[European Expat in Hong Kong] Bonds, Currency and Fees for global portfolio

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FikLinci
Posts: 3
Joined: Tue Jul 24, 2018 1:58 am

[European Expat in Hong Kong] Bonds, Currency and Fees for global portfolio

Post by FikLinci » Tue Jul 24, 2018 9:18 am

Hi Bogleheads,

Thank you everyone for making this a very good educational place for us - investor beginners.

I am EU country permanent resident (Czech Republic), but tax resident in Hong Kong for last 3 years. I am 27 yo and not sure yet if I will move to back to EU in the coming years and have less idea about my retirement (when and where) but will most probably go back to EU (not necessarily to Czech Rep.) rather than to any other continent.

Could you please help me with the following questions please?

1. IWDA vs any dirt cheap SP500 (e.g.CSPX)? I am pondering that BH community recommends a lot IWDA as a top ETF to invest in for European - because it covers a lot of developed countries and hence minimises currency risk as opposed to SP500. But won't these benefits be offset by a higher fee (0.2% for IWDA) compared compared to iShares SP500 (0.07%)? Some simple explanation would be nice.

2. Re Equity purchasing - As HKD is pegged to USD, I believe it's better for me to buy the USD denominated ETF's? It's probably cheaper than buying EUR denominated ETFs. However, from the long term perspective - if I am going back to EU, is it ok to buy IWDA in EUR and hold both USD and EUR IWDAs? Just stop buying USD and start buying EUR? Or shall I convert the USD one to one ETF holding later down the road?

3. Bonds - What would be your ETF suggestions for bonds please? I've read about that the best is to have bond ETF that are shorter term (due to interest rate risks) and that is ideally denominated in your own currency to prevent any currency risks. Being from Czech Rep. and living in Hong Kong, what would be a good ETF bond that would be counter-balancing my IWDA investment and I could hold over long term? Shall I go with EUROzone or USD? I want to keep it simple so probably one fund would be enough for now.

4. Just out of curiosity - I saw a lot of posts from Europeans starting - "I live in a tax free jurisdiction" or "No tax country residency" - I am wondering where these paradises in EU are? It looks like the EU is one big tax paradise which I am sure it's not :-)

Thank you so much for your time and patience answering these maybe basic questions!

imperia
Posts: 126
Joined: Tue Feb 21, 2017 6:31 am

Re: [European Expat in Hong Kong] Bonds, Currency and Fees for global portfolio

Post by imperia » Tue Jul 24, 2018 2:47 pm

1. Difference between 0.07 and 0.2 is not big.
For 100.000 you pay 70 or 200.
IWDA and CSPX are not same ETF and you can not compere tham.
If you belive that USA will preform better than rest of develope world than invest in CSPX.
I prefere diversification that IWDA give to me, but we will see result for 20 years.

2. You can buy/sell IWDA for EUR,GBP, USD, it is same ETF, but traded in different currency.
If you have USD than buy in USD, or if you have EUR,buy for EUR.

3. I use bank saving account instead of bonds.

FikLinci
Posts: 3
Joined: Tue Jul 24, 2018 1:58 am

Re: [European Expat in Hong Kong] Bonds, Currency and Fees for global portfolio

Post by FikLinci » Tue Jul 31, 2018 8:29 am

Thank you for your insights!

DJN
Posts: 130
Joined: Mon Nov 20, 2017 12:30 am

Re: [European Expat in Hong Kong] Bonds, Currency and Fees for global portfolio

Post by DJN » Tue Jul 31, 2018 10:16 am

Hi,
here are my suggestions for a portfolio for an EU investor where I am offshore tax free and coming back to EU in 18 months. I have had some good feedback already here, I am using UCIT, Ireland based and accumulating. I have included optional suggestions for value and small cap if you like to make things more complex:
BONDS
TICKER: AGGH (iShares) - IE00BDBRDM35
DESCRIPTION: Global aggregate
TER: 0.10% 
COMMENTS: Accumulating, hedged

EQUITY
TICKER: SWDA (iShares) - IE00B4L5Y983
DESCRIPTION: Global, developed countries
TER: 0.20% 
COMMENT: Accumulating

TICKER: EIMI (iShares) - IE00BKM4GZ66
DESCRIPTION: Emerging mkts
TER: 0.18%
COMMENT: Accumulating

TICKER: WSML (iShares) - IE00BF4RFH31 
DESCRIPTION: MSCI World Small Cap 
TER: 0.35%
COMMENTS: Accumulating

TICKER: IWVL (iShares) - IE00BP3QZB59
DESCRIPTION: World, value
TER: 0.3%
COMMENT: Accumulating

User avatar
BeBH65
Posts: 1242
Joined: Sat Jul 04, 2015 7:28 am

Re: [European Expat in Hong Kong] Bonds, Currency and Fees for global portfolio

Post by BeBH65 » Wed Aug 01, 2018 12:13 pm

FikLinci wrote:
Tue Jul 24, 2018 9:18 am
Hi Bogleheads,

Thank you everyone for making this a very good educational place for us - investor beginners.

I am EU country permanent resident (Czech Republic), but tax resident in Hong Kong for last 3 years. I am 27 yo and not sure yet if I will move to back to EU in the coming years and have less idea about my retirement (when and where) but will most probably go back to EU (not necessarily to Czech Rep.) rather than to any other continent.

Could you please help me with the following questions please?

1. IWDA vs any dirt cheap SP500 (e.g.CSPX)? I am pondering that BH community recommends a lot IWDA as a top ETF to invest in for European - because it covers a lot of developed countries and hence minimises currency risk as opposed to SP500. But won't these benefits be offset by a higher fee (0.2% for IWDA) compared compared to iShares SP500 (0.07%)? Some simple explanation would be nice.
IWDA is more diversified. IWDA invests in all the developped markets, CSPX only in one. If one compares currency risk and equity risk then the former is dwarfed by the latter. Also there is link between changes in exchange rate and changes in stock price: at the time of the Brexit the GBP fell and/but at the same time the international large caps quoted on the LSE gained.

2. Re Equity purchasing - As HKD is pegged to USD, I believe it's better for me to buy the USD denominated ETF's? It's probably cheaper than buying EUR denominated ETFs. However, from the long term perspective - if I am going back to EU, is it ok to buy IWDA in EUR and hold both USD and EUR IWDAs? Just stop buying USD and start buying EUR? Or shall I convert the USD one to one ETF holding later down the road?
The currency in which you buy is only importatn to avoid currency exchange costs. (see also Base_currency_vs._trading_currency_vs._currency_of_the_underlying_asset. What is cheapest for you: echange from HKD->USD or HKD->EUR. Of course if you are certain that you will spend the money at the end in EUR then you should to compare HKD->USD->EUR or HKD->EUR

3. Bonds - What would be your ETF suggestions for bonds please? I've read about that the best is to have bond ETF that are shorter term (due to interest rate risks) and that is ideally denominated in your own currency to prevent any currency risks. Being from Czech Rep. and living in Hong Kong, what would be a good ETF bond that would be counter-balancing my IWDA investment and I could hold over long term? Shall I go with EUROzone or USD? I want to keep it simple so probably one fund would be enough for now.
in the BH philosophey bonds are for stability. Hence best in the currency that you will spend it in. Indeed many expect a rise in interest rates, bonds with short duration rebound quicker from such raises.

4. Just out of curiosity - I saw a lot of posts from Europeans starting - "I live in a tax free jurisdiction" or "No tax country residency" - I am wondering where these paradises in EU are? It looks like the EU is one big tax paradise which I am sure it's not :-)

Thank you so much for your time and patience answering these maybe basic questions!
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

FikLinci
Posts: 3
Joined: Tue Jul 24, 2018 1:58 am

Re: [European Expat in Hong Kong] Bonds, Currency and Fees for global portfolio

Post by FikLinci » Sun Aug 12, 2018 11:57 pm

Thank you everyone for your contribution! Very valuable insights.

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