New to investing from Latvia

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Topic Author
dreamingHere
Posts: 4
Joined: Sat Apr 13, 2019 3:49 pm

New to investing from Latvia

Post by dreamingHere » Sat Apr 13, 2019 4:29 pm

Hello,

I am new to investing, but been rather frugal all along. So now I have saved about 100K EUR free cash. Currently it is in deposits with 1,1% annual rate. Seems that putting that to work in stock market is a good idea. But I am rather worried about doing an investment now. I have checked Shiller PE ratio. It is scary for me to go in when it is that high. There has only been 1 peak that is higher than where we are now. It is not just about if I get a bit better return if I wait for a market correction, rather it is about very scary option to lose big part of investment early.

Is that a good idea to wait? Would you still suggest braking the sum up and invest in monthly bits over 1-2 years? MSCI World has been rather flat last year. And there are high risks across the board.

Another question is about broker that would make sense to use. I have not seen any low cost brokers operating in Latvia. Bank fees are not that low (0,25% transaction fee + 0,18% of NAV annually). What would you suggest?

typical.investor
Posts: 736
Joined: Mon Jun 11, 2018 3:17 am

Re: New to investing from Latvia

Post by typical.investor » Sat Apr 13, 2019 8:54 pm

dreamingHere wrote:
Sat Apr 13, 2019 4:29 pm
Hello,

I am new to investing, but been rather frugal all along. So now I have saved about 100K EUR free cash. Currently it is in deposits with 1,1% annual rate.
Welcome. Nice job saving the money.
dreamingHere wrote:
Sat Apr 13, 2019 4:29 pm
Seems that putting that to work in stock market is a good idea. But I am rather worried about doing an investment now. I have checked Shiller PE ratio. It is scary for me to go in when it is that high. There has only been 1 peak that is higher than where we are now. It is not just about if I get a bit better return if I wait for a market correction, rather it is about very scary option to lose big part of investment early.
Worried about Shiller PE (CAPE)?

Vanguard's analysis finds that:
Traditional valuation metrics, such as CAPE (cyclically adjusted
price/earnings ratio), paint an alarming—but incomplete—
picture when compared with long-term averages. Vanguard’s
“fair-value” CAPE, a more useful measure for assessing over or undervaluation than traditional metrics, suggests that while
stocks are trading above fair value, they aren’t yet near the
extremes reached in the dot-com high.
https://personal.vanguard.com/pdf/ISGGMMRR.pdf
dreamingHere wrote:
Sat Apr 13, 2019 4:29 pm
Is that a good idea to wait? Would you still suggest braking the sum up and invest in monthly bits over 1-2 years? MSCI World has been rather flat last year. And there are high risks across the board.
Personally, I think you should invest immediately in something similar to Vanguard's VT (Vanguard total world) + some allocation of bonds for rebalancing in case of a drop. VWRL is traded in EUR I think.
dreamingHere wrote:
Sat Apr 13, 2019 4:29 pm
Another question is about broker that would make sense to use. I have not seen any low cost brokers operating in Latvia. Bank fees are not that low (0,25% transaction fee + 0,18% of NAV annually). What would you suggest?
Interactive Brokers often gets recommended especially if you are over $100k in assets and avoid the monthly trade minimum. Stay away from US domiciled funds (ie. traded on a US exchange) - there is a potential estate tax on anything over $60k.

IB has good rates if you ever need to convert from EUR to something else. Website isn't so user friendly I hear though.

DJN
Posts: 277
Joined: Mon Nov 20, 2017 12:30 am

Re: New to investing from Latvia

Post by DJN » Sat Apr 13, 2019 11:26 pm

hi,
if you haven't already read the EU investor section on Wiki it's probably a good place to start: https://www.bogleheads.org/wiki/EU_investing
There are a few suggested portfolios there that could be used. One is distributing and one is accumulating, the choice of which type depends upon the tax regime in your location. In regards to risk appetite, its seems that you are nervous, you should think hard about your allocation level and split your equities and bonds in an allocation with which you are comfortable.
There are a number of other international brokers which should be able to take you on: deGiro; Internaxx; Saxo for example.
DJN

Laurizas
Posts: 17
Joined: Mon Dec 31, 2018 4:44 am
Location: Lithuania

Re: New to investing from Latvia

Post by Laurizas » Sun Apr 14, 2019 5:16 am

dreamingHere wrote:
Sat Apr 13, 2019 4:29 pm
Another question is about broker that would make sense to use. I have not seen any low cost brokers operating in Latvia. Bank fees are not that low (0,25% transaction fee + 0,18% of NAV annually). What would you suggest?
Look at Luminor trade. For example, in Lithuania Nav is 0.12, trade fee 0.1, minimun 10 Euros. I guess similiar costs should be in Latvia too.

imperia
Posts: 145
Joined: Tue Feb 21, 2017 6:31 am

Re: New to investing from Latvia

Post by imperia » Sun Apr 14, 2019 10:08 am

Interactive Brokers is best and worldwide available.

Topic Author
dreamingHere
Posts: 4
Joined: Sat Apr 13, 2019 3:49 pm

Re: New to investing from Latvia

Post by dreamingHere » Sun Apr 14, 2019 11:24 am

Thank you for all the suggestions and insights. It was useful to find out about Vanguard fair value CAPE. Does anybody else have opinion on whether I should jump into market now right away or do it gradually over 1-2 years?

I have been considering Interactive brokers, but was not sure about guarantees in case they run into trouble. Also are there any other considerations to make when I pick an online broker over a local bank?

IB state that there is no maintenance fee if account is greater than 100,000 USD in average equity. I wonder if equity includes cash on the account?

Laurizas
Posts: 17
Joined: Mon Dec 31, 2018 4:44 am
Location: Lithuania

Re: New to investing from Latvia

Post by Laurizas » Sun Apr 14, 2019 1:22 pm

I could not find definite explanations regarding IB guarantees. Some say SIPC would cover, others say that UK investors scheme would apply (85 000 pounds) because EU investors conclude contract with IB UK. There is also opinion that neithet SIPC, neither UK protections applies in case ETF is based in Ireland. With your local bank you get protection of 22000 Euros I guess.

As regards IB maintenance fee, I opened an account with Tradestation UK which acts as an introducing broker to IB and I am not charged any fee. Though the commision is a little bit higher then IB.

Topic Author
dreamingHere
Posts: 4
Joined: Sat Apr 13, 2019 3:49 pm

Re: New to investing from Latvia

Post by dreamingHere » Sun Apr 14, 2019 1:31 pm

In Latvia bank deposits are guaranteed by government up to 100 000 EUR same as in Estonia and Lithuania.

Teague
Posts: 1406
Joined: Wed Nov 04, 2015 6:15 pm

Re: New to investing from Latvia

Post by Teague » Sun Apr 14, 2019 2:14 pm

dreamingHere wrote:
Sun Apr 14, 2019 11:24 am
Thank you for all the suggestions and insights. It was useful to find out about Vanguard fair value CAPE. Does anybody else have opinion on whether I should jump into market now right away or do it gradually over 1-2 years?
No one can be sure of course, because that depends on how things go in the near future, and predictions about that are unreliable.

One way often mentioned here is to "split the difference" meaning invest 1/2 now and the rest over a period of time. Welcome to the forum, and good luck!
Semper Augustus

Laurizas
Posts: 17
Joined: Mon Dec 31, 2018 4:44 am
Location: Lithuania

Re: New to investing from Latvia

Post by Laurizas » Sun Apr 14, 2019 2:22 pm

dreamingHere wrote:
Sun Apr 14, 2019 1:31 pm
In Latvia bank deposits are guaranteed by government up to 100 000 EUR same as in Estonia and Lithuania.
Deposits and investors protection are 2 different things. If you hold 100 000 Eur at IB it is not a deposit since IB is not a bank.

Panabadia
Posts: 9
Joined: Fri Jul 18, 2014 6:50 pm

Re: New to investing from Latvia

Post by Panabadia » Sun Apr 14, 2019 4:09 pm

IB state that there is no maintenance fee if account is greater than 100,000 USD in average equity. I wonder if equity includes cash on the account?
[/quote]
Yes it is included, it is total value over 100000 USD

typical.investor
Posts: 736
Joined: Mon Jun 11, 2018 3:17 am

Re: New to investing from Latvia

Post by typical.investor » Sun Apr 14, 2019 9:23 pm

Laurizas wrote:
Sun Apr 14, 2019 1:22 pm
I could not find definite explanations regarding IB guarantees. Some say SIPC would cover, others say that UK investors scheme would apply (85 000 pounds) because EU investors conclude contract with IB UK. There is also opinion that neithet SIPC, neither UK protections applies in case ETF is based in Ireland. With your local bank you get protection of 22000 Euros I guess.

As regards IB maintenance fee, I opened an account with Tradestation UK which acts as an introducing broker to IB and I am not charged any fee. Though the commision is a little bit higher then IB.
I dug into it one time. It seemed then that the UK investor scheme applied temporarily until holdings were in custody in the US . Not sure if that still applies.

In any case, it seems like the Universal Account is protected by SIPC

https://gdcdyn.interactivebrokers.com/U ... ormdb=3203
Universal Accounts: An IB Universal Account is two underlying accounts: an SEC-regulated securities account and a CFTC-regulated commodity account. Customer authorizes transfers between the securities and commodity accounts to cover Margin Requirements and other obligations, and acknowledges IB may liquidate positions to cover obligations in the other account. Customer authorizes IB to provide combined confirmations/statements for both accounts. Customer acknowledges that only assets in the securities account are covered by SIPC protection and excess coverage and not assets in the commodity account.
Even on the UK page it says:
Interactive Brokers LLC is regulated by the US SEC and CFTC and is a member of the SIPC (www.sipc.org) compensation scheme;
products are only covered by the UK FSCS in limited circumstances.
https://www.interactivebrokers.co.uk/en/home.php

Laurizas
Posts: 17
Joined: Mon Dec 31, 2018 4:44 am
Location: Lithuania

Re: New to investing from Latvia

Post by Laurizas » Mon Apr 15, 2019 1:20 am

The problem with SIPC in my opinion is that it only applies to securities which are registered (?) by SEC and since ETF from Ireland are not traded on US markets they are not registered and have no protection. But it would be strange.

typical.investor
Posts: 736
Joined: Mon Jun 11, 2018 3:17 am

Re: New to investing from Latvia

Post by typical.investor » Mon Apr 15, 2019 3:06 am

Laurizas wrote:
Mon Apr 15, 2019 1:20 am
The problem with SIPC in my opinion is that it only applies to securities which are registered (?) by SEC and since ETF from Ireland are not traded on US markets they are not registered and have no protection. But it would be strange.
I don't believe that is true. I agree that is true for investment contracts and fixed annuity contracts which need to be registered, but not for stocks if held at a SIPC member firm.

What are securities:
SIPC protects stocks, bonds, Treasury securities, certificates of deposit, mutual funds, money market mutual funds and certain other investments as "securities." SIPC does not protect commodity futures contracts (unless held in a special portfolio margining account), or foreign exchange trades, or investment contracts (such as limited partnerships) and fixed annuity contracts that are not registered with the U.S. Securities and Exchange Commission under the Securities Act of 1933.

For a more detailed explanation, consult the definition of “security” in the Securities Investor Protection Act, section 78lll(14):

The term “Security” means any

note,
stock,
treasury stock,
bond,
debenture,
evidence of indebtedness,
any collateral trust certificate, preorganization certificate or subscription,
transferable share,
voting trust certificate,
certificate of deposit
certificate of deposit for a security, or
any security future as that term is defined in section 78c(a)(55)(A)  of this title,
any investment contract or certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or mineral royalty or lease (if such investment contract or interest is the subject of a registration statement with the Commission pursuant to the provisions of the Securities Act of 1933 [15 U.S.C. 77a et seq.]),
any put, call, straddle, option, or privilege on any security, or group or index of securities (including any interest therein or based on the value thereof), or
any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency,
any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase or sell any of the foregoing, and
any other instrument commonly known as a security.
Except as specifically provided above, the term “security” does not include any

currency, or
any commodity or related contract or futures contract, or
any warrant or right to subscribe to or purchase or sell any of the foregoing.

QuantOfAsia
Posts: 10
Joined: Sun Apr 14, 2019 7:57 pm
Location: Hong Kong

Re: New to investing from Latvia

Post by QuantOfAsia » Mon Apr 15, 2019 3:27 am

dreamingHere wrote:
Sat Apr 13, 2019 4:29 pm
Hello,

I am new to investing, but been rather frugal all along. So now I have saved about 100K EUR free cash. Currently it is in deposits with 1,1% annual rate. Seems that putting that to work in stock market is a good idea. But I am rather worried about doing an investment now. I have checked Shiller PE ratio. It is scary for me to go in when it is that high. There has only been 1 peak that is higher than where we are now. It is not just about if I get a bit better return if I wait for a market correction, rather it is about very scary option to lose big part of investment early.

Is that a good idea to wait? Would you still suggest braking the sum up and invest in monthly bits over 1-2 years? MSCI World has been rather flat last year. And there are high risks across the board.

Another question is about broker that would make sense to use. I have not seen any low cost brokers operating in Latvia. Bank fees are not that low (0,25% transaction fee + 0,18% of NAV annually). What would you suggest?
Great question.

First of all, it's important to know what your eventual goals are. If you plan to take out half of the EUR100k in two years to buy a house or apartment, you'd invest the money very differently than if you were keeping it away for a goal 20 years away.

Second, there's no one level of "the market" - you've well observed MSCI World, but some markets are cheaper than others, and some assets provide safer yields than others. It's often worth considering a balance of stocks vs bonds vs real estate / REITs, and US vs Europe vs Asia vs Elsewhere.

1,1% is not bad for EUR deposits, though that probably has some bank risk (I remember Latvian banks paying much higher rates not long ago), and there may be safer ways to earn 2% or more in EUR depending what your goals are and how well you tolerate risk.

Topic Author
dreamingHere
Posts: 4
Joined: Sat Apr 13, 2019 3:49 pm

Re: New to investing from Latvia

Post by dreamingHere » Mon Apr 15, 2019 7:03 am

Good point! :) My plan is to start living off my investments in 10 years. I will soon have a rental property that I expect to cussion busts in stock portfolio. Apart from that I plan to have 100% stock portfolio. I am ready to work bit longer if needed (if my planned fire time doesnt match up with favourable market). Somwhere in 5-10 years I might pick up a bond etf to serve as additional safety pillow in case of market turbulences. The bond etf would be what i use up in case times are rough in stock market, and rental with other income are not enough.

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