Core portfolio for retirement in Europe - Living in Singapore

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EUR-SGD
Posts: 9
Joined: Sat Aug 18, 2018 12:49 am

Core portfolio for retirement in Europe - Living in Singapore

Post by EUR-SGD » Sat Aug 18, 2018 1:39 am

Thank you in advance for your help. I have been reading and researching quite a bit but there is a lot of information and ETFs out there so would appreciate your help in structuring my thoughts. This forum has some great topics - so really looking forward to your input.

I work and live in Singapore but want to retire in Europe (The Netherlands). After reading "A random Walk Down Wall Street" I was charmed by some US denominated Vanguard funds but decided against US based funds given the fact I will retire in Europe. (I liked VTSAX, VTIAX, VBTLX, VTABX but they don't seem to have an EUR denominated variant). the Vanguard funds listed in Europe don't seem to cut it (happy to hear other views).
I earn my salary in SGD and am taxed in Singapore.

Basis principles for ETS portfolio are:
  • Core exposure to index tracking funds
    EUR denominated (UCITS compliant)
    tax efficient
    As simple as possible
    Cost efficient (low expense ratio)
    balanced risk
We sold our house in Europe in 2016 and therefore I think it may be smart to have some exposure in REITs?

I am 20 years away from retirement and think about the following allocation:
  • 55-60% global Equity portfolio
    10-15% European REITS
    30% global bond portfolio
For the equity portfolio I came to the following:
  • 80% IWDE iShares MSCI World EUR Hedged UCITS ETF (Acc)
    20% IEMM iShares MSCI EM UCITS ETF USD (Dist)
    Maybe balancing out with few % of FXC iShares China Large Cap UCITS ETF as China seems under-weighted (or am I complicating things?)
For the REIT I found the following iShares listing:
  • IPRP iShares European Property Yield UCITS ETF
I struggled with the bonds - and judging from previous posts on this forum I am not the only European investor that struggles with this. I found two relatively new iShares funds that I like. One Aggregate global bond fund and one Global Inflation adjusted global Government bond fund. I am thinking of 50%/50% division between the two (or 15%/15% on a portfolio basis)

Bond funds:
  • AGGH iShares Global Aggregate Bond UCITS ETF
    GILE iShares Global Inflation Linked Govt Bond UCITS ETF
Looking forward to your responses.

DJN
Posts: 92
Joined: Mon Nov 20, 2017 12:30 am

Re: Core portfolio for retirement in Europe - Living in Singapore

Post by DJN » Sat Aug 18, 2018 8:34 am

Hi,
here is another version for a European investing in accumulating funds, all UCITS and Ireland domiciled, this should be acceptable to most:
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 MSCI) - IE00BF4RFH31
DESCRIPTION: World Small Cap
TER: 0.35%
COMMENT: Accumulating

Important to check what's allowable or most cost effective under your own tax system before you go too far.
good luck,
DJN

DJN
Posts: 92
Joined: Mon Nov 20, 2017 12:30 am

Re: Core portfolio for retirement in Europe - Living in Singapore

Post by DJN » Sat Aug 18, 2018 8:57 am

Distributing version could be as follows and find some for small cap and value to add if you prefer:
SUGGESTION PORTFOLIO 2
BONDS
TICKER: IGLO - (iShares) IE00B3F81K65
DESCRIPTION: World dev, govt
TER: 0.2%
COMMENT: Distibuting

STOCKS
TICKER: VWRD - (Vanguard) IE00B3RBWM25
DESCRIPTION: World dev, em, large, mid
TER: 0.25%
COMMENTS: Distributing

EUR-SGD
Posts: 9
Joined: Sat Aug 18, 2018 12:49 am

Re: Core portfolio for retirement in Europe - Living in Singapore

Post by EUR-SGD » Sat Aug 18, 2018 9:20 pm

DJN wrote:
Sat Aug 18, 2018 8:34 am
Hi,
here is another version for a European investing in accumulating funds, all UCITS and Ireland domiciled, this should be acceptable to most:
BONDS
TICKER: AGGH (iShares) - IE00BDBRDM35 - EUNA is EUR Ticker on German Exchange
DESCRIPTION: Global aggregate
TER: 0.10%
COMMENTS: Accumulating, hedged

EQUITY
TICKER: SWDA (iShares) - IE00B4L5Y983 - Thanks this is the better option indeed - IWDA is ticker on Euronext Amsterdam
DESCRIPTION: Global, developed countries
TER: 0.20%
COMMENT: Accumulating

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

TICKER: WSML (iShares MSCI) - IE00BF4RFH31 Thanks - I found the IUSN is the ticker on the German Exchange
DESCRIPTION: World Small Cap
TER: 0.35%
COMMENT: Accumulating

Important to check what's allowable or most cost effective under your own tax system before you go too far.
good luck,
DJN
Thanks DJN - much appreciated - some initial comments in bold above.

I like the idea of a small-cap fund - do you have any guidance/idea what is a suitable % for the equity portfolio for the small-cap fund to come to a representative overall result (i.e. x% of equity portfolio should be IUSN/WSML small-cap fund)?

on the TICKER: VWRD - (Vanguard) IE00B3RBWM25 fund - I did not find a EUR denominated version? Do you know of one?

On tax: there is no capital gain tax in Singapore and dividends are typically non-taxed as far as I understand. As a consequence I focussed on EU/Dutch taxation for when I were to return to Europe.

Looking forward to your comments.

ICH
Posts: 42
Joined: Wed Jun 13, 2018 3:08 am

Re: Core portfolio for retirement in Europe - Living in Singapore

Post by ICH » Sat Aug 18, 2018 11:38 pm

EUR-SGD wrote:
Sat Aug 18, 2018 9:20 pm


on the TICKER: VWRD - (Vanguard) IE00B3RBWM25 fund - I did not find a EUR denominated version? Do you know of one?

On tax: there is no capital gain tax in Singapore and dividends are typically non-taxed as far as I understand. As a consequence I focussed on EU/Dutch taxation for when I were to return to Europe.
VWRL is the ticker for EUR trading currency in 3 European exchanges.
https://www.justetf.com/uk/etf-profile. ... ab=listing

If you have not done so already, have a look at Andrew Hallam's book "Millionaire expat".

Taxation: say after some time you take your funds and return to Europe. How is your home country going to tax you for capital gains already accummulated while you were a Singapore tax resident? Will you have to sell off before returning to Europe and bring cash or are you planning to bring the funds?

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BeBH65
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Joined: Sat Jul 04, 2015 7:28 am

Re: Core portfolio for retirement in Europe - Living in Singapore

Post by BeBH65 » Sun Aug 19, 2018 12:01 am

Hello eur-usd,

Welcome to the forum.

We have a number of wiki pages related to investing from Non-US_domiciles. Have a look at the ones for the EU and the Netherlands.

The page for the Netherlands has a note related to US-domiciled funds. They will be difficult to trade, especially augment your position once you would move to the Europe. As you are now in Signapore you might still be able to take advantage of it.


Reits are stocks and are already included in the stock funds, why do you want to invest double in them?

On the langer term currency volatility is minimal compared to the stock volatility. Hence there is little need to pay for hedged equity funds.
Emerging markets is about 10% of the world markets, why overweegt them? Em is also very volatile.

Inflation linked bonds are good to protect that portion of you portfolio against unexpected inflation; at a price. They are especially usefull in retirement, less so in the accumulating phase.
For the bond funds there might be a sense in hedging to the euro as you want bonds for stability in euro.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

EUR-SGD
Posts: 9
Joined: Sat Aug 18, 2018 12:49 am

Re: Core portfolio for retirement in Europe - Living in Singapore

Post by EUR-SGD » Sun Aug 19, 2018 1:36 am

VWRL is the ticker for EUR trading currency in 3 European exchanges.
https://www.justetf.com/uk/etf-profile. ... ab=listing

Thanks a lot - will have a further look

If you have not done so already, have a look at Andrew Hallam's book "Millionaire expat". Certainly will check that out!

Taxation: say after some time you take your funds and return to Europe. How is your home country going to tax you for capital gains already accummulated while you were a Singapore tax resident? Will you have to sell off before returning to Europe and bring cash or are you planning to bring the funds?

We have "vermogensbelasting" in the The Netherlands - basically you have to list all your investments and they assume that you made 4% on your investments which they consequently tax with 30%, so effectively you pay 1.2% tax per annum on your investments.

Thanks a lot for your reply!

EUR-SGD
Posts: 9
Joined: Sat Aug 18, 2018 12:49 am

Re: Core portfolio for retirement in Europe - Living in Singapore

Post by EUR-SGD » Sun Aug 19, 2018 2:05 am

Thanks so much BeBH65!
You cover a lot of areas and I would love to pick you brain on all of them!
BeBH65 wrote:
Sun Aug 19, 2018 12:01 am
Hello eur-usd,

Reits are stocks and are already included in the stock funds, why do you want to invest double in them?
Thanks - the reason why I was thinking of getting some additional exposure is that I currently don't have a house in NL and this may be a way of getting some exposure to the Dutch housing market - or are there better ways?
BeBH65 wrote:
Sun Aug 19, 2018 12:01 am
On the langer term currency volatility is minimal compared to the stock volatility. Hence there is little need to pay for hedged equity funds.
I have been breaking my head around currency hedging to be honest. There are basically 3 options in my mind:
  • 1. Buy original funds in USD
  • 2. Buy the related fund listings in EUR
  • 3. Buy related fund listing in EUR that is also EUR currency hedged
My concern with the first two is currency risk. I buy into your argument that over the long run the currency exposure should average out but what happens if in year 19 (out of 20) the currency goes against you. Let's say the EUR gets significantly stronger. Am I correct in understanding that in option 1 and 2 your USD assets will convert into less EUR and therefore less pension spending? Option 2 would still have a significant exposure to foreign currencies as most of the underlying assets are outside the US? While option 3 would have no significant currency exposure and therefore option 3 warrants a stable income? Obviously option 3 comes with a cost for hedging and therefore lower returns
BeBH65 wrote:
Sun Aug 19, 2018 12:01 am
Emerging markets is about 10% of the world markets, why overweegt them? Em is also very volatile.
I had a look at market capitalisation and came to 20% for EM markets compared to global market cap? Can you share your calculation/info source on 10%? I agree with you that the EM seems very volatile.
BeBH65 wrote:
Sun Aug 19, 2018 12:01 am
Inflation linked bonds are good to protect that portion of you portfolio against unexpected inflation; at a price. They are especially useful in retirement, less so in the accumulating phase.
Are you saying that it is better to convert in inflation linked bonds close to pensionable age? Why do you see limited value for them in the accumulating phase? Interest and inflation rates may pick up in the near future?
BeBH65 wrote:
Sun Aug 19, 2018 12:01 am
For the bond funds there might be a sense in hedging to the euro as you want bonds for stability in euro.
Can you explain why you do see value in hedging to the Euro for bonds?
Also do you know aggregate bond funds that you would recommend?

Once again thanks for your response and looking forward to your reply on the above!

EUR-SGD
Posts: 9
Joined: Sat Aug 18, 2018 12:49 am

Re: Core portfolio for retirement in Europe - Living in Singapore

Post by EUR-SGD » Sun Aug 19, 2018 7:04 am

ICH wrote:
Sat Aug 18, 2018 11:38 pm
VWRL is the ticker for EUR trading currency in 3 European exchanges.
https://www.justetf.com/uk/etf-profile. ... ab=listing

Thanks ICH - do you know if Vanguard has European exchange listings for:
  • Total World Small Cap ETF, and/or a
  • Total World global aggregate bond ETF
Thanks for your reply

ICH
Posts: 42
Joined: Wed Jun 13, 2018 3:08 am

Re: Core portfolio for retirement in Europe - Living in Singapore

Post by ICH » Sun Aug 19, 2018 7:48 am

EUR-SGD wrote:
Sun Aug 19, 2018 7:04 am
ICH wrote:
Sat Aug 18, 2018 11:38 pm
VWRL is the ticker for EUR trading currency in 3 European exchanges.
https://www.justetf.com/uk/etf-profile. ... ab=listing

Thanks ICH - do you know if Vanguard has European exchange listings for:
  • Total World Small Cap ETF, and/or a
  • Total World global aggregate bond ETF
Thanks for your reply
To the best of my knowledge, no. You have to go for other providers, but you can check justetf link above. I would not sweat over small caps by the way.

User avatar
BeBH65
Posts: 1218
Joined: Sat Jul 04, 2015 7:28 am

Re: Core portfolio for retirement in Europe - Living in Singapore

Post by BeBH65 » Mon Aug 20, 2018 12:36 pm

answers in blue
EUR-SGD wrote:
Sun Aug 19, 2018 2:05 am
BeBH65 wrote:
Sun Aug 19, 2018 12:01 am
On the langer term currency volatility is minimal compared to the stock volatility. Hence there is little need to pay for hedged equity funds.
I have been breaking my head around currency hedging to be honest. There are basically 3 options in my mind:
  • 1. Buy original funds in USD
  • 2. Buy the related fund listings in EUR
  • 3. Buy related fund listing in EUR that is also EUR currency hedged
My concern with the first two is currency risk. I buy into your argument that over the long run the currency exposure should average out but what happens if in year 19 (out of 20) the currency goes against you. Let's say the EUR gets significantly stronger. Am I correct in understanding that in option 1 and 2 your USD assets will convert into less EUR and therefore less pension spending? Option 2 would still have a significant exposure to foreign currencies as most of the underlying assets are outside the US? While option 3 would have no significant currency exposure and therefore option 3 warrants a stable income? Obviously option 3 comes with a cost for hedging and therefore lower returns

Actually, i thing what you are facing is the possible volatility between your current SGD, in which you are currently earning, and the EUR, in which you will be spending
Your stocks will vary with a lot; expect a correction of -10% on average once a year, -20% every two years and once in a while
-30,40 or 50%. The currency volatility will mean nothing here

Important to understand is that the currency risk is related to the currency of the underlying asset. e.g. if this is a japanese stock then the currencu volatility will play between the JPY and "your" currency; independent if you buy the fund in GPB, CHF or other
BeBH65 wrote:
Sun Aug 19, 2018 12:01 am
Emerging markets is about 10% of the world markets, why overweegt them? Em is also very volatile.
I had a look at market capitalisation and came to 20% for EM markets compared to global market cap? Can you share your calculation/info source on 10%? I agree with you that the EM seems very volatile.
Have a look here on MSCI website

BeBH65 wrote:
Sun Aug 19, 2018 12:01 am
Inflation linked bonds are good to protect that portion of you portfolio against unexpected inflation; at a price. They are especially useful in retirement, less so in the accumulating phase.
Are you saying that it is better to convert in inflation linked bonds close to pensionable age? Why do you see limited value for them in the accumulating phase? Interest and inflation rates may pick up in the near future?
Typically it is said that stocks are the best inflation protection. Stocksprices would go up when all prices go up.
Indeed, one often sees the advise to augment inflation protection in bonds when one is in the withdrawal phase. Personlly I have not yet decided for me. During the accumulation phase the "proce" you currently pay for inflation protection of your bonds seems not worth it. Maybe do a search on "TIPS" on this forum
BeBH65 wrote:
Sun Aug 19, 2018 12:01 am
For the bond funds there might be a sense in hedging to the euro as you want bonds for stability in euro.
Can you explain why you do see value in hedging to the Euro for bonds?
Also do you know aggregate bond funds that you would recommend?
2- volatilyt of bonds is a lot lower then equity. Bonds will not go up as much as the % mentioned for equity above. /hence bonds are more impacted by currency fluctuations1- Where equity is for growht, bonds are for stability.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

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