17 years old seeing advice for +15 years portfolio [Colombia]

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Topic Author
Jcap
Posts: 10
Joined: Sun Apr 04, 2021 8:59 am

17 years old seeing advice for +15 years portfolio [Colombia]

Post by Jcap »

Hello there! I hope you all are good.

A little context of me:
Im 17 Years Old, from Colombia Latinamerica, I have a income of 150-200 US Dollars per month and have 1000 US Dollars in savings.
No debt, and I dont have any financial responsability, im in college and live with parents and I plan to invest all my income into ETFS.


Im planning to make a portfolio for +15 years with little or any modifications over time.

Portfolio:

VTI 60-70 %
XVUS 20%

Questions:
- ¿Should I add 10% MCHI for more China exposure?

- ¿The portfolio is extremly simple but I feel pretty comfortable with it, Im not going to need the money and Im going to add all Im able to it month to month. But is it good that it is that simple?

- ¿Would it be responsible if I add a 5% for me to move between trend funds like ARKK or CNBS?

- ¿Is there any advice You could make to me in my specific situation? Little more diversification... anything You could recommend?

- Based in this portfolio and knowing that past performance don't secure future performance... ¿Would It be correct to say that the expected return of this portfolio could be 7-8% annually?


Notes:
I dont want to invest in bonds until im +50 years.
I apologize if I got any incorrect writting in english.



Thanks for the help!
typical.investor
Posts: 2554
Joined: Mon Jun 11, 2018 3:17 am

Re: 17 years old seeing advice for +15 years portfolio [Colombia]

Post by typical.investor »

Jcap wrote: Sun Apr 04, 2021 9:30 am Hello there! I hope you all are good.
Welcome to the forum.
Jcap wrote: Sun Apr 04, 2021 9:30 am A little context of me:
Im 17 Years Old, from Colombia Latinamerica, I have a income of 150-200 US Dollars per month and have 1000 US Dollars in savings.
No debt, and I dont have any financial responsability, im in college and live with parents and I plan to invest all my income into ETFS.
Great plan.
Jcap wrote: Sun Apr 04, 2021 9:30 am Im planning to make a portfolio for +15 years with little or any modifications over time.

Portfolio:

VTI 60-70 %
XVUS 20%
That's a fine portfolio.
Jcap wrote: Sun Apr 04, 2021 9:30 am Questions:
- ¿Should I add 10% MCHI for more China exposure?
You could, but personally I would simply increase VXUS to closer to 45% or about global market cap weight.
Jcap wrote: Sun Apr 04, 2021 9:30 am - ¿The portfolio is extremly simple but I feel pretty comfortable with it, Im not going to need the money and Im going to add all Im able to it month to month. But is it good that it is that simple?
Yes, it's good. You can spend a lot of time and effort trying to figure out ways to do better than that simple portfolio (timing models, factor investing, leverage etc) but the single biggest thing contributing to your success will be how much you can invest. So spend your effort on your career. Not many really beat the market over any length of time. It's difficult even for professionals.
Jcap wrote: Sun Apr 04, 2021 9:30 am - ¿Would it be responsible if I add a 5% for me to move between trend funds like ARKK or CNBS?
You can. Some people have play money (up to 5%). If it's interesting and you like thinking about it then I don't see why not have it as a sort of hobby. But it may or may not help your returns. If it does, yeah. If not, that's the cost of admission to the show.
Jcap wrote: Sun Apr 04, 2021 9:30 am - ¿Is there any advice You could make to me in my specific situation? Little more diversification... anything You could recommend?
Focus on your career. Like seriously.
Jcap wrote: Sun Apr 04, 2021 9:30 am - Based in this portfolio and knowing that past performance don't secure future performance... ¿Would It be correct to say that the expected return of this portfolio could be 7-8% annually?
I think that's optimistic for US stocks which have had a huge and long run. And the USD is quite high which ultimately will likely weaken due to the economic pressures of having a strong currency (ie less economic competitiveness). I'd never bet against the US though, and it could return more than I am currently expecting.
DJN
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Joined: Mon Nov 20, 2017 12:30 am

Re: 17 years old seeing advice for +15 years portfolio [Colombia]

Post by DJN »

Hi,
Good plan. In the long run I would have some money in a global aggregate bond fund, helps with re-balancing.
if you are non resident in the US you should probably check the tax status of your chosen funds. As far as I know Columbia doesn't have a tax treaty with the US.
Check the Bogleheads Wiki out for background information:
https://www.bogleheads.org/wiki/Outline ... _domiciles
DJN
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.
TedSwippet
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Location: UK

Re: 17 years old seeing advice for +15 years portfolio [Colombia]

Post by TedSwippet »

typical.investor wrote: Mon Apr 05, 2021 3:35 am
Jcap wrote: Sun Apr 04, 2021 9:30 am Im planning to make a portfolio for +15 years with little or any modifications over time.

Portfolio:

VTI 60-70 %
XVUS 20%
That's a fine portfolio.
Just a note here though that Colombia has no tax treaties with the US. Assuming the topic author is not a US citizen, this means losses of 30% of each dividend annually to US tax, and the threat of loss of 26-40% of US sited assets above $60,000 to US estate tax.

Nonresident alien investors and Ireland domiciled ETFs - Bogleheads

From a tax perspective then -- and ignoring practical considerations, such as perhaps higher costs for access to non-US exchanges -- using equivalent non-US domiciled ETFs will be more efficient. For example, 100% VWRL.
Topic Author
Jcap
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Joined: Sun Apr 04, 2021 8:59 am

Re: 17 years old seeing advice for +15 years portfolio [Colombia]

Post by Jcap »

I just searched for all the tax information for non Us Citizen in ETFs.
As I understanded... (Please correct me if I say something that is not exactly correct):

- No capital Gains are taxed in etfs.

- Dividends pay %30 percent in the worst case.

- No interest are taxed in etfs.

So if I buy a portfolio of VTI, VXUS... I should only care of 30% of my dividends being taxed? I mean... I dont have problem with that... is pretty aceptable in comparation with other assets.


By the way...
I just joined Bogleheads yesterday so I don´t know how to quote, post a reply to a comment... Can You say me please if there is a guide to ussing this forum?

Thanks for all the help.
jg12345
Posts: 70
Joined: Fri Dec 11, 2020 1:03 pm

Re: 17 years old seeing advice for +15 years portfolio [Colombia]

Post by jg12345 »

Hi Jcap,
you're posting just fine.
There's a bogleheads wiki and a pinned post with general instructions for asking about portfolio allocation questions. There's also a spanish speaking forum if that helps. Hay tambien un forum de hispano hablantes me parece.

few points:
1) you are 17yo, 30% on dividends (say 1.5-1.7% per year) over the course of a lifetime is a big big drag on your portfolio returns, especially when the cost is close to 0: just using a different ETF. O sea, si el costo de cambiar ETF es 0, porque pagar los 30% de impuesto sobre los dividendos?! si el costo de cambiar ETF es mas que 0, es necesario decir-nos cuanto es el costo de VWRL por ejemplo, para brindar ayuda.

2) I assume you pay a commission to buy those etf. given the current amount invested per month, and assuming there is a minimum fixed commission, you could simplify to 1 ETF (i.e. ftse all world ETF or MSCI ACWI) so you minimize the commission costs. If the commission is a % with no minimum amount, then you're fine with two ETFs.

3) as many people already mentioned, education and professional experience should now be your top priority so your time can be sold at a high price later on. most definitely do NOT underinvest in education to put more money in the portfolio. Education returns are far higher than the 5-7% you can expect from stock markets

4) No i would not add China. This presumes you can price the Chinese market better than the market, which is not the case. I would actually simplify your portfolio to 1 ETF, non-US domiciled, so you minimize tax and commissions.

good luck!
Topic Author
Jcap
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Joined: Sun Apr 04, 2021 8:59 am

Re: 17 years old seeing advice for +15 years portfolio [Colombia]

Post by Jcap »

Okey! Thanks jg12345!

Somethings:


1. I really liked this forum, Im learning a lot of things learning the Q&A.

2. Thanks for the explanation of the 30% dividens and why should I choose an no US domiciled ETF, as I was searching there is going a negotiation of US with Colombia for the tax treaty but those take a lot of time, so Im going to search for a equivalent portfolio (VTI, VXUS) non domiciled in US, if You got any good idea please let me know.

3. By th way I use TD ameritrade so I don't have commitions per position taken.

Questions:

1. Why is ireland a Good country for searching for etfs? because of the taxes..? which is the reason im seeing a lot of stuff about ireland ETFs?


Thanks for all the help, really really useful!
Warsad
Posts: 36
Joined: Fri Jun 05, 2020 12:47 pm

Re: 17 years old seeing advice for +15 years portfolio [Colombia]

Post by Warsad »

I just want to commend you on starting to Invest at such a young age (17). I will even talk about what I was doing at 17.


One piece of advice, I would invest in Total Stock Market index and let it ride. Continue to do what you are doing each and every month & it will really pay off for you. Reading your post put a huge smile on my face!
Last edited by Warsad on Tue Apr 06, 2021 9:34 am, edited 1 time in total.
Topic Author
Jcap
Posts: 10
Joined: Sun Apr 04, 2021 8:59 am

Re: 17 years old seeing advice for +15 years portfolio [Colombia]

Post by Jcap »

Wow! Thanks @Warsad.

Thanks for that! I appreciate your comment.
jg12345
Posts: 70
Joined: Fri Dec 11, 2020 1:03 pm

Re: 17 years old seeing advice for +15 years portfolio [Colombia]

Post by jg12345 »

glad you find this helpful
1) amazing to not have commissions!

2) why so many ETF in ireland? I do not know, I believe it has to do with tax/stamp duty issues

3) the equivalent of doing US + ex-US would be to do "all world"

Ftse all-world (ETF: VWRA, suggested by TedSwippet in an earlier post, 0.22% TER) and Ishares MSCI ACWI (IE00B6R52259, 0.2% TER) would work to that end.

Choose accumulating funds, so that the dividends are reinvested automatically, denominated in US$.
Topic Author
Jcap
Posts: 10
Joined: Sun Apr 04, 2021 8:59 am

Re: 17 years old seeing advice for +15 years portfolio [Colombia]

Post by Jcap »

Ok! So Im going to check those. @jg12345

I have a last question, the market at this exact moment is in the maximun price... I have always thought that I dont want to time the market, but now when Im actually taking the decision I start to wonder... should I wait to it to go down to enter o shouldn´t I strictly time the market in any type of situation?
DJN
Posts: 805
Joined: Mon Nov 20, 2017 12:30 am

Re: 17 years old seeing advice for +15 years portfolio [Colombia]

Post by DJN »

Hi,
Ireland is the first port of call for tax efficient ETFs due to the tax regime which doesn't impose any local taxes on non resident non US investors.
Keep on reading:
https://www.bogleheads.org/wiki/Simple_ ... portfolios
https://www.bogleheads.org/wiki/Buildin ... _portfolio
DJN
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.
jg12345
Posts: 70
Joined: Fri Dec 11, 2020 1:03 pm

Re: 17 years old seeing advice for +15 years portfolio [Colombia]

Post by jg12345 »

Jcap wrote: Tue Apr 06, 2021 11:37 am Ok! So Im going to check those. @jg12345

I have a last question, the market at this exact moment is in the maximun price... I have always thought that I dont want to time the market, but now when Im actually taking the decision I start to wonder... should I wait to it to go down to enter o shouldn´t I strictly time the market in any type of situation?
good question!

1- remember that the markets are biased up, so they will often be at "all time high"
2- remember the idea is to buy and forget, so the question you want to pose yourself is: will the market be higher when I plan to need this money (in your case, in 2051)
3- timing the market presumes again that you know better than financial analysts, software created by PhD in quantitative finance, etc. etc., which is not possible
4- However, we all have a hard time investing large lump sum all in one go, so many of us resort to dollar cost average: invest 100 or 200 or xxxUS$ per month, on the same day each month, until your 1000 US$ is gone.
5- please do remember: saving is important, but education comes first. the money you're putting in the stock market may not be available in 2 years from now if you need them to pay for tuition at a good uni. the return on investment of education is much higher than any 5 6 7 8 % in the stock market. I know I am repeating myself, but I just want to be 200% sure you are aware of this. If I was you I'd first make sure that I have enough money to go to uni, and then after that I'd start saving.

congratulations for starting this early, almost 20y before me, really impressive !

Best of luck,
Topic Author
Jcap
Posts: 10
Joined: Sun Apr 04, 2021 8:59 am

Re: 17 years old seeing advice for +15 years portfolio [Colombia]

Post by Jcap »

@jg12345

- Okey, I got it, I will do 200 $ different days. Also Thanks for just dont saying "Do this in this way" You also said me why should I do it and explanined to me in a easy way really helpful!

- I understand your point on education, I read about finance, investing, programming and also Im doing courses of portfolio construction and stuff like that related to programming, because I want to also study Finances in Uni. About the Uni, My parents are healthy financialy, they saved since I was born and also invested (With a not great result but the did It) to pay for my college. And Im 100% agree that education is also a great investment.

If you got any especial book orcourse recommendation it would be great.


Thanks for all Your help @jg12345.

Best of luck to you.
Topic Author
Jcap
Posts: 10
Joined: Sun Apr 04, 2021 8:59 am

Re: 17 years old seeing advice for +15 years portfolio [Colombia]

Post by Jcap »

@DJN

Okey, Im going to check those two posts, I already started and thats exactly what I needed thank you!
typical.investor
Posts: 2554
Joined: Mon Jun 11, 2018 3:17 am

Re: 17 years old seeing advice for +15 years portfolio [Colombia]

Post by typical.investor »

Jcap wrote: Tue Apr 06, 2021 6:31 pm @DJN

Okey, Im going to check those two posts, I already started and thats exactly what I needed thank you!
You definitely should. Ted S has a good eye for international tax treaties and you want to keep your taxes down. My comment was more towards allocation and I still suggest more of a global market cap weighting.
Neuralgia
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Re: 17 years old seeing advice for +15 years portfolio [Colombia]

Post by Neuralgia »

SPANISH

Hola,

Saludos desde Costa Rica.

Primero, felicidades por hacer esto a los 17.

Pregunta: ¿TD Ameritrade es tu broker verdad? Busca si tienen ETF's de Irlanda (como ya todo el mundo te dijo y te explicó).

De esos, a tu edad y para mantenerlo simple , invierte en VWRA (es de Vanguard y es acumulativo, es decir, los dividendos se auto invierten sin tener que hacer nada). Tiene un Expense Ratio de 0.22% y todo son acciones. A tú edad yo no usaría bonos, una opinión personal. En algún momento usarás VAGU.

El problema que veo en Latinoamerica es que es muy limitada la opción de Brokers con acceso a ETF's que nos sirvan (Irlanda) y que agregar fondos sea simple.

Desconozco cuanta es la comisión por Wire Transfer o por enviar cheques de TD Ameritrade, entonces toma eso en cuenta.

Si no tienes acceso a ETF's de Irlanda, entonces vas a tener que invertir según tu plan inicial: VTI + VXUS en las proporciones que gustes.

Si quieres "jugar" con el mercado, invirtiendo en acciones sueltas o etfs tipo ARK, SÓLO hazlo con un 5% de tu dinero y tus ganancias van a los fondos de retiro y las pérdidas se asumen como parte de tu 5% y no puedes volver a agregar dinero. Esto es mi recomendación.

Ten cuidado porque en Estados Unidos, además de los impuestos Federales, están los impuestos estatales, que en caso de muerte, se pueden quedar con un 40% de tu dinero, siempre y cuando tú inversión en Estados Unidos supere 60 mil dólares (todo eso está en lo links que ya te compartieron). Entonces tienes que ahorrar para que algún día, puedas tener una cuenta en algún banco americano para que de ahí puedas transferir a un bróker con acceso a ETF's de Irlanda, como Interactive Broker. Pero para eso necesitas $100 000 porque sino las tarifas de mensuales son altas, después de $100 000 no existen.
Si tienes alguna duda, para eso estamos.

-------

ENGLISH

HI from Costa Rica.

First of all congratulations for starting at 17.

Since TD Ameritrade is your broker, look for Ireland ETF's (for the reasons everyone mentioned).

From those, at your age, get VWRA (Vanguard's all World accumulative, which means dividends are automatically invested inside your ETF's). TER of 0.22%, all equities. Personal opinion: at your age I wouldn't use any bonds. VAGU is what you'll eventually need.

The problem in Latin America is that brokers have limited access to Ireland ETF's, and adding funds is a pain.

What's the fee for doing a Wire Transfer from your local bank to TD Ameritrade? Can you send checks?

If you don't have access to Ireland ETF's you'll have Ti go with your original route: VTI + VXUS in the allocation you fell comfortable with

If you want to "play" with stocks and ETF's like ARKs, do it with a total of 5% of your portfolio. Your gains should go to your retirement fund and is you happen to lose, you can't add more funds to that original 5%.

Be careful with Federal and Estate taxes in the US, since if you die, they can take 40% of your savings in case your investment is over $60k.

You'll eventually save enough money y to 1. Open a US bank account (Charles Swabb is the best option, but you'll need $25k to open one) and then 2. add funds to that account to be able to wire transfer (free) to a Broker like Interactive Brokers (which offer Ireland ETF's) which has no monthly fees after you have $100k with them.
Topic Author
Jcap
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Joined: Sun Apr 04, 2021 8:59 am

Re: 17 years old seeing advice for +15 years portfolio [Colombia]

Post by Jcap »

@Neuralgia

1. Yes my broker is TD Ameritrade and as You said and I Saw yes, they just offer US based ETFs, so I cant buy there any ireland based ones.

2. Im searching a broker with no minumum, low fees and ireland base ETFs, but Im not able to find any that I can enter in Latam.
So I thing i will have to stuck with VTI and VXUS until Im able to go to I.Brokers with a big account to dont pay the fees.
At this moment my money in the portfolio is not going to be a lot so dividend tax is not going to hurt that much, maybe im lucky US and Colombia make a treaty tax in the next 8 Months with the on going negotiations.


So Until I find anything:
70 % VTI
25% VXUS
5% "Play Money"



Thanks to all of You guys, all the advices are really helpful.
Neuralgia
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Re: 17 years old seeing advice for +15 years portfolio [Colombia]

Post by Neuralgia »

Great AA (asset allocation). Keep saving and you'll get to those $25k and $100k really fast.

BTW, with TD Ameritrade how do you fund your account? How are wire transfer fees?

I'm using eToro which can be funded by Credit/Debit card. Really easy to have an account with them. Just ignore all the "social" BS and focus on your goals.

Just make sure sure you ask for UK regulation and not Australia/Cypres once you have your account open.

You'll have fun there with your 5% 😉
TedSwippet
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Re: 17 years old seeing advice for +15 years portfolio [Colombia]

Post by TedSwippet »

Jcap wrote: Wed Apr 07, 2021 6:09 pm ... maybe im lucky US and Colombia make a treaty tax in the next 8 Months with the on going negotiations.
I suppose it is possible, but do not hold up your actions for this hope.

After more than ten years of negotiation, in 2010 Chile finally signed its tax treaty with the US. However, because the US Senate has not "ratified" this treaty, as of 2021 it is still not operative. US tax treaty progress is glacial.
DJN
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Re: 17 years old seeing advice for +15 years portfolio [Colombia]

Post by DJN »

Hi,
I know nothing about Columbia but have you tried to open a personal account in Interactive Brokers in order to access global equities.
Alternatively could you incorporate an BVI/Bahamas/Cayman´s company to invest in global markets. The main motivation to open an BVI company is to avoid the onerous US estate tax whereby investments in 'US situs' assets over $60,000 are subject to a high estate tax.
DJN
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.
typical.investor
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Re: 17 years old seeing advice for +15 years portfolio [Colombia]

Post by typical.investor »

DJN wrote: Thu Apr 08, 2021 3:51 am Hi,
I know nothing about Columbia but have you tried to open a personal account in Interactive Brokers in order to access global equities.
Alternatively could you incorporate an BVI/Bahamas/Cayman´s company to invest in global markets. The main motivation to open an BVI company is to avoid the onerous US estate tax whereby investments in 'US situs' assets over $60,000 are subject to a high estate tax.
DJN
Colombia is a supported country for IB. That would give you access to Ireland domiciled ETFs.

The only issue with IB is that they charge a minimum transaction fee until you reach $100k. Apparently there is a waiver of the usual $10/month minimum so you only have to pay $3/month minimum in commissions if you are age 25 or younger. https://www.interactivebrokers.com/en/index.php?f=4969

The good thing about IB is that the exchange rates are good if you need to change currencies to buy your ETF, and also their fees are very low. Plus, you'd have tax savings by using the Ireland funds. And you will get good execution on your trades --better than if you were using a broker with free ETFs.

I know people will mention that IB US has the lite package where there are no commissions but that's only for US residents though and you don't get as good of execution. And I am not sure if it still has a monthly fee below a certain portfolio value level.

Supported countries. https://www.interactivebrokers.com/en/index.php?f=7021
Topic Author
Jcap
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Joined: Sun Apr 04, 2021 8:59 am

Re: 17 years old seeing advice for +15 years portfolio [Colombia]

Post by Jcap »

@Typical.investor

Yes, IB is famous and plenty used here in Colombia, but 10 USD/ Month would be a great loss for me at this moment, and I see that You commented about 3 USD/Month if Im younger than 25 but Im a minor, so actually all my brokers accounts are in my parents name, BUT Im going to be 18 Years Old in like 21 days, so if Im able to open a IB account with 3 Usd fee/Month and access to Ireland ETFs that would be a pretty good option for me. But im seeing that the link You added to your post says that if I dont pay 10.000 USD in commitions the first 8 months they will charge me the difference between 10,000 and the commitions I have already paid... Is that true? or Im confusing something?

If the last thing is True, I will take the portfolio in TD Ameritrade or Etoro, if not i will wait until I have the age to open the IB account.

Thanks for the help @Typical.investor.
typical.investor
Posts: 2554
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Re: 17 years old seeing advice for +15 years portfolio [Colombia]

Post by typical.investor »

Jcap wrote: Thu Apr 08, 2021 8:26 am @Typical.investor

Yes, IB is famous and plenty used here in Colombia, but 10 USD/ Month would be a great loss for me at this moment, and I see that You commented about 3 USD/Month if Im younger than 25 but Im a minor, so actually all my brokers accounts are in my parents name, BUT Im going to be 18 in like 21 days, so if Im able to open a IB account with 3 Usd fee/Month and access to Ireland ETFs that would be a pretty good option for me. But im seeing that the link You added to your post says that if I dont pay 10.000 USD in commitions the first 8 months they will charge me the difference between 10,000 and the commitions I have already paid... Is that true? or Im confusing something?

If the last thing is True, I will take the portfolio in TD Ameritrade or Etoro, if not i will wait until I have the age to open the IB account.

Thanks for the help @Typical.investor.

For the $10k commission in 8 months, I think that is for brokers who run their brokerage via IB platform. And it's only $2k minimum that comes out of their $10k deposit. But I don't think that applies to you.

Anyway, the most important thing is to just get started. If you hold US domiciled stocks until you are old enough of open your own IB account, you will be fine. Many of us made costly mistakes in our early years or didn't get started until later. You are getting off to a good start and pretty much anything you do by investing in index funds is going to work in your favor. Perfect is the enemy of good enough!
Topic Author
Jcap
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Joined: Sun Apr 04, 2021 8:59 am

Re: 17 years old seeing advice for +15 years portfolio [Colombia]

Post by Jcap »

@Typical.investor


Ok, Im going to try to get all the IB information about fees and costs and search for the oportunity of opening the account there.

Thanks You for your help.
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