4% retirement rule - valid in HK

[traineeinvestor]

Don't forget HKMC's annuity for those that are 60+ Hong Kong permanent residents. It's 5% per year and the government isn't trying to make money off of this fairly simple straight-forward product. I think the least attractive part is it sounds too boring to most people, but boring can be good depending on your risk appetite.
https://www.hkmca.hk/eng/our_busines...uity_plan.html

Thanks for posting.

I'm afraid I am not a fan of this product. It's basically a case of handing over a lump sum in exchange for govt guaranteed monthly payments for life. I'm simplifying here to keep the post short:

Scenario 1. policy holder dies or surrenders the policy before the guarantee period runs out. The policy holder (or beneficiary) receives (i) the monthly payments during the policy period + (ii) a lump sum equal to the difference between the amount invested and the total monthly payments received + (iii) one year's payments. This is not an attractive investment - you're basically being paid back your own money with zero (or nearly so) return on your investment. You might as well leave your money in the bank

Scenario 2: the policy holder lives longer than the guarantee period. At some point the cumulative payments will make this a reasonable investment - but you have to live long enough to get there. I haven't attempted to run the numbers but I'm guessing a 60 year old investor would have to live to close to 90 to make this worth doing. The exact answer will, of course, depend on what rate of return you plug in to your calculation.

The advantages of the HKMC annuity plan are (i) some protection against longevity risk and (ii) protection against the risk of either over spending or making dud investments.

Personally, I would take a product like a diversified investment grade bond fund or an inflation linked bond over the HKMC annuity any day.

Edit: or maybe I just don't understand it - please let me know where I've gone wrong.

[pin]

Definitely not in HK, around 3% net guaranteed return still possible back home..

2800 is kind of nowhere index, mix of growth and dividend dragging each other, perhaps 3110 and 3067 good compliments to each other.. Son has recently started parking savings in 3067..

3110, 3067 or a high quality muni CEF?

I did have money in 3067 a while back but got out. Its gone down the skidders recently and not sure where its going to go. Chinese government not to keen on tech at the moment but expect more US listed tech companies will find their way into HK soon. But that means HKSE becomes more Chian focused. Good thing or bad thing, who know?

3110. Trainee is probably a better investor than I am (or has the patience to study annual reports) but whenever I see high yield I always think that they are either tapping into principal or junk bond status.

[traineeinvestor]

3110. Trainee is probably a better investor than I am

Yeah, right.

[jobin]

May i ask if there are 'inflation linked bonds' available in HK? A goodly pile of those would be very comforting just now.

[njstone9]

I have IGIL - global inflation linked government bonds. Buy on the LSE.

[LoganH]

May i ask if there are 'inflation linked bonds' available in HK? A goodly pile of those would be very comforting just now.

The HK government has been issuing bonds linked to inflation in HK for a few years in limited quantities (I don't know the quantities these days, but usually the iBonds were oversubscribed).
https://www.hkgb.gov.hk/en/retail/iBond_Key.html
You can click around there for additional information.

Available in HK is a bit vague. You can definitely buy inflation linked bonds listed on various exchanges around the world through an appropriate broker (I'm pretty sure Interactive Brokers, Saxo, and more let you invest in most bonds/stocks/funds and such).

[traineeinvestor]

HK iBonds are a good alternative to cash but the problem is that most issues you can only get $20 - 30,000 worth on issuance. Not sure if they are worth purchasing in the secondary market at a premium to par.

For those over 60, silver bonds also look attractive. I don't know the allocation numbers.

https://www.hkgb.gov.hk/en/retail/Silver_Rates.html

[ndt]

3110, 3067 or a high quality muni CEF?

Personally im happy with high quality munis for now, need to keep an eye on Interest rate movement

3110 could be an interesting option to keep in watch for 1) How inflation situation goes ahead 2) Interest rate movement 3) If and when growth-to-value transition happens 4) Some diversification in Asia to pay bills

3067 has hit the bottom so just an item in punt bucket for short term quick money for Son..

[shri]

Vanguard article...

https://investor.vanguard.com/invest...early-retirees

[huja]

Vanguard article...

https://investor.vanguard.com/invest...early-retirees

The 4% rule is based on a 30-year retirement horizon. However, a FIRE investor’s retirement could last 50 years or more. That’s a big difference! According to our VCMM calculations, the 4% rule gives an investor with a 30-year retirement horizon about an 82% chance of success—but a FIRE investor with a 50-year retirement horizon only a 36% chance of success.**

t’s important to note that the 4% rule didn’t factor investment fees into estimated returns, which also affects its likelihood of success.
If we reevaluate a FIRE investor’s 36% chance of success by applying a 0.2% expense ratio to their portfolio, their estimated success rate drops to less than 28%. With a 1% expense ratio, that estimate drops to less than 9%.**
As the numbers show, minimizing costs allows for a significantly higher likelihood of success.

Good read. A lot of things worth considering.