40 y.o. European expat, UAE resident, high 7 figures

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JohnDoe78
Posts: 2
Joined: Sun Feb 02, 2020 2:06 am

40 y.o. European expat, UAE resident, high 7 figures

Post by JohnDoe78 » Sun Feb 02, 2020 6:38 am

Hi, I'm 40, married and with 2 kids. UAE resident, European citizen, with high 7 figures in a business generating semi passive income, but decided to move most of it to equity/bonds.

I'm certain I'll be retiring in Europe, but it shouldn't happen for at least 20 more years, and probably I'll move to at least one more country before that.

Emergency funds: Yes, 2-3 years.

Debt: No debt

Currency: USD and EUR

Desired Asset allocation: I'm thinking something like 70% stocks, 15% real estate, 10% bonds and 5% others (gold+crypto) (I'm not including here what I may leave in my business and emergency fund). The idea is to move most (if not all) out of my business, into the market, within 5 years. I'm happy to dollar cost average it, because the rest of the money will continue working meanwhile.

I have an account with Interactive Brokers and already started buying regularly ETFs following this allocation (the 70% in stocks):

52% IE00B5BMR087 CSPX S&P500 in USD
15% IE00B4K48X80 IMEA Europe Large-Cap Blend in EUR
10% IE00BKM4GZ66 EIMI Emerging Markets in USD
8% IE00B52MJY50 SXR1 Pacific ex-Japan in EUR
15% IE00BF4RFH31 WSML World Small Cap in USD

1) First doubt I have is if I'm making it difficult unnecessarily, and if a more simple approach like IWDA + EIMI + WSML wouldn't be enough. I understand allocation would be a bit different, but main reason why I originally decided the stated allocation was to reduce ongoing charge (0.20% on IWDA vs 0.07 CSPX and 0.12% IMEA).

2) I have not taken any decision regarding the specifics in the bond allocation, I'm not sure if I should buy mostly European bond ETF because I'll retire there eventually, EUR hedged global bonds (AGGH?), simply diversify globally and in currencies as much as possible, or maybe go full equity and increase my emergency fund to 4 or 5 years.

3) Originally I thought of having some REITS, but I keep reading they are correlated with equity because most REITS are commercial real estate. In your opinion, would holding some REITS smooth the ride when market goes down?

Any suggestion, comment or criticism is welcome! Thanks for reading.

msk
Posts: 1470
Joined: Mon Aug 15, 2016 10:40 am

Re: 40 y.o. European expat, UAE resident, high 7 figures

Post by msk » Sun Feb 02, 2020 8:46 am

After 40 years investing I have decided on 100% stocks worldwide by market weight. No bonds because my portfolio is large enough to weather, say, a 50% drop for several years. After many plays with long term data and Excel, I have come to the conclusion that I can safely withdraw 5% of portfolio balance annually, forever, and, if history is any guide (from 1871 to 2018) then the portfolio balance should keep up with inflation forever. There will, of course be volatility, but as long as I never exceed cashing out more than 5% in any year then my cash withdrawals ought to, on average, also keep pace with inflation forever. Hence, if you trust yourself not to panic following severe market collapses, and you have in excess of, say, $5 million then my recommendation for you and for my adult kids, is to:
- invest in 100% stocks worldwide by market weight
- withdraw as needed but NEVER exceed 5% of the portfolio in any year; so that your portfolio lasts forever
- activate Margin in your IB account to act as your Emergency Fund

How to invest Worldwide by free-market weight. Choices I narrowed to:
IWDA (developed world), WSML (small caps in developed world), EIMI (Emerging markets)
VWRD (Vanguard world), pays dividends
VWRA (Vanguard world accumulative)

I launched on this path around 2016 with the 1st (percentages of 76, 12, 12% but these have probably drifted since). New money went into the 2nd, VWRD in 2017 because of simplicity, then later on to VWRA when it became available recently. Today I would put all new money in VWRA. As for bonds, I am unimpressed (3% withdrawal max ought to be sustainable forever (maybe) compared to 5% for stocks. I made excellent $ on RE 30 to 40 years ago. Dabbling in RE in the UAE can be super profitable or super costly... RE requires that you are right both for location and time! I would view purchasing a home, either to live in or to retire to, as "enough" RE exposure for most people. You are the best judge as to what keeps you fuzzy and warm, but I am focused on VWRA only and steer my adult kids the same way. Whatever you decide on, you need it to keep pace with inflation for several decades. That's what makes stocks the most attractive to me, provided your portfolio is large enough for your near-future needs not to go over the 5% limit in any year.

glorat
Posts: 581
Joined: Thu Apr 18, 2019 2:17 am

Re: 40 y.o. European expat, UAE resident, high 7 figures

Post by glorat » Sun Feb 02, 2020 10:56 am

JohnDoe78 wrote:
Sun Feb 02, 2020 6:38 am
main reason why I originally decided the stated allocation was to reduce ongoing charge (0.20% on IWDA vs 0.07 CSPX and 0.12% IMEA).
If instead you go with VDEV/VDEM or SWRD/EIMI then then the ongoing charges will be almost the same but a much simpler where less can go wrong.

assyadh
Posts: 214
Joined: Tue Sep 18, 2018 12:44 pm

Re: 40 y.o. European expat, UAE resident, high 7 figures

Post by assyadh » Sun Feb 02, 2020 1:58 pm

Consider VWRA. Sure the ER is higher, but the simplicity is worth it imo and it is still low er. You can then focus on something else.

Topic Author
JohnDoe78
Posts: 2
Joined: Sun Feb 02, 2020 2:06 am

Re: 40 y.o. European expat, UAE resident, high 7 figures

Post by JohnDoe78 » Sun Feb 09, 2020 9:40 am

Thanks for your replies!

It's encouraging to see all your comments suggesting simplicity, because I was almost decided to go that route. I'll review the different ETFs you guys recommended and choose which option suits me, going 100% VWRA makes sense, but it feels "too simply" and almost too easy. Still, I made some calculations and what I could save/earn from having a lower ER in 20-30 years shouldn't make a difference.

I'm still doubting about the bond allocation, because my target is being diversified rather than seeking high returns... no greater wealth than peace of mind.

Regarding RE, the target is again being diversified, in this case owning something outside the stock market, a "just in case" ... and at the same time, I wouldn't put all my eggs in the UAE.

Thanks!

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