Brazilian Boglehead needs help with Ireland Domiciled ETFs

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Hiraclis
Posts: 5
Joined: Wed Jan 10, 2018 1:27 pm

Brazilian Boglehead needs help with Ireland Domiciled ETFs

Post by Hiraclis » Wed Jan 10, 2018 2:27 pm

Hi everybody,

I am a Brazilian Boglehead that is starting to try to invest internationally.
I plan to buy ETF's domiciled in Ireland, with no distribution and traded on London Stock Exchange, due to tax issues. The 30% taxation in USA is very heavy .
I need some help regarding the kind of ETF I should have in my portfolio. I am thinking about EMI and SWDA.
Any help will be much appreciated.
Regards,

Hiraclis
Last edited by Hiraclis on Fri Jan 12, 2018 8:44 am, edited 1 time in total.

pkcrafter
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Location: CA
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Re: Brazilian Boglehead needs help

Post by pkcrafter » Wed Jan 10, 2018 8:32 pm

Wecome,

We do have some members who are familiar with ETF's domiciled in Ireland, but it might help if you edited your title to include those words to alert them.

Something like "Help with ETFs domiciled in Ireland"

Go to your original post and up in the right corner is an image of a pencil. Click on that and you can edit the title or the content of the post.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

Hiraclis
Posts: 5
Joined: Wed Jan 10, 2018 1:27 pm

Re: Brazilian Boglehead needs help with Ireland Domiciled ETFs

Post by Hiraclis » Fri Jan 12, 2018 8:46 am

Dear pkcrafter,

I already changed the subject to make it more explicit.
Thanks for the tip.
Best regards,

Hiraclis

ATope
Posts: 31
Joined: Tue Jan 06, 2015 7:36 am

Re: Brazilian Boglehead needs help with Ireland Domiciled ETFs

Post by ATope » Fri Jan 12, 2018 9:01 am

Hi!
I think you need to follow the basics of the forum and post as many details about your situation, investing plan, duration of investments, goals etc.
It’ll be hard for people to advise & recommend otherwise.
I’d also suggest using the search function for ‘expat portfolios’, ‘Ireland domiciled ETFs’, ‘non-US based investing’ ‘EU based investors’ etc.etc.

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

Re: Brazilian Boglehead needs help with Ireland Domiciled ETFs

Post by msk » Fri Jan 12, 2018 9:14 am

I put my money where my mouth is. All my NW is in stocks. Apart from a few carried-over individual stock picks (that I am steadily selling off to buy the same ETFs) I am invested 90% in IWDA (same as SWDA) and 10% in EIMI. I have enough $ in those two ETFs that my two ETF portfolio went up by 7 figures just in 2017. Sooner rather than later(?) the great ride-up will fade and reverse. Join the ride while it lasts, rather than studying things endlessly. Just checked: made another 5 figures today :greedy

Hiraclis
Posts: 5
Joined: Wed Jan 10, 2018 1:27 pm

Re: Brazilian Boglehead needs help with Ireland Domiciled ETFs

Post by Hiraclis » Fri Jan 12, 2018 10:09 am

Hi Atope,

I am new to the forum and I am still not quite aware of the best way to communicate.
I am a Brazilian with all my investments in Brazil right now and worried about the fiscal and political situation in the country.
I decided to diversify internationally and, due to fee costs and world wide presence, I am opening an account on Interactive Brokers USA and I intent to use it to gain access to the London Stock Exchange. I will buy ETFs domiciled in Ireland to reduce taxes because they are accumulative (They do not make any distribution monthly, annually or what so ever).
I decided to start with EIMI and IWDA. I may add some Bond ETF LQDA.
My plan is to have 50% of my investments on this international strategy after 1 to 2 years.
I am planning to retire around 2026, 8 years from now.
Is it a wise strategy?
What can you tell me about the Ireland Domiciled ETFs?
What would be a wise proportion between those ETFs?
Are other ETFs that I should consider?
Thank in advance for any help.
Best regards,

Hiraclis

Hiraclis
Posts: 5
Joined: Wed Jan 10, 2018 1:27 pm

Re: Brazilian Boglehead needs help with Ireland Domiciled ETFs

Post by Hiraclis » Fri Jan 12, 2018 10:15 am

Hi msk,

What country do you live?
I am using the time to have my account approved to interact here and get some opinions to take into consideration.
I need to invest in Ireland ETFs to escape from paying 30% of distribution in taxes as a Brazilian. They way I figured out to do it is buying ETFs that do not distribute (they are accumulative ones), so I will only pay taxes in Brazil when I sell them.
I was think about being more aggressive with 70% in IWDA and 30% in EIMI. I have no idea about Bond ETF LQDA.
Kind regards,
Hiraclis

msk
Posts: 588
Joined: Mon Aug 15, 2016 10:40 am

Re: Brazilian Boglehead needs help with Ireland Domiciled ETFs

Post by msk » Fri Jan 12, 2018 10:39 am

There are no personal taxes where I live, neither on capital gains nor on income. There are about 10 countries worldwide where this is the case. Emerging Markets constitute, roughly, 10 to 12% of world free-float stocks, so any more weighting than that is a personal tilt. I decided to go simply with the 10% at end 2016. With Emerging Markets having outperformed, up 37% compared to 20+% for SP500, that 10% has probably grown slightly, to 11%? I have nil interest in bonds.

Valuethinker
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Re: Brazilian Boglehead needs help with Ireland Domiciled ETFs

Post by Valuethinker » Fri Jan 12, 2018 11:27 am

Hiraclis wrote:
Fri Jan 12, 2018 10:15 am
Hi msk,

What country do you live?
I am using the time to have my account approved to interact here and get some opinions to take into consideration.
I need to invest in Ireland ETFs to escape from paying 30% of distribution in taxes as a Brazilian. They way I figured out to do it is buying ETFs that do not distribute (they are accumulative ones), so I will only pay taxes in Brazil when I sell them.
I was think about being more aggressive with 70% in IWDA and 30% in EIMI. I have no idea about Bond ETF LQDA.
Kind regards,
Hiraclis
You live in an Emerging Market so I would most definitely not overweight Emerging Markets. EM indices tend to be c. 35-40% China, so it's not too much to Brazil BUT Brazil is one of those countries whose prosperity is quite linked to China (prices of iron ore, agricultural commodities etc.). So you'd be doubling up on something you are already exposed to.

It is your call but I would be:

- 70% global index fund
- 30% bond fund

It's tricky living in an emerging market, for example restrictions on foreign investment. Also your currency and your government bonds are not risk free. Either a global government bond fund (investment grade) or even a US Treasury Bond fund would probably work. The latter has currency risk, of course, but in the long run there probably is convergence (currency moves driven by difference in inflation rates) at least to an extent.

An alternative, if available, might be Brazilian government inflation linked bonds. You have risks of the government misstating inflation deliberately (as it does in Argentina) or some kind of financial crisis leading to a restructuring, But you are protected against loss of buying power in your home currency.

To be honest probably your biggest risk is taxation risk: a future government changes the tax policies on domestic or foreign investment by its residents. Not much that can be done about that, but it's one reason why Emerging Market residents seek to diversify -- offshore bank accounts (probably not legal if undeclared), real estate, real estate in foreign countries (all that Latin American money in Miami etc.).

The actual percentage of bonds depends on your time horizon but I think it is a good rule of thumb never to be less than 20% in bonds, and never more than 80% (Ben Graham, who trained Warren Buffett, said 25%/ 75%). As and when there is another bear market, and you rebalance from bonds into (falling) stocks, you will feel the wisdom of that judgement.

Hiraclis
Posts: 5
Joined: Wed Jan 10, 2018 1:27 pm

Re: Brazilian Boglehead needs help with Ireland Domiciled ETFs

Post by Hiraclis » Fri Jan 12, 2018 2:28 pm

Valuethinker wrote:
Fri Jan 12, 2018 11:27 am
Hiraclis wrote:
Fri Jan 12, 2018 10:15 am
You live in an Emerging Market so I would most definitely not overweight Emerging Markets. EM indices tend to be c. 35-40% China, so it's not too much to Brazil BUT Brazil is one of those countries whose prosperity is quite linked to China (prices of iron ore, agricultural commodities etc.). So you'd be doubling up on something you are already exposed to.

It is your call but I would be:

- 70% global index fund
- 30% bond fund

It's tricky living in an emerging market, for example restrictions on foreign investment. Also your currency and your government bonds are not risk free. Either a global government bond fund (investment grade) or even a US Treasury Bond fund would probably work. The latter has currency risk, of course, but in the long run there probably is convergence (currency moves driven by difference in inflation rates) at least to an extent.

An alternative, if available, might be Brazilian government inflation linked bonds. You have risks of the government misstating inflation deliberately (as it does in Argentina) or some kind of financial crisis leading to a restructuring, But you are protected against loss of buying power in your home currency.

To be honest probably your biggest risk is taxation risk: a future government changes the tax policies on domestic or foreign investment by its residents. Not much that can be done about that, but it's one reason why Emerging Market residents seek to diversify -- offshore bank accounts (probably not legal if undeclared), real estate, real estate in foreign countries (all that Latin American money in Miami etc.).

The actual percentage of bonds depends on your time horizon but I think it is a good rule of thumb never to be less than 20% in bonds, and never more than 80% (Ben Graham, who trained Warren Buffett, said 25%/ 75%). As and when there is another bear market, and you rebalance from bonds into (falling) stocks, you will feel the wisdom of that judgement.
Hi Valuethinker and msk,

You are right about over weighting in Emerging Markets, I was not taking into consideration the links between Brazil's economy and the economies of other emerging countries. The percentage you are suggesting makes perfect sense.

I already have inflation bonds from the Brazilian government in my portfolio. The risk of the government misstating inflation deliberately is slow but it is possible to have an increase in inflation rates due to the fiscal situation.

It is a possibility to have a taxe change but such a change must be done through a law and the constitution states that a law like this can only be enforced in the next fiscal year. So I would have some time to make changes in my portfolio to avoid or minimize a change like that.

We have elections in the second semester and I am concerned about a president from a left wing party being elected. I will sleep much better knowing that part of my retirement money is out of reach.

The BOND ETF LQDA from Ishares I was studying seems to have low liquidity. Can you suggest a Bond ETF with a higher liquidity? Is it better to wait for the interest rate to raise before buy Bond ETFs?
Regards,

Hiraclis

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