Late Starter - First Portfolio

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Topic Author
cabbagehead
Posts: 4
Joined: Sun Feb 09, 2020 11:26 am

Late Starter - First Portfolio

Post by cabbagehead » Mon Feb 10, 2020 8:51 am

Country of Residence: Philippines (British citizen), but all income derived from abroad (Hong Kong). I don't expect to be taxable on my foreign-based investment income based on previous tax advice and this guidance.

Preferred currency: USD

International Lifestyle: I don't anticipate changing tax residence status prior to retirement.

Emergency Fund: Yes (12 months). I have a paid apartment, and my child's education funds set aside, basic life insurance and good health insurance.

Debt: None

Age: 35 - 40

Current retirement assets: None aside from maybe the value of my business if I were to sell.

Intend to follow the Three-fund Portfolio as close as possible. Not sure on exact allocation, but I am thinking along the lines of:
  • 56% Vanguard Total Stock Market Index Fund (VTSAX) non-US alternative
  • 14% Vanguard Total International Stock Index Fund (VTIAX) non-US alternative
  • 30% Vanguard Total Bond Market Fund (VBTLX) non-US alternative
I intend to invest USD 300k to 350k per year provided my business continues to support this level of output.

Questions:
1. I need to avoid US-domiciled funds due to the associated tax issues. Which are the preferred non-US domiciled ETFs recommended as alternatives for the above listed funds? I am going with Interactive Brokers. Are these still recommended?
https://www.bogleheads.org/wiki/Simple_ ... cumulating

2. I feel like the stock market is overpriced currently - is now really a good time to start? Should I wait?

3. Is my bond allocation reasonable for my age, especially given current interest rates?

4. What can I safely do with my child's education funds until needed (around USD 300k)?

Looking forward to getting started!

DJN
Posts: 545
Joined: Mon Nov 20, 2017 12:30 am

Re: Late Starter - First Portfolio

Post by DJN » Mon Feb 10, 2020 9:38 am

Hi,
Looks ok.
I would go with simple proportions just for ease: 70% equity and 30% bonds.
If you haven't already looked at the full Wiki for non-US here is the link: https://www.bogleheads.org/wiki/Outline ... _domiciles
The suggested portfolios on Wiki for non-US are still ok I believe.
One simple rule for bonds allocation is "your age in bonds", there are others.
DJN
Yah shure

ICH
Posts: 225
Joined: Wed Jun 13, 2018 3:08 am

Re: Late Starter - First Portfolio

Post by ICH » Mon Feb 10, 2020 1:56 pm

1. As per wiki should be fine. Suggest to keep some of the fixed income in local currency. Do you have access to SSS, Pagibig, PERA, etc?

2. Wait for what?

3. Yes, but depends on your risk tolerance. Would you be ok is stocks dropped by 50% in the next 6 months?

4. Definitely don't keep it in a Filipino bank lol. Basically depends on the time frame. Here is an idea: https://andrewhallam.com/2019/09/how-ex ... education/

Topic Author
cabbagehead
Posts: 4
Joined: Sun Feb 09, 2020 11:26 am

Re: Late Starter - First Portfolio

Post by cabbagehead » Tue Feb 11, 2020 5:54 am

Thanks for the responses here. Sounds encouraging.
ICH wrote:1...Suggest to keep some of the fixed income in local currency. Do you have access to SSS, Pagibig, PERA, etc?
Good point on the local currency. I do pay myself a taxable salary in the Philippines separately from all this that includes SSS, Pagibibig, Philhealth contributions etc. and have some cash savings. I hadn't actually heard of PERA, so that's an interesting one, although with a max contribution of P100k per year it's limited in usefulness. Why OFWs get double allowance is a mystery to me.
ICH wrote:2. Wait for what?
Hehe, I guess this comes back to the cardinal rules (don't try to time the market). Will require a shift in mindset on my part. :)
ICH wrote:3. Yes, but depends on your risk tolerance. Would you be ok is stocks dropped by 50% in the next 6 months?
I guess I'll find out; given I'm at the accumulation stage and able to buy more for less when the markets are down I think I could tolerate that.
ICH wrote:4. Definitely don't keep it in a Filipino bank lol.
Haha, that's for sure. Thanks for the link. Sounds like a global bond ETF might be the way to go. I don't really need it to grow, it should already cover everything, but it would be nice if I could at least combat inflation.

Thanks for the link DJN, I've been reading that whole Wiki section for non-US.

In terms of books, I've read The Bogleheads' Guide to the Three-Fund Portfolio and have The Bogleheads' Guide to Investing downloaded (Kindle) but not read yet. I'll also make my way through the recommended reading list on the wiki in time.

Topic Author
cabbagehead
Posts: 4
Joined: Sun Feb 09, 2020 11:26 am

Re: Late Starter - First Portfolio

Post by cabbagehead » Wed Feb 12, 2020 5:41 am

My Interactive Brokers account is ready to go, but I have some questions (hoping they're not overly stupid).

I've noticed that the recommended funds on
https://www.bogleheads.org/wiki/Simple_ ... cumulating

are EUR / GBP denominated, but I really want USD denominated funds.

I've been through the Non-US Boglebot as posted elsewhere on this forum and ended up with the following recommendations:

Equity: VHVE FTSE Developed World (62%) + VFEA FTSE Emerging Markets UCITS ETF (8%)
Fixed Income: AGGU iShares Core Global Aggregate Bond (USD Hedged) (30%)

Is this reasonable? Are there any issues with these?

For VHVE I've noticed that there is a "C" prefix before the price, like this:
Image
I couldn't find what this means - any ideas?

For VFEA there are two different entries for the same fund on different exchanges (IBIS2 / LSEETF) - are there any advantages to one vs the other?
Image

Topic Author
cabbagehead
Posts: 4
Joined: Sun Feb 09, 2020 11:26 am

Re: Late Starter - First Portfolio

Post by cabbagehead » Wed Feb 12, 2020 5:56 am

Update: I think the "C" prefix means last closing price, according to:
https://www.elitetrader.com/et/threads/ ... ws.267434/

glorat
Posts: 394
Joined: Thu Apr 18, 2019 2:17 am

Re: Late Starter - First Portfolio

Post by glorat » Wed Feb 12, 2020 9:07 am

cabbagehead wrote:
Wed Feb 12, 2020 5:41 am
Equity: VHVE FTSE Developed World (62%) + VFEA FTSE Emerging Markets UCITS ETF (8%)
Fixed Income: AGGU iShares Core Global Aggregate Bond (USD Hedged) (30%)

Is this reasonable? Are there any issues with these?
I'm biased as the boglebot author so better to defer that question to others. All I'll say is that if you were looking to implement the 2-fund international portfolio, this is a sensible way to implement it
cabbagehead wrote:
Wed Feb 12, 2020 5:41 am

For VHVE I've noticed that there is a "C" prefix before the price, like this:
I couldn't find what this means - any ideas?
As you've figured out, it means the last traded price was yesterday's closing price. I.e. noone has traded this since the open (give or take the 15 minute delay). This often happens with low volume traded ETFs like this. But don't worry, liquidity should be fine. IB will show you not only the bid/ask prices but also how many shares are available at bid/ask so you can convince yourself the bid/ask spread is reasonable.
cabbagehead wrote:
Wed Feb 12, 2020 5:41 am
For VFEA there are two different entries for the same fund on different exchanges (IBIS2 / LSEETF) - are there any advantages to one vs the other?
The LSE definitely lists in USD. Other exchanges might list under different currencies. Since you want to be based on USD, the LSE can't be a bad choice IMHO.

Caduceus
Posts: 2271
Joined: Mon Sep 17, 2012 1:47 am

Re: Late Starter - First Portfolio

Post by Caduceus » Fri Feb 14, 2020 11:29 am

cabbagehead wrote:
Wed Feb 12, 2020 5:41 am
I really want USD denominated funds.
Is there a particular reason you want USD denominated funds? Do you earn money or are paid by clients in the Phillipines in USD? Or is this more a currency play? You think the USD is undervalued relative to GBP?

TedSwippet
Posts: 2651
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Late Starter - First Portfolio

Post by TedSwippet » Fri Feb 14, 2020 11:51 am

Caduceus wrote:
Fri Feb 14, 2020 11:29 am
cabbagehead wrote:
Wed Feb 12, 2020 5:41 am
I really want USD denominated funds.
Is there a particular reason you want USD denominated funds? Do you earn money or are paid by clients in the Phillipines in USD? Or is this more a currency play? You think the USD is undervalued relative to GBP?
An ETF's denomination and trading currencies are immaterial to the long term investing results from holding the fund. The only currency exchange effect that matters is that between the currency of the assets that the ETF holds and the currency in which the investor will spend the resulting gains.

Details in the wiki: Non-US investors and ETF currencies - Bogleheads

ICH
Posts: 225
Joined: Wed Jun 13, 2018 3:08 am

Re: Late Starter - First Portfolio

Post by ICH » Fri Feb 14, 2020 11:58 am

cabbagehead wrote:
Wed Feb 12, 2020 5:41 am


Equity: VHVE FTSE Developed World (62%) + VFEA FTSE Emerging Markets UCITS ETF (8%)
Why not get VWRD FTSE All World, which combines developed and emerging markets? Simpler.

For ETF listings you can have a look here: https://www.justetf.com/uk/find-etf.html?ls=any

occambogle
Posts: 61
Joined: Thu Dec 12, 2019 4:58 am

Re: Late Starter - First Portfolio

Post by occambogle » Sat Feb 15, 2020 3:50 am

I'm looking at a somewhat similar situation for my wife's investments who's a non-US person living abroad.... Still learning, so take anything I say with a pinch of salt.

I'm a dual-American citizen so I just got an IB account in the US and so far very happy with their service. I just mention that.

But for my wife who is non-US I'm looking at non-US domiciled Irish ETFs. It seems you are not subject to dividend tax so VWRD seems a good option. My wife isn't subject to divident tax now, but "may" later, so I've been looking at VWRA (accumulating version of VWRD I think) + AGGU (there's also Vanguard VAGU).

For someone who's not paying any tax on dividends I'm not sure if there is advantage/disadvantage to an accumulating equities fund like VWRA vs the distributing VWRD, maybe someone else can comment.

One thing... I'm not sure where your IB account would be located as a Phillipines resident. I know for some non-EU non-US countries it ends up with IB US. And that's fine in the sense that if you are buying Irish ETFs they will not be "US Situs" so not subject to US estate tax on more than $60k. BUT if you hold more than $60k in your IB US cash account, it would be subject to that. Just to keep in mind and as the ever-helpful @tedswippet advises... don't die while rebalancing (!)

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