[Seeking advice] Non-US/Non-EU IPS

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Topic Author
ekami
Posts: 5
Joined: Fri Nov 29, 2019 11:59 am

[Seeking advice] Non-US/Non-EU IPS

Post by ekami » Sat Nov 30, 2019 12:51 pm

Hello,
I’m from French Polynesia and I’m 28 years old (French Polynesia is a non-EU/non-US country with no tax treaties with any countries). My plan is to retire in 10-12 years with a net worth ~$2M.
My base currency is the USD as I'm being paid by US clients. I’d like to retire without ever having to sell my investments and just live off of the dividends (no 4% rule with assets selling). Liquidating 4% of my portfolio every year until I die isn’t very appealing to me, if I have kids someday there won’t be anything left for them. My generation (millennials) is also prone to live longer than the generations before it. If I don't have any income left at 100yo I'll be screwed. I’m also very interested in retiring in New Zealand.

Do you think my IPS/goals looks reasonable?
I'd also like to know if the Boglehead philosophy is compatible with long term dividend growth investing? Finding information on Ireland based ETFs is also hard, it's not as easy as finding information on an US stock or ETFs. Does any of you have advises on Ireland based dividend growth ETFs for stocks and bonds? Thanks a lot for your help!

Investment Objectives:
- Retire before the age of 40 with a net worth of $2M USD
- Accumulate enough money for a downpayment of my house in 5-6 years, max cost of the house will be $1.3M USD. I may need ~$260 000 of cash for the downpayment.
- Eventually buy a car in 5-6 years

Risk Tolerance:
High in term of logical decision. For instance if my stocks are down 50% but they didn’t cut their dividends I’m very unlikely to sell. On the other hand if my stocks are down 50% and cut their dividends I’m likely to sell depending on the dividend cut.

Investment Philosophy:
Buy-and-hold, as long as the security is generating income through interest or dividends

Asset Allocation:
- Maintain overall 70% dividend growth ETFs + 10% fixed-income allocation (bonds) + 10% individual stocks (mostly dividend aristocrat stocks) + 10% cash
- Assets should be diversified across major asset classes including US equity, international equity and across all major sectors (Energy, Materials, Industrial, Consumer Discretionary, Consumer Staples, Health Care, Financials, Information Technology, Telecommunication Services, Utilities, Real Estate).
- Mainly invest in Ireland domiciled ETFs to avoid the 30% US flat tax on my dividends. Unavoidable on individual stocks.
- Avoid markets with uncertain political stability or countries with the state having too much influence over the currency/companies such as China (see here). Only allow investment in those countries through ETFs to mitigate the risk.

Selection Criteria:
Mostly invest in Ireland based ETFs or established companies with strong dividend growth potential or sold at a discount with high dividend yield (as long as the discount wasn’t created by an event which will harm the company in an unrecoverable way)

Funds & Accounts:
- Emergency account equivalent to 1 year and half of expense. Half of this money also serves to buy the risky part of my portfolio (10% of individual stocks) during an eventual recession (account already funded).
- Invest at least $8000/month in my portfolio which will make ~$1M over the course of 10y and half (no compounding taken into account). In 2020 this amount may grow to $12 000/month, reaching $1.4M after 10 years an half

Target Allocation:
- VWRD? (hard to know its dividend yield or get any real data on Ireland based ETFs)
- ???
- Individual solid US stocks known for giving dividends (so far in the portfolio: ABBV, AVGO, D, MSM, TXN, UNM, XOM)

Rebalancing:
Do not sell assets to rebalance the portfolio, always hold and direct future investments toward the asset class which need to be rebalanced

glorat
Posts: 295
Joined: Thu Apr 18, 2019 2:17 am

Re: [Seeking advice] Non-US/Non-EU IPS

Post by glorat » Sun Dec 01, 2019 5:55 am

ekami wrote:
Sat Nov 30, 2019 12:51 pm
I’d like to retire without ever having to sell my investments and just live off of the dividends (no 4% rule with assets selling). Liquidating 4% of my portfolio every year until I die isn’t very appealing to me,
My family members also have this view but it is based on incorrect assumptions.

First, let's assume numbers and see where it leads.

VWRD pays about 2% annual dividend at present, a number you can look up. Based on historic performance, it had a total return (dividends + capital growth) safely in excess of 4% over any long period of time, let's call it 6%.

In that case, to fund your living, you spend the 2% dividend, liquidate 2% of your portfolio but since your portfolio value grew by 4%, your portfolio is still growing and you can still leave money to your kids.

Of course there is a 1% chance your portfolio will actually shrink to nothing over such a strategy so you could spend less.

However, if you compare this to a dividend only strategy, you risk adjusted total returns compared to a whole market approach is worse, meaning your strategy will be more likely to leave you and your kids with less money. (or you'll need to retire with a higher networth than necessary to fund a dividend only retirement)

DJN
Posts: 516
Joined: Mon Nov 20, 2017 12:30 am

Re: [Seeking advice] Non-US/Non-EU IPS

Post by DJN » Sun Dec 01, 2019 8:37 am

hi,
If I am roughly correct you are looking to have at least $3.6M salted away or spent over the next 12 years?
Do you pay tax in your country? Maybe do a quick and dirty cash flow to see how much you need to earn in order to save and invest what you aspire to get to after expenses. You didn't mention your income that I could see.
See: https://www.bogleheads.org/wiki/Outline ... l_planning and
https://www.bogleheads.org/wiki/Buildin ... _portfolio
DJN
Yah shure

Topic Author
ekami
Posts: 5
Joined: Fri Nov 29, 2019 11:59 am

Re: [Seeking advice] Non-US/Non-EU IPS

Post by ekami » Sun Dec 01, 2019 10:01 am

glorat wrote:
Sun Dec 01, 2019 5:55 am
ekami wrote:
Sat Nov 30, 2019 12:51 pm
I’d like to retire without ever having to sell my investments and just live off of the dividends (no 4% rule with assets selling). Liquidating 4% of my portfolio every year until I die isn’t very appealing to me,
My family members also have this view but it is based on incorrect assumptions.

First, let's assume numbers and see where it leads.

VWRD pays about 2% annual dividend at present, a number you can look up. Based on historic performance, it had a total return (dividends + capital growth) safely in excess of 4% over any long period of time, let's call it 6%.

In that case, to fund your living, you spend the 2% dividend, liquidate 2% of your portfolio but since your portfolio value grew by 4%, your portfolio is still growing and you can still leave money to your kids.

Of course there is a 1% chance your portfolio will actually shrink to nothing over such a strategy so you could spend less.

However, if you compare this to a dividend only strategy, you risk adjusted total returns compared to a whole market approach is worse, meaning your strategy will be more likely to leave you and your kids with less money. (or you'll need to retire with a higher networth than necessary to fund a dividend only retirement)
Well, I'm not a big fan of this withdrawing method for 2 reasons very much outlined in these forums:
1. Quote from the wiki: "Keep it simple". I don't want to be choosing each year how much I will sell if I'm in the middle of a recession (because yes, that will happen over the course of the next 30 or 40 years). I quote from this article https://www.simplysafedividends.com/int ... end-stocks: "During market drops, such as the 2000 tech crash and the 2008-2009 financial crisis, the 4% rule can cause a lot of stress for retirees and potentially fail some of them altogether.

After all, if your portfolio declines by as much as 50% as it did in both of the last two crashes, then sticking to the 4% rule will result in a 50% reduction in income compared to the prior year."
In such a situation I would probably not want to withdraw 4% of my portfolio, and no one knows how many years the next recession will last, so how many years will I have to struggle with a lesser income compared to the previous years after being used to a certain standard of living?

2. Quote from the wiki: "What worked in the past won't necessarily work in the future". The perfect example is the interest rates in bonds which are historically low, if this trend continues then the 4% rules will be hard to follow. I invite you to look at the video on this website https://www.investopedia.com/terms/f/fo ... t-rule.asp and this article https://www.simplysafedividends.com/int ... end-stocks.
Of course there is a 1% chance your portfolio will actually shrink to nothing over such a strategy so you could spend less.
Could I know where does this 1% comes from? Is there empirical evidence to support this claim?
However, if you compare this to a dividend only strategy, you risk-adjusted total returns compared to a whole market approach is worse, meaning your strategy will be more likely to leave you and your kids with less money. (or you'll need to retire with a higher networth than necessary to fund a dividend only retirement)
Same here, I'm curious to know what makes you think dividends strategy will leave me with less money.

The dividend strategy, on the other hand, is very appealing to me, look at companies such as XOM/KO/T which have been giving dividends for more than 30, or even 50 years. While I'm not saying "they are too big to fail", I feel much more confident knowing I won't ever have to sell or decide how much I should sell this or that year. I may get even more than 4%/year from the dividends and during a recession, I won't care about the value of my stocks as long as the dividends are not cut and given these companies kept increasing their dividend during the recession of these past 50 years I will probably sleep well at night.

Topic Author
ekami
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Joined: Fri Nov 29, 2019 11:59 am

Re: [Seeking advice] Non-US/Non-EU IPS

Post by ekami » Sun Dec 01, 2019 10:10 am

DJN wrote:
Sun Dec 01, 2019 8:37 am
hi,
If I am roughly correct you are looking to have at least $3.6M salted away or spent over the next 12 years?
Not sure I understand this correctly, you are saying that I said that I want to spend $3.6M over the next 12 years? What I said was that I want to accumulate at least $2M of net worth by 2030/2032.
DJN wrote:
Sun Dec 01, 2019 8:37 am
Do you pay tax in your country? Maybe do a quick and dirty cash flow to see how much you need to earn in order to save and invest what you aspire to get to after expenses. You didn't mention your income that I could see.
See: https://www.bogleheads.org/wiki/Outline ... l_planning and
https://www.bogleheads.org/wiki/Buildin ... _portfolio
DJN
I do pay taxes in my country of residence but they are very low and serve for social security. There is no income tax "per say" so no capital gain taxes or taxes on dividends. That will change when I will move to another country tho because I don't want to live in this third world country forever, for now, it's ok as it allows me to put more savings aside.
As for my income, it very much depends on the amount of work I do as I'm a freelancer, but for these past 2 years, I always managed to put aside at least $8000/month, sometimes more but never less (excepted when I take vacations).

glorat
Posts: 295
Joined: Thu Apr 18, 2019 2:17 am

Re: [Seeking advice] Non-US/Non-EU IPS

Post by glorat » Sun Dec 01, 2019 10:18 am

ekami wrote:
Sun Dec 01, 2019 10:01 am
Well, I'm not a big fan of this withdrawing method for 2 reasons very much outlined in these forums:
1. Quote from the wiki: "Keep it simple". I don't want to be choosing each year how much I will sell if I'm in the middle of a recession (because yes, that will happen over the course of the next 30 or 40 years).
Very good reason
ekami wrote:
Sun Dec 01, 2019 10:01 am

I quote from this article https://www.simplysafedividends.com/int ... end-stocks: "During market drops, such as the 2000 tech crash and the 2008-2009 financial crisis, the 4% rule can cause a lot of stress for retirees and potentially fail some of them altogether.
Not such a good reason because it isn't actionable. To make it actionable, you'll need to accumulate a higher networth before retiring than someone who also has growth stocks. And that's okay... it just means accumuating 30x, or 40x, rather than 25x to be ready to retire. Your choice as to when you feel comfortable.
ekami wrote:
Sun Dec 01, 2019 10:01 am
After all, if your portfolio declines by as much as 50% as it did in both of the last two crashes, then sticking to the 4% rule will result in a 50% reduction in income compared to the prior year."
In such a situation I would probably not want to withdraw 4% of my portfolio, and no one knows how many years the next recession will last, so how many years will I have to struggle with a lesser income compared to the previous years after being used to a certain standard of living?
Again, all good points but these are independent of your investment strategy. Living off dividends isn't helping you here
ekami wrote:
Sun Dec 01, 2019 10:01 am

2. Quote from the wiki: "What worked in the past won't necessarily work in the future". The perfect example is the interest rates in bonds which are historically low, if this trend continues then the 4% rules will be hard to follow. I invite you to look at the video on this website https://www.investopedia.com/terms/f/fo ... t-rule.asp and this article https://www.simplysafedividends.com/int ... end-stocks.
Again, these are relevant on how to retire but not relevant on an investment strategy
ekami wrote:
Sun Dec 01, 2019 10:01 am
Of course there is a 1% chance your portfolio will actually shrink to nothing over such a strategy so you could spend less.
Could I know where does this 1% comes from? Is there empirical evidence to support this claim?
Sure - go to portfoliocharts.com or firecalc.com and see how often a 25x portfolio based on total stock market + total market bonds in some ratio fails. And I'll be failure rate will be higher if you replace TSM with a dividend heavy stock allocation. If those tools supported a "defensive sector" allocation, you could even compare your proposed strategy - I'm sure failure rate given the same networth will be higher with a defensive only allocation such as yours.
ekami wrote:
Sun Dec 01, 2019 10:01 am

However, if you compare this to a dividend only strategy, you risk-adjusted total returns compared to a whole market approach is worse, meaning your strategy will be more likely to leave you and your kids with less money. (or you'll need to retire with a higher networth than necessary to fund a dividend only retirement)
Same here, I'm curious to know what makes you think dividends strategy will leave me with less money.
Because I'm basing calculations on total return, not dividend return and a dividends strategy has a lower total return AND a lower risk adjusted return than a total stock market portfolio
ekami wrote:
Sun Dec 01, 2019 10:01 am
The dividend strategy, on the other hand, is very appealing to me, look at companies such as XOM/KO/T which have been giving dividends for more than 30, or even 50 years. While I'm not saying "they are too big to fail", I feel much more confident knowing I won't ever have to sell or decide how much I should sell this or that year. I may get even more than 4%/year from the dividends and during a recession, I won't care about the value of my stocks as long as the dividends are not cut and given these companies kept increasing their dividend during the recession of these past 50 years I will probably sleep well at night.
That's a fine way to soothe one's psychology - looking at dividends and not total returns because psychologically, it is difficult to accept selling capital. It is, as you say, less simple to manage.

It's also a reasonable strategy to look at defensive sectors, which is what you are essentially promoting. Stocks that pay dividends but don't grow in capital as much. Defensives are more stable in dividends in a recession but overall have much lower total returns over the economic cycle and over the long term. To give sample numbers, your portfolio might generate a relatively stable 4%, whereas a TSM will generate a more volatile total return 6%.

Having done my best to be objective in the pros/cons, it is up to you which way you want to go. Personally, I think maximising total return risk adjusted expectation is the objective of investment and a dividends maximising strategy will fall quite short of that.

EddyB
Posts: 1076
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Re: [Seeking advice] Non-US/Non-EU IPS

Post by EddyB » Sun Dec 01, 2019 10:22 am

ekami wrote:
Sun Dec 01, 2019 10:10 am

Not sure I understand this correctly, you are saying that I said that I want to spend $3.6M over the next 12 years? What I said was that I want to accumulate at least $2M of net worth by 2030/2032.
I think the question was really whether the (up to) $1.6 million house you mentioned is in addition to the $2M in “net worth.”

I think you’re turned around on the issue of making things simple. If that’s really what you want, look into total market (or total developed market) investments. I think you also misunderstand what the “4% rule” is.

Also consider how likely your consulting income is to survive in a recession.

Are there preliminary steps you need to take to secure a right to residency in NZ (e.g., does your legal ability to move there depend on making a substantial income)?

ignition
Posts: 282
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Re: [Seeking advice] Non-US/Non-EU IPS

Post by ignition » Sun Dec 01, 2019 10:42 am

ekami wrote:
Sun Dec 01, 2019 10:01 am
Well, I'm not a big fan of this withdrawing method for 2 reasons very much outlined in these forums:
1. Quote from the wiki: "Keep it simple". I don't want to be choosing each year how much I will sell if I'm in the middle of a recession (because yes, that will happen over the course of the next 30 or 40 years). I quote from this article https://www.simplysafedividends.com/int ... end-stocks: "During market drops, such as the 2000 tech crash and the 2008-2009 financial crisis, the 4% rule can cause a lot of stress for retirees and potentially fail some of them altogether.

After all, if your portfolio declines by as much as 50% as it did in both of the last two crashes, then sticking to the 4% rule will result in a 50% reduction in income compared to the prior year."
In such a situation I would probably not want to withdraw 4% of my portfolio, and no one knows how many years the next recession will last, so how many years will I have to struggle with a lesser income compared to the previous years after being used to a certain standard of living?
Don't forget that dividends can be cut as well. During the financial crisis dividends were cut by about 20-30% I believe.

Usually, early retirees will also have bonds which will be more stable than stocks during a crisis. Retirees can sell bonds to meet their cash flow needs instead of equities during a market crash.
ekami wrote:
Sun Dec 01, 2019 10:01 am
2. Quote from the wiki: "What worked in the past won't necessarily work in the future". The perfect example is the interest rates in bonds which are historically low, if this trend continues then the 4% rules will be hard to follow. I invite you to look at the video on this website https://www.investopedia.com/terms/f/fo ... t-rule.asp and this article https://www.simplysafedividends.com/int ... end-stocks.
The same can be said about dividend investing. It might give a false sense of security.
ekami wrote:
Sun Dec 01, 2019 10:01 am
The dividend strategy, on the other hand, is very appealing to me, look at companies such as XOM/KO/T which have been giving dividends for more than 30, or even 50 years. While I'm not saying "they are too big to fail", I feel much more confident knowing I won't ever have to sell or decide how much I should sell this or that year. I may get even more than 4%/year from the dividends and during a recession, I won't care about the value of my stocks as long as the dividends are not cut and given these companies kept increasing their dividend during the recession of these past 50 years I will probably sleep well at night.
I think it will be very hard to construct a diversified portfolio with a 4% dividend yield.


DJN
Posts: 516
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Re: [Seeking advice] Non-US/Non-EU IPS

Post by DJN » Sun Dec 01, 2019 8:41 pm

Hi,
I think that you need to work out your cashflow for the next 12 years or so and then for your intended retirement period from 2032 or whatever date you choose. You will need to save 3.6M over this period in order to achieve your goals. I am not aware of your income or expenditure from your original post so cannot comment on the adequacy of 2M for a 50 year retirement.
good luck
DJN
Yah shure

andrew99999
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Re: [Seeking advice] Non-US/Non-EU IPS

Post by andrew99999 » Sun Dec 01, 2019 9:23 pm

ekami,

You're information about dividends are inaccurate, to say the least. You're using the completely false notion that dividends are, secure, represent earnings, and that drawing down on dividends is different to a withdrawal. For "proof", you link to an article that is biased and misleading.
PassiveInvestingAustralia.com

glorat
Posts: 295
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Re: [Seeking advice] Non-US/Non-EU IPS

Post by glorat » Mon Dec 02, 2019 12:53 am

andrew99999 wrote:
Sun Dec 01, 2019 9:23 pm
For "proof", you link to an article that is biased and misleading.
I finally had a chance to read the article properly (https://www.simplysafedividends.com/int ... end-stocks) . Indeed there are so so many things wrong in that article. Clearly the case being made by OP is based on this article. It might be a worthy effort to deconstruct and debunk the stuff there.

Welcome to bogleheads OP!

Update (to avoid excessive posting by me). There's yet another thread in the other forum on this whole topic of dividend strategies. Here are a range of useful links on the topic
arcticpineapplecorp. wrote:
Fri Nov 29, 2019 11:23 pm
socialforums2019 wrote:
Fri Nov 29, 2019 8:24 pm
For some reason, I've been flooded with a bunch of advertising around people focused on dividend investing. How they are making $X of passive income a month with this "strategy".

So what is the benefit of this vs just putting the money into something that tracks the S&P 500? One of the articles mentioned that dividend investing actually outperforms the index funds. Do you have this in your mix? Is it good to do for just passive income?
so much to read. so much to learn:

https://www.etf.com/sections/index-inve ... idend-myth
https://www.advisorperspectives.com/art ... sacred-cow
viewtopic.php?f=10&t=242939#p3806231
viewtopic.php?t=231661
viewtopic.php?t=227902
viewtopic.php?f=10&t=286813
viewtopic.php?f=10&t=294211
viewtopic.php?f=10&t=242939

what do you think after reading this?

Topic Author
ekami
Posts: 5
Joined: Fri Nov 29, 2019 11:59 am

Re: [Seeking advice] Non-US/Non-EU IPS

Post by ekami » Mon Dec 02, 2019 5:56 am

Thank you all for your advice.
ekami,

You're information about dividends are inaccurate, to say the least. You're using the completely false notion that dividends are, secure, represent earnings, and that drawing down on dividends is different to a withdrawal. For "proof", you link to an article that is biased and misleading.
Don't forget that dividends can be cut as well. During the financial crisis dividends were cut by about 20-30% I believe.

Usually, early retirees will also have bonds which will be more stable than stocks during a crisis. Retirees can sell bonds to meet their cash flow needs instead of equities during a market crash.
I think it will be very hard to construct a diversified portfolio with a 4% dividend yield.
Sure - go to portfoliocharts.com or firecalc.com and see how often a 25x portfolio based on total stock market + total market bonds in some ratio fails. And I'll be failure rate will be higher if you replace TSM with a dividend heavy stock allocation. If those tools supported a "defensive sector" allocation, you could even compare your proposed strategy - I'm sure failure rate given the same networth will be higher with a defensive only allocation such as yours.
Because I'm basing calculations on total return, not dividend return and a dividends strategy has a lower total return AND a lower risk adjusted return than a total stock market portfolio
That's a fine way to soothe one's psychology - looking at dividends and not total returns because psychologically, it is difficult to accept selling capital. It is, as you say, less simple to manage.
I think you're both making a point here. One of the main reasons I chose the dividends investing route was because psychologically speaking I would never have to touch or erode my principal. I guess I'm a bit biased here.
Also while I promote simplicity, keeping track of dividend cuts from companies is a job by itself, I'm not even speaking about selecting the right company during a buy. So I was considering buying VYM (I guess the Ireland based fund equivalent for my case would be VHYD) to get rid of that tedious part.
But I think I'll completely reconsider my strategy from scratch and take the same route you guys suggested. So if you were in my situation (considering my tax residence), what funds would you buy?
This is also interesting:
https://www.advisorperspectives.com/art ... sacred-cow
https://www.etf.com/sections/index-inve ... idend-myth
Interesting resources, I'll read for sure. Thanks! :)
I think you’re turned around on the issue of making things simple. If that’s really what you want, look into total market (or total developed market) investments. I think you also misunderstand what the “4% rule” is.
How so? What do you find incorrect in my reasoning regarding the 4% rule? Do you have any resources for me to learn more about it?
Are there preliminary steps you need to take to secure a right to residency in NZ (e.g., does your legal ability to move there depend on making a substantial income)?
Yep, I started looking into it but didn't take action in that regard yet. There are many solutions like their "Talents" or "Entrepreneurship" visas. I'm sure I'll find a solution when the time will come, for now, I'm ok in my current country as it allows me to make some good savings. Also, NZ has a 4 years tax exemption from the date when you immigrate as they consider you as a "transient immigrant".
Welcome to bogleheads OP!
May I ask what is OP?
I think the question was really whether the (up to) $1.6 million house you mentioned is in addition to the $2M in “net worth.”
No, the $1.3M house will probably be paid with a loan, that's why I included a ~$260 000 downpayment in my plans, which is around 20% of the price.

Thank you all for your help, this forum/wiki is very much enlightening!

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BeBH65
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Re: [Seeking advice] Non-US/Non-EU IPS

Post by BeBH65 » Mon Dec 02, 2019 7:50 am

Hello ekami,

Welcome to the Forum.
You have already recieved a lot of good answers.

Just to ensure you start with the correct understanding of the 4% rate.
The original mention of this rate comes from the trinity study which studied the safe withdrawwl rates for the US.
They found that, under a series of assumptions, an US investor had 98% chance of not running our of money over 30 years if he started with a 4% withdrawal an augmented that with inflation each year. In most of the cases the end capital is many times lareger then the begin. Other studies have extended that for various time periods and across the globe.
See our wiki page: Safe_withdrawal_rates.
Also, play with the calculators like: https://firecalc.com/ , http://www.cfiresim.com/ or on the portfoliocharts site: articke: your-home-country-is-inseparable-from-your-withdrawal-rate and tool


Let me address a few additional points:
ekami wrote:
Sat Nov 30, 2019 12:51 pm
Hello,
I’m from French Polynesia and I’m 28 years old (French Polynesia is a non-EU/non-US country with no tax treaties with any countries).
My plan is to retire in 10-12 years with a net worth ~$2M.
My base currency is the USD as I'm being paid by US clients. Are your expenses in USD?
I’d like to retire without ever having to sell my investments and just live off of the dividends (no 4% rule with assets selling). Liquidating 4% of my portfolio every year until I die isn’t very appealing to me, An average portfolio will generate dividends and intrest, you are not selling 4% each year. if I have kids someday there won’t be anything left for them. In most periods, the portfolio was not deplated, many times more was left at the end then the starting capital My generation (millennials) is also prone to live longer than the generations before it. If I don't have any income left at 100yo I'll be screwed. I’m also very interested in retiring in New Zealand. then maybe your base currency should be NZD?


Do you think my IPS/goals looks reasonable?
I'd also like to know if the Boglehead philosophy is compatible with long term dividend growth investing? One of the principles of the Boglehead community is Diversify. "Bogleheads buy funds that are widely diversified, or even approximate the whole market." By only focussing on dividend growth investing you are not fully diversified.
Finding information on Ireland based ETFs is also hard, it's not as easy as finding information on an US stock or ETFs. Does any of you have advises on Ireland based dividend growth ETFs for stocks and bonds? Thanks a lot for your help! justetf.com is a good start

Investment Objectives:
- Retire before the age of 40 with a net worth of $2M USD
- Accumulate enough money for a downpayment of my house in 5-6 years, max cost of the house will be $1.3M USD. I may need ~$260 000 of cash for the downpayment.
- Eventually buy a car in 5-6 years

Risk Tolerance:
High in term of logical decision. For instance if my stocks are down 50% but they didn’t cut their dividends I’m very unlikely to sell. But dividend stocks do cut their dividends in times of crisis. The out of the 52 stocks in the SP500 dividends aristorcrats at the start of 2008, 19 were removed by 2010 from the index as they have cut their dividends. On the other hand if my stocks are down 50% and cut their dividends I’m likely to sell depending on the dividend cut. You would have sold many. Selling at the makrket low is detrimental to your return

Investment Philosophy:
Buy-and-hold, as long as the security is generating income through interest or dividends

Asset Allocation:
- Maintain overall 70% dividend growth ETFs + 10% fixed-income allocation (bonds) + 10% individual stocks (mostly dividend aristocrat stocks) + 10% cash
- Assets should be diversified across major asset classes including US equity, international equity and across all major sectors (Energy, Materials, Industrial, Consumer Discretionary, Consumer Staples, Health Care, Financials, Information Technology, Telecommunication Services, Utilities, Real Estate). Dividend growth stock are often NOT diversified over sectors, only a few sectros have dividends sufficient for your plan.
- Mainly invest in Ireland domiciled ETFs to avoid the 30% US flat tax on my dividends. Unavoidable on individual stocks.
- Avoid markets with uncertain political stability or countries with the state having too much influence over the currency/companies such as China (see here). Only allow investment in those countries through ETFs to mitigate the risk.

Selection Criteria:
Mostly invest in Ireland based ETFs or established companies with strong dividend growth potential or sold at a discount with high dividend yield (as long as the discount wasn’t created by an event which will harm the company in an unrecoverable way) How will you do this?

Funds & Accounts:
- Emergency account equivalent to 1 year and half of expense. Half of this money also serves to buy the risky part of my portfolio (10% of individual stocks) during an eventual recession (account already funded). then 1/2 of this fund is your emergency fund and 1/2 is part of your investment porfolio. Imagine that the stock market crashes, you buy your stock and then you have an emergency.
- Invest at least $8000/month in my portfolio which will make ~$1M over the course of 10y and half (no compounding taken into account). In 2020 this amount may grow to $12 000/month, reaching $1.4M after 10 years an half

Target Allocation:
- VWRD? (hard to know its dividend yield or get any real data on Ireland based ETFs) Yield is 1.98% - See Vanguard website : select performance - annual returns or Morningstar
- ???
- Individual solid US stocks known for giving dividends (so far in the portfolio: ABBV, AVGO, D, MSM, TXN, UNM, XOM)

Rebalancing:
Do not sell assets to rebalance the portfolio, always hold and direct future investments toward the asset class which need to be rebalanced IF your portfolio becomes large this will be difficult as the new contribution will be minute compared to the volatiliyt of your portfolio.
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

EddyB
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Re: [Seeking advice] Non-US/Non-EU IPS

Post by EddyB » Mon Dec 02, 2019 10:46 pm

BeBH65 wrote:
Mon Dec 02, 2019 7:50 am


Just to ensure you start with the correct understanding of the 4% rate.
The original mention of this rate comes from the trinity study which studied the safe withdrawwl rates for the US.
FYI, William Bengen described it four years before the Trinity Study: http://www.retailinvestor.org/pdf/Bengen1.pdf

EddyB
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Re: [Seeking advice] Non-US/Non-EU IPS

Post by EddyB » Mon Dec 02, 2019 10:55 pm

ekami wrote:
Mon Dec 02, 2019 5:56 am
I think you’re turned around on the issue of making things simple. If that’s really what you want, look into total market (or total developed market) investments. I think you also misunderstand what the “4% rule” is.
How so? What do you find incorrect in my reasoning regarding the 4% rule? Do you have any resources for me to learn more about it?
Another poster addressed it, but it’s not “[l]iquidating 4% of [your] portfolio every year,” it’s spending 4% of the initial balance in the first year, and adjusting that spending amount to reflect inflation in subsequent years. The original article is available here: http://www.retailinvestor.org/pdf/Bengen1.pdf
ekami wrote:
Mon Dec 02, 2019 5:56 am
I think the question was really whether the (up to) $1.6 million house you mentioned is in addition to the $2M in “net worth.”
No, the $1.3M house will probably be paid with a loan, that's why I included a ~$260 000 downpayment in my plans, which is around 20% of the price.
So the spending to repay the approximately $1 million loan, and the interest, will come from the $2 million portfolio?

Topic Author
ekami
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Re: [Seeking advice] Non-US/Non-EU IPS

Post by ekami » Thu Dec 05, 2019 3:40 am

Again, thank ya'll for your advises.
Are your expenses in USD?

then maybe your base currency should be NZD?
No, my currency changes every month (as I jump to another country, I'm location independent), but I'm being paid in USD and I will always look for clients based in the US in a foreseeable future. So I consider USD as my base currency. As for NZD, maybe along the way, I'll find another country I prefer to immigrate to and I'll change my mind in regard to New Zealand. So on this front, my solution is simple: Do everything in USD, even if I immigrate to New Zealand someday I'll still receive USD and as soon as I start retiring I'll consider moving to other funds in NZD.
One of the principles of the Boglehead community is Diversify. "Bogleheads buy funds that are widely diversified, or even approximate the whole market." By only focussing on dividend growth investing you are not fully diversified.
That's right, non-established companies or tech companies rarely offer dividends, so with my dividend strategy, I could not buy them.
justetf.com is a good start
Thanks. So far I've bought only VWRD, I'm not sure yet what fund I should choose for my bonds allocation. I'm also considering splitting VWRD into VDEV (90%) and VDEM (10%) as the TER of VWRD is 0.22% and VDEV is only 0.12% and VDEM is 0.22%. Thing is, VWRD is trading at a significantly higher volume than VDEV/VDEM and I don't understand why. Why would people choose a fund with higher TER? Is splitting between VDEV/VDEM not a wiser choice?

IF your portfolio becomes large this will be difficult as the new contribution will be minute compared to the volatiliyt of your portfolio.
I think I'll have to work longer before retirement then if that happens. Probably at some point I'll sell, but I prefer not to.
FYI, William Bengen described it four years before the Trinity Study:
Another poster addressed it, but it’s not “[l]iquidating 4% of [your] portfolio every year,” it’s spending 4% of the initial balance in the first year, and adjusting that spending amount to reflect inflation in subsequent years. The original article is available here: http://www.retailinvestor.org/pdf/Bengen1.pdf
That's a very old study, I wonder if that rule holds nowadays, I found some articles in its favor, some other against. I guess I should probably do my own due diligence.
So the spending to repay the approximately $1 million loan, and the interest, will come from the $2 million portfolio?
That's the idea, what do you think about it?


Last question for you guys: I'm still not sure what fund I should take for bonds (or if I should buy real bonds directly), what do you guys think given my tax situation? Thanks.

Thanks for everything!
Last edited by ekami on Thu Dec 05, 2019 10:53 pm, edited 1 time in total.

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BeBH65
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Re: [Seeking advice] Non-US/Non-EU IPS

Post by BeBH65 » Thu Dec 05, 2019 7:47 am

Within the Boglehead community, bonds are often used to provide stability in a portfolio, while stocks provide the growth due to their higher expected return in turn for the higher risk.

Often it is advised to invest in bonds hedged to your home currency to protect your spending power.

According to you post this could then be the USD hedged version, alternatively - as your final destination might still change - you could go for the unhedged version.
https://www.justetf.com/de-en/find-etf. ... =Aggregate
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

EddyB
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Re: [Seeking advice] Non-US/Non-EU IPS

Post by EddyB » Thu Dec 05, 2019 11:14 am

ekami wrote:
Thu Dec 05, 2019 3:40 am
FYI, William Bengen described it four years before the Trinity Study:
Another poster addressed it, but it’s not “[l]iquidating 4% of [your] portfolio every year,” it’s spending 4% of the initial balance in the first year, and adjusting that spending amount to reflect inflation in subsequent years. The original article is available here: http://www.retailinvestor.org/pdf/Bengen1.pdf
That's a very old study, I wonder if that rule holds nowadays, I found some articles in its favor, some other against. I guess I should probably do my own due diligence.
So the spending to repay the approximately $1 million loan, and the interest, will come from the $2 million portfolio?
That's the idea, what do you think about it?
See the wiki on "safe withdrawal rates" here: https://www.bogleheads.org/wiki/Safe_withdrawal_rates and this discussion of a 2018 update to the Trinity Study: viewtopic.php?t=247050.

Whether you can be comfortable relying on that or some variant is up to you, I merely wanted to correct your apparent misunderstanding of what "the 4% rule" is.

I think going into retirement with a two million dollar portfolio and a million dollar loan to service would exacerbate the series of return risks and severely limit your ability to temporarily reduce spending at a time when returns (including dividends) are down.

glorat
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Re: [Seeking advice] Non-US/Non-EU IPS

Post by glorat » Thu Dec 05, 2019 8:53 pm

ekami wrote:
Thu Dec 05, 2019 3:40 am
Thanks. So far I've bought only VWRD, I'm not sure yet what fund I should choose for my bonds allocation. I'm also considering splitting VWRD into VDEV (90%) and VDEM (10%) as the TER of VWRD is 0.22% and VDEV is only 0.12% and VDEM is 0.22%. Thing is, VWRD is trading at a significantly higher volume than VDEM/VWRD and I don't understand why. Why would people choose a fund with higher TER? Is splitting between VDEV/VDEM not a wiser choice?

Last question for you guys: I'm still not sure what fund I should take for bonds (or if I should buy real bonds directly), what do you guys think given my tax situation? Thanks.
I've recently switched investing in VWRD to investing in VDEV/VDEM for the lower cost (and also because I have high external exposure to Asia EM already so can balance with a higher VDEV weighting). The reason not to do it is because splitting into two funds is a pain for a simple investor - you need to keep knowing what your balance is and where to invest new funds. Most investors lose opportunity just by getting their AA wrong and buying/selling to "fix" it.

As for bonds, I hesitate to comment since as you rightly say your tax situation is a huge factor in how you invest. However, if you had no taxes to worry about AGGU (global bonds hedged to USD) is a sensible way to go.

All my above suggestions can be extracted and explained at https://www.boglebot.com (minus the tax consideration)

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