My Portfolio / Retirement Plan - Please Review & Comment

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Topic Author
michoco911
Posts: 44
Joined: Sun Jul 14, 2019 4:13 am

My Portfolio / Retirement Plan - Please Review & Comment

Post by michoco911 » Tue Aug 13, 2019 10:46 am

Hello

Need advise from experts about portfolio as i need to make sure i am well covered in terms of strategy before accumulation (changes are easier at the start).

Emergency funds: 6 months of expenses available

Debt: None. CC paid monthly.

Tax Filing Status: Non-US Resident, Married with kids, wife does not work

Tax Rate: none, using an out of country broker.

State of Residence: middle east / Dubai

Age: 40

Kids College: Saved in Cash

Desired Asset allocation: 60% stocks / 40% bonds
Desired International allocation: Still not final. Debating whether VOO only (which in my current states and my thinking is that US companies have a ww exposure. Or change to 2/3 US and 1/3 Outside US)

Current retirement assets
Cash 100K - to be moved gradually to stocks/bonds
VOO (S&P 500) 60K

New Contributions
10K$ Additional Quarterly while keeping 60/40 stocks/bonds balance
Around 10K$ additional yearly (Salary Bonus stuff)

Retirement date/hopes:
Age of 60 with around 2.5M to 3M$ total

Rebalancing plan:
- Rebalance when AA differs by 5% up (65% stocks / 35% Bonds)- Equivalent to 25% stocks gain
- Rebalance when AA differs by 10% down (50% stocks / 50% Bonds) - Equivalent to 33% stocks drop
- In addition to above, rebalance once annually

Issues to avoid:
Estate Tax as an NRA, and reduce dividends tax that is why i am seeking funds with Ireland as Domicile.
No tax treaty with US

Main currency
USD

Questions:
1. For stocks, i am confused between CSPX (iShares S&P500 ETF) which is US companies only or VRWA for international coverage.CSPX has low fees (0.07%) and usually US companies have global coverage overall
2. For bonds, are US treasury bonds best for me such as CBU0 (iShares Treasury Bonds7-10Y ETF with Ireland domicile), or should i consider VAGU or something worldwide for any reason?
3. Is the retirement date/amount somewhat reasonable? I know nobody can predict the future
4. Any other comments or recommendations knowing my situation, age and plans/targets?

Thanks in advance.

glorat
Posts: 161
Joined: Thu Apr 18, 2019 2:17 am

Re: My Portfolio / Retirement Plan - Please Review & Comment

Post by glorat » Thu Aug 15, 2019 1:55 am

For 1) and 2), the https://www.boglebot.com will give you some sensible suggestions based on investing in the world market for equities (for maximum diversification) and the world market for bonds. If you use it, post back the feedback here :)

So something like 60% VWRA (accumulating version of VWRD) and 40% AGGG (global bonds, unhedged) is sensible.

It will only be personal preference if wish to narrow your choices to specific markets like the S&P or US treasuries. Going global means you don't need to make such choices.

TedSwippet
Posts: 2334
Joined: Mon Jun 04, 2007 4:19 pm

Re: My Portfolio / Retirement Plan - Please Review & Comment

Post by TedSwippet » Thu Aug 15, 2019 2:42 am

michoco911 wrote:
Tue Aug 13, 2019 10:46 am
VOO (S&P 500) 60K
I assume you are already aware of this, since you mention US estate and dividend tax later on, but ...

... this is (probably, only just) safe from US estate taxes, which start at $60k of aggregate US holdings. Even so, as a resident of the UAE you are overpaying US tax on dividends here. Your rate is 30%, but if you held VUSD you would pay 15% effective. On a 2% dividend, that's a $180/year of unnecessary tax paid. VUSD's TER is slightly higher than VOO's, but nowhere near enough to negate the benefit from losing this avoidable tax drag.

Topic Author
michoco911
Posts: 44
Joined: Sun Jul 14, 2019 4:13 am

Re: My Portfolio / Retirement Plan - Please Review & Comment

Post by michoco911 » Thu Aug 15, 2019 7:42 am

... this is (probably, only just) safe from US estate taxes, which start at $60k of aggregate US holdings. Even so, as a resident of the UAE you are overpaying US tax on dividends here. Your rate is 30%, but if you held VUSD you would pay 15% effective. On a 2% dividend, that's a $180/year of unnecessary tax paid. VUSD's TER is slightly higher than VOO's, but nowhere near enough to negate the benefit from losing this avoidable tax drag.
The VOO were purchased before i knew about the estate tax but moving forward i am investing in Ireland domiciled etfs only so either CSPX and CBU0 if US only or VWRD/VWRA and AGGU if Worldwide diversification.

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

Re: My Portfolio / Retirement Plan - Please Review & Comment

Post by BeBH65 » Thu Aug 15, 2019 10:17 am

michoco911 wrote:
Tue Aug 13, 2019 10:46 am
1. For stocks, i am confused between CSPX (iShares S&P500 ETF) which is US companies only or VRWA for international coverage.CSPX has low fees (0.07%) and usually US companies have global coverage overall
2. For bonds, are US treasury bonds best for me such as CBU0 (iShares Treasury Bonds7-10Y ETF with Ireland domicile), or should i consider VAGU or something worldwide for any reason?
Your results will be determined first by the general evolution of the markets, then by the AA that you choose and then by your choices of funds, timing, .... The AA that you choose is important.

You seem to be focussing on the US. Yes the US has been doing great the last decade, not so much the decade before.
Do you want to gamble that the US will continue to outperform until you need the money?
One of the principles of the Bogleheads is diversification. For your equity this would mean also investing in the stock outside of the US. A 'world' fund typically has 55% in the US. Consider if you want this diversification.
On this forum we consider bonds for stability. We want to avoid volatilty. As you are 'counting' in USD you have the option to invest in USD bonds or in a global bond fund that hedges to USD. For the actual bonds you could choose for treasuries/government or a more aggregate fund. Treasuries are stable, aggregate should have a higher yield.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence). | Have a look at https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles

Topic Author
michoco911
Posts: 44
Joined: Sun Jul 14, 2019 4:13 am

Re: My Portfolio / Retirement Plan - Please Review & Comment

Post by michoco911 » Thu Aug 15, 2019 12:29 pm

For 1) and 2), the https://www.boglebot.com will give you some sensible suggestions based on investing in the world market for equities (for maximum diversification) and the world market for bonds. If you use it, post back the feedback here
Thanks for the bot link. Actually i tried it and ended up with the below:
SWDA 53%
EIMI 7%
AGGU 40%

Some things can be added to the bot such as:
- Type: Accumulating or Distributing
- Liquidity of the ETF (very new vs established one)

Topic Author
michoco911
Posts: 44
Joined: Sun Jul 14, 2019 4:13 am

Re: My Portfolio / Retirement Plan - Please Review & Comment

Post by michoco911 » Sat Aug 17, 2019 3:00 am

Narrowing down the portfolio to the below based on multiple threads feedback and my own preference:

60/40 stocks/bonds
Will change my US only previous mindset to include a 20% to 25% Non-US Equities

Ended up with the below:

30% of my portfolio in CSPX (iShares S&P500 ETF, Accumulating) with ER = 0.07%
30% of my portfolio in VWRA (Vanguard All World FTSE, Accumulating) with ER = 0.25%
40% of my portfolio in AGGU (Global aggregate bonds, Accumulating) with ER = 0.10%

This will provide my equities around 75% to 80% US exposure and 20% to 25% non-US exposure with an average ER = 0.16% while avoiding dividend tax by using Accumulating ETF and having 0% Capital Gain Tax.

Only small question mark / doubt is whether i change from AGGU (Global aggregate bonds) to US Treasury 7-10 years iShares Accumulating bonds ETF with ER= 0.07%

Mindhacker
Posts: 13
Joined: Tue Aug 20, 2019 12:07 pm

Re: My Portfolio / Retirement Plan - Please Review & Comment

Post by Mindhacker » Wed Aug 21, 2019 6:18 am

One question doesn't CSPX already being contained in the VWRA to some extent? So basically you are betting that CSPX will grow faster than VRWA in the long term, right?

Valuethinker
Posts: 38417
Joined: Fri May 11, 2007 11:07 am

Re: My Portfolio / Retirement Plan - Please Review & Comment

Post by Valuethinker » Wed Aug 21, 2019 10:39 am

michoco911 wrote:
Sat Aug 17, 2019 3:00 am
Narrowing down the portfolio to the below based on multiple threads feedback and my own preference:

60/40 stocks/bonds
Will change my US only previous mindset to include a 20% to 25% Non-US Equities

Ended up with the below:

30% of my portfolio in CSPX (iShares S&P500 ETF, Accumulating) with ER = 0.07%
30% of my portfolio in VWRA (Vanguard All World FTSE, Accumulating) with ER = 0.25%
40% of my portfolio in AGGU (Global aggregate bonds, Accumulating) with ER = 0.10%

This will provide my equities around 75% to 80% US exposure and 20% to 25% non-US exposure with an average ER = 0.16% while avoiding dividend tax by using Accumulating ETF and having 0% Capital Gain Tax.

Only small question mark / doubt is whether i change from AGGU (Global aggregate bonds) to US Treasury 7-10 years iShares Accumulating bonds ETF with ER= 0.07%
The All-World is 55% USA? What you have then is an odd way to get to 47.5% US stocks.

Why not just hold 60% VWRA? Then you hold c. 35% US stocks. The world weighting. Neither more nor less. Let the market figure out if the US market is over or undervalued. If your bond fund is hedged to USD then you would have c. 75% USD exposure.

I am not sure what I'd hold if I was particularly pro USA, but some version of the Vanguard large cap US growth fund. That would catch all the big stock names like Apple & Google that have been sucking in the outperformance the last few years. The FAANGs (+ Microsoft).

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