Portfolio Advice - Singapore

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Topic Author
MoRS76
Posts: 5
Joined: Wed Nov 13, 2019 5:35 am

Portfolio Advice - Singapore

Post by MoRS76 » Fri Nov 15, 2019 11:43 pm

Hi,

I'm new to this forum and posted in the US investing section before realizing there is a non-US investing section so I'm posting here for portfolio advice.

Country of Residence: Singapore (Canadian citizen on Employment Pass)
International Lifestyle: 9 years working in Singapore. No work-related move expected in the near future. Enjoying Singapore with 2 kids (5 and 2)
Emergency funds: 3 months of expenses
Debt: None
Pension: None
Age: 43 (Retire in 25 years)
Profession/Company: Cloud Data Analytics / US tech company. Stable job security based on current trends.

Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 80% of stocks in the US
Risk Tolerance: High
Currency: Invest in USD

Current portfolio (6 figures)
27% - VTI (Total US Market)
26% - Employer Stock (Equity Awards) -> these are vested stocks which I can sell (they exclude restricted stocks which are 50% of vested shares)
22% - VWO (Emerging Markets Equity)
11% - VXUS (International Equity)
8% - BND (US Intermediate Bonds)
6% - BNDX (International Intermediate Bonds)

Considering the below allocation and switching to ETFs domiciled in Ireland to reduce dividend tax + US estate tax
60% - VUSD (S&P 500)
10% - VWRD (Global large cap blend) -> for non-US diversification (45% of holdings are non-US)
10% - EIMI (Emerging markets equity) -> for non-US long-term growth
20% - IBTA (US Treasuries 1-3yr) -> cash substitute with interest rate protection

DJN
Posts: 521
Joined: Mon Nov 20, 2017 12:30 am

Re: Portfolio Advice - Singapore

Post by DJN » Fri Nov 15, 2019 11:47 pm

Hi,
if you haven't already discovered it have a look at the Canadian website that is affiliated or somehow related to Wiki: https://www.finiki.org/wiki/Main_Page
I am not sure if it will help with your Canadian taxes etc.
DJN
Yah shure

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bubbasour
Posts: 144
Joined: Thu Jul 26, 2018 10:28 am

Re: Portfolio Advice - Singapore

Post by bubbasour » Sat Nov 16, 2019 6:36 am

Hi MoRS76, I would keep things really simple and stick to VUSD and VWRD for the exact reasons that you mentioned, dividend tax and US estate tax.
Please understand that there's a currency risk with both of the above if you're planning to continue to stay in Singapore. Personally.. I only hold USD as foreign currency for my equity investments. However, for my FI I also hold SGS bonds, T-bills, SSB, and if needed FD. I know the returns are not great.. however you are holding some SGD at least that may help out at times when conversion rates may not be in your favor.
NRA, Prefer VUSD (VOO) and VWRD (VT), No capital gain tax.

Valuethinker
Posts: 39069
Joined: Fri May 11, 2007 11:07 am

Re: Portfolio Advice - Singapore

Post by Valuethinker » Sat Nov 16, 2019 10:39 am

MoRS76 wrote:
Fri Nov 15, 2019 11:43 pm
Hi,

I'm new to this forum and posted in the US investing section before realizing there is a non-US investing section so I'm posting here for portfolio advice.

Country of Residence: Singapore (Canadian citizen on Employment Pass)
International Lifestyle: 9 years working in Singapore. No work-related move expected in the near future. Enjoying Singapore with 2 kids (5 and 2)
Emergency funds: 3 months of expenses
Debt: None
Pension: None
Age: 43 (Retire in 25 years)
Profession/Company: Cloud Data Analytics / US tech company. Stable job security based on current trends.

Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 80% of stocks in the US
Why? If you hold the world index, around 55% of your stocks will be in the USA - if you restrict yourself to developed markets, I believe it's now over 60%.

And you work in tech, and tech is the largest sector in the US market. So if the tech sector experiences another downturn, you've added a correlation between your employment income and your portfolio.
Risk Tolerance: High
Currency: Invest in USD
I think it is worth covering off that you can invest in a global stock market index, which reports in USD, pays out dividends in USD, is bought & sold in USD, but unless the fund actually hedges its foreign currency exposures back into USD, you will get the full exchange rate volatility (but also possibly benefit).

In other words the currency of reporting is not the currency of economic exposure. Were you aware of that point?

But this also cuts the other way. If you own US stocks and the USD falls, some of the companies will go up in value (companies like CAT and Boeing which are major exporters).
Current portfolio (6 figures)
27% - VTI (Total US Market)
26% - Employer Stock (Equity Awards) -> these are vested stocks which I can sell (they exclude restricted stocks which are 50% of vested shares)
22% - VWO (Emerging Markets Equity)
11% - VXUS (International Equity)
8% - BND (US Intermediate Bonds)
6% - BNDX (International Intermediate Bonds)

Considering the below allocation and switching to ETFs domiciled in Ireland to reduce dividend tax + US estate tax
60% - VUSD (S&P 500)
10% - VWRD (Global large cap blend) -> for non-US diversification (45% of holdings are non-US)
10% - EIMI (Emerging markets equity) -> for non-US long-term growth
20% - IBTA (US Treasuries 1-3yr) -> cash substitute with interest rate protection
I would need to understand the desire to overweight the USA. To avoid exposure to Asian markets?

I would tend to hold the world portfolio or if that does not include EM then the developed world portfolio (80-90%) + EM (10-20%).

Topic Author
MoRS76
Posts: 5
Joined: Wed Nov 13, 2019 5:35 am

Re: Portfolio Advice - Singapore

Post by MoRS76 » Sat Nov 16, 2019 7:27 pm

Thank you for the responses. I did not consider some of the great points shared.

The currency reporting vs exchange rate exposure of an ETF was an area I did not consider. Which world indexes have reduced exchange rate volatility? Where would such info be found when researching ETFs? I usually look at ETF prospectus but haven't paid attention to this.

Would the expense ratio differences between VUSD (.07%), VWRD (.25%) and SWDA (.2%) justify the higher asset allocation to VUSD?

Agree with the tech correlation between my work and the US market and it makes sense to reduce exposure. I will also take a closer look at the US holdings in the world indexes.

Thank you for the advice!

Valuethinker
Posts: 39069
Joined: Fri May 11, 2007 11:07 am

Re: Portfolio Advice - Singapore

Post by Valuethinker » Sun Nov 17, 2019 4:05 am

MoRS76 wrote:
Sat Nov 16, 2019 7:27 pm
Thank you for the responses. I did not consider some of the great points shared.

The currency reporting vs exchange rate exposure of an ETF was an area I did not consider. Which world indexes have reduced exchange rate volatility? Where would such info be found when researching ETFs? I usually look at ETF prospectus but haven't paid attention to this.



Would the expense ratio differences between VUSD (.07%), VWRD (.25%) and SWDA (.2%) justify the higher asset allocation to VUSD?

Agree with the tech correlation between my work and the US market and it makes sense to reduce exposure. I will also take a closer look at the US holdings in the world indexes.

Thank you for the advice!
For non US listed funds it can damned hard to figure out.

It should say USD hedged somewhere in the name. Or in the description of the index it tracks sometimes.

But sometimes it seems not to at all.

Most bond funds currency hedge to currency of reporting. The majority of equity funds do not.

With bond funds if you did not hedge the currency volatility would vastly exceed the interest earned by the fund. It would not be a bond fund so much as a currency speculation fund.

In your shoes I would probably hold US dollar bond funds and run with that. On the basis that if you don't know what currency your retirement spending will be in then the default world currency is as good as you will get.

On equities global equities give you the maximum diversification. Non US has badly lagged USA last 10 years mostly due to strength of US tech stocks and stronger performance of US economy. History says that outperformance will reverse some day. More diversification is better than less.

The hard call is Emerging Markets. For all sorts of reasons mostly around suspicion of what the actual profits are of Chinese companies, I suggest a modest underweighting of somewhere between 10 and 15 per cent of portfolio. But anywhere between 10 and 20 will work.

On expense ratios. This is hard. I don't know the ticker codes btw. But 10 basis points on 100k is 100 dollars pa. Compounded by 30 years of course.

For me the greater diversification and the simplicity of a single fund would rule. But that is not necessarily a good choice.

msk
Posts: 1394
Joined: Mon Aug 15, 2016 10:40 am

Re: Portfolio Advice - Singapore

Post by msk » Sun Nov 17, 2019 4:29 am

Your investment horizon is 40 to 50 years till you liquidate the bulk of your portfolio (or die). With such a long horizon I would aim to be highly diversified and resist guessing where is "best". Choose between VWRD (pays dividends) and VWRA (accumulating). Both cover the entire world including Emerging Markets weighted by free market weight. Currently some 11% is in Emerging Markets. Many view that as too much/too volatile. Nevertheless bear in mind that the GDP of Emerging Markets is around 30% of world total, so 11% is, in fact, underweighting anyway. Bonds? Not for me. I do not wish to lend my hard earned money to anyone for a negative real interest rate... So, for me, 100% in VWRA and leave it there. Over the next 40 years you will be saving more. You can worry each year whether 100% VWRA was the correct choice in 2019 but however much you put in today need never be sold. Leave your outguessing the world's markets for future years. I would also not worry too much about the expense ratio. Vanguard will stay competitive.

Hustlinghustling
Posts: 38
Joined: Mon Jul 25, 2016 12:09 am

Re: Portfolio Advice - Singapore

Post by Hustlinghustling » Sun Nov 17, 2019 5:34 am

MoRS76 wrote:
Sat Nov 16, 2019 7:27 pm

Would the expense ratio differences between VUSD (.07%), VWRD (.25%) and SWDA (.2%) justify the higher asset allocation to VUSD?
fyi VRWD recently dropped fees to 0.22%

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