast for Vanguard ETFs), isnt it?
cahn1996 wrote:
Tue May 22, 2018 6:08 pm
TL;DR - Non-US (South American / European) citizen living and working in the US hoping to open a three-fund (US stocks, Int stocks, US bonds) account with a low-cost broker which allows me to keep making contributions to the account whether or not I am in the US (future residence is uncertain). Where should I go?
I have a Vanguard account, and I asked them exactly that yesterday - the reply can be seen here - viewtopic.php?f=1&t=141211&p=3936816#p3938378
In short - yes you can continue to hold and contribute more into the funds since you opened the funds while you were in the US as a tax resident.

Hey, thanks for the reply. Today I went to Schawb and Fidelity offices, and I just got out of the phone with Vanguard.

Strangely (based on what you said) I cannot keep making investments in my US acccount with Vanguard if I leave the country. What I got from the call is that to buy ETF's I have to have a residency in the United States; If I am living abroad, even though I opened an account here, I cannot maintain these deposits.

Fidelity is similar. I can open an account here, but if I were to leave, I would not be able to keep buying ETF's.

Luckily, however, Schawb allows me to currently open an account here and transform it into an International account if I have to leave the US. What they told me is that I only need a SSN/Address to open an account, and if I leave the country, I basically have to just give them my new address outside the US so that my account becomes International. If I were to come back to the US, then the account could be switched back to domestic. Only caveat with Schawb is that an international account's minimum is $25,000. I'm 21 and will be starting my new job. I plan to save 6 months of expenses and then start investing into ETF's, so I'm not sure I'd be able to hit the 25k mark by the end of my first here in the US (the time where I'd have to leave in case I don't get an H1B.)

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galeno
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Re: 21, non-US citizen, best options for a lazy portfolio?

Post by galeno » Fri May 25, 2018 2:27 pm

I just answered you privately before I saw this post.

I think your best bet would be to start with Schwab USA. Then if you move out of the USA you can switch to IB.

IMHO the Schwab funds and ETFs are excellent if you are a USA domicile. If not you want to buy your ETFs on the LSE.

IB lets me buy and sell financial assets on almost any stock exchange in the world.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 3.0%. TER = 0.4%. Port Yield = 2.0%. Term = 35 yr. FI Duration = 6.2 yr. Portfolio survival probability = 100%.

manedark
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Re: 21, non-US citizen, best options for a lazy portfolio?

Post by manedark » Fri May 25, 2018 4:38 pm

cahn1996 wrote:
Fri May 25, 2018 2:01 pm
Strangely (based on what you said) I cannot keep making investments in my US acccount with Vanguard if I leave the country. What I got from the call is that to buy ETF's I have to have a residency in the United States; If I am living abroad, even though I opened an account here, I cannot maintain these deposits.
Ok that is strange, I need to call Vanguard to clarify that question as well - to be able to buy more funds when out of US. But I guess we have a consistent answer on the more important question - that you can continue to "hold" the funds you already purchased while you were in the US - without having to sell them (as opposed to buying more). Like you said, I think you just need to convert it into an international account and give them some extra forms for taxation purposes.

Coming back to your situation - I would wait and see your situation pans out before stating to worry about taxable account allocation. More importantly I would wait to see the benefits you get from your employer - especially 401K and any ESPP or RSU options, and use them to the fullest extent (employer match, discount ESPP etc.) and then plan on asset allocation for taxable account.

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galeno
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Re: 21, non-US citizen, best options for a lazy portfolio?

Post by galeno » Fri May 25, 2018 5:38 pm

An USA expat friend of mine lives all over the world. He withdraws from his Vanguard accounts the using internet. BUT he uses the address of a friend in the USA. It needs to be a physical address not a PO Box.

Do you have a friend or relative in the USA who would allow you to use his USA address?
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 3.0%. TER = 0.4%. Port Yield = 2.0%. Term = 35 yr. FI Duration = 6.2 yr. Portfolio survival probability = 100%.

cahn1996
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Re: 21, non-US citizen, best options for a lazy portfolio?

Post by cahn1996 » Fri May 25, 2018 9:23 pm

manedark wrote:
Fri May 25, 2018 4:38 pm
cahn1996 wrote:
Fri May 25, 2018 2:01 pm
Strangely (based on what you said) I cannot keep making investments in my US acccount with Vanguard if I leave the country. What I got from the call is that to buy ETF's I have to have a residency in the United States; If I am living abroad, even though I opened an account here, I cannot maintain these deposits.
Ok that is strange, I need to call Vanguard to clarify that question as well - to be able to buy more funds when out of US. But I guess we have a consistent answer on the more important question - that you can continue to "hold" the funds you already purchased while you were in the US - without having to sell them (as opposed to buying more). Like you said, I think you just need to convert it into an international account and give them some extra forms for taxation purposes.

Coming back to your situation - I would wait and see your situation pans out before stating to worry about taxable account allocation. More importantly I would wait to see the benefits you get from your employer - especially 401K and any ESPP or RSU options, and use them to the fullest extent (employer match, discount ESPP etc.) and then plan on asset allocation for taxable account.

Yep it is strange. I noticed that those brokerage firms often gave inconsistent answers when it came to opening accounts. For instance, I called Fidelity and someone told me that my assets would have to be liquidated if I move out the US. Today, I went to one of their offices and someone told me that they would not be liquidated, (would remain in account accumulating / depreciating) but that I could make no further investments. I suppose these situations involving expats and international accounts are trickier...

As for the 401k, I'm not even sure it is applicable to me... According to some sources, like this one, I would not be able to transfer my 401k funds tax-free if I moved outside the US, and I would probably be subject to the 10% early withdrawing fee as well.

cahn1996
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Re: 21, non-US citizen, best options for a lazy portfolio?

Post by cahn1996 » Fri May 25, 2018 9:24 pm

galeno wrote:
Fri May 25, 2018 5:38 pm
An USA expat friend of mine lives all over the world. He withdraws from his Vanguard accounts the using internet. BUT he uses the address of a friend in the USA. It needs to be a physical address not a PO Box.

Do you have a friend or relative in the USA who would allow you to use his USA address?
I would, but how does this work? The account would be open in my name but with someone else's address? Or it would be all together in their name, and I would transfer them money so that they could buy products? Because from what I learned today is that one cannot make international purchases on a US domiciled vanguard/fidelity/schawb account (it will pop a red flag in the system and they freeze the account until the issue is resolved)

TedSwippet
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Re: 21, non-US citizen, best options for a lazy portfolio?

Post by TedSwippet » Sat May 26, 2018 3:39 am

cahn1996 wrote:
Fri May 25, 2018 9:23 pm
As for the 401k, I'm not even sure it is applicable to me... According to some sources, like this one, I would not be able to transfer my 401k funds tax-free if I moved outside the US, and I would probably be subject to the 10% early withdrawing fee as well.
The link you cite talks about transferring a 401k to another non-US retirement account. You most definitely cannot do that -- the US financial system is entirely Balkanised when it comes to 401ks and IRAs, so that nothing foreign either goes in or comes out. (Compare to QROPS practised by some other countries.)

However, Vanguard in particular certainly does not reflexively simply close out a 401k if you become a non-resident. I have one even though I left the US over a decade ago and am neither a US citizen nor a green card holder. Some providers might not be so amenable; anecdotal reports suggest that Fidelity are particularly unhelpful here, so you probably want to choose your 401k or IRA provider carefully. I also still hold my Vanguard taxable account, and while it contains only a 'rump' holding in a prime money market fund, I have been able to both put money into that and take it out, including via check.

As for transfers to other US retirement accounts, as a non-resident alien I have been able to open a new Roth IRA and also rollover between my 401k and my IRAs (both traditional and Roth) in Vanguard. Some of this may well depend on which country you end up in. There were reports a few years ago of Canadians having... issues due to some sort of regulatory spat between Canada and the US. I am not in Canada, so this didn't affect me.

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galeno
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Re: 21, non-US citizen, best options for a lazy portfolio?

Post by galeno » Sat May 26, 2018 1:41 pm

He uses a friend's address in the USA. It's his USA address. When he's outside the USA (almost all the time) he accesses the Vanguard website via a free PVN app so the website thinks he's in the USA. Like us, he rebalances once a year and keeps 5% of his port in cash. That 5% is available to him all year in a different bank account which does not care where he spends it.

I use the same app to listen to a music program called "Pandora" which is only accessible in the USA.
cahn1996 wrote:
Fri May 25, 2018 9:24 pm
galeno wrote:
Fri May 25, 2018 5:38 pm
An USA expat friend of mine lives all over the world. He withdraws from his Vanguard accounts the using internet. BUT he uses the address of a friend in the USA. It needs to be a physical address not a PO Box.

Do you have a friend or relative in the USA who would allow you to use his USA address?
I would, but how does this work? The account would be open in my name but with someone else's address? Or it would be all together in their name, and I would transfer them money so that they could buy products? Because from what I learned today is that one cannot make international purchases on a US domiciled vanguard/fidelity/schawb account (it will pop a red flag in the system and they freeze the account until the issue is resolved)
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 3.0%. TER = 0.4%. Port Yield = 2.0%. Term = 35 yr. FI Duration = 6.2 yr. Portfolio survival probability = 100%.

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