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  • 1 Post By shri
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(Another) first steps into investing post

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  1. #1

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    (Another) first steps into investing post

    First of all, thank you to all the contributors of the various threads/stickies about personal finance! I have done (what I hope!) is a fair bit of research and have read some of the recommended books, and now feel I am in a position to begin "properly" investing (thus far, my investment strategy has been a lump sum I put in Zopa - a UK P2P lending platform - some 5 years ago, classic cars (specifically our two, restored, original Minis) and overpayments on our mortgage whilst we were living in the UK).

    Anyway, bit on circumstances... mid thirties married couple with two kids (7 and 4), both employed fulltime in HK. No 'borrowing' in HK apart from a credit card (paid in full each month), and in the UK our mortgage on our house (currently 45% L2V with 20yrs left @ 2.13% APR) which we currently rent out (rent ~175% of mortgage payment). No plans to return to the UK in the immediate future, but we will do a some point in the future (I reckon at least next 5-10 years in HK).

    Looking at investing a lump sum (~HK$100k / GBP 10k). In addition, I currently save GBP100 per child into two UK regular saver accounts (4.5% gross p.a.) which after 12 months accrual transfers to a savings account (paying 1.98% up to GBP 5000). I am looking at transferring the excess in these savings accounts (i.e. that above GBP5000) into the same portfolio as our lump sum. We will also likely add to the lump sum around twice a year (when we receive bonuses). We have an emergency fund which should cover 'repatriation' to the UK and outgoings for at least 3 months, in addition to the 2x5000GBP in the kids saving accounts.

    I understand that, as the funds will be saving for our future when we return to the UK (e.g. kids schooling/university and eventually our retirement), that it makes sense for our holdings to be LSE listed (Ireland-domiciled for tax purposes for US stocks), and I have setup a trading account with DeGiro (as I have a UK bank account).

    Considering we have a substantial cash reserve, I am looking at (what I believe) a relatively more risky portfolio, comprising something along the lines of the following:

    ~20% Bonds - most likely comprising a mix of some/all of IGLT / ISXF / AGGG / JPEM
    ~15% Real Estate - most likely comprising a mix of some/all of IUKP / EURL / ICRP / IWDP
    ~65% Stocks - comprising a mix of IWDA / EIMI / CSP1 / CUKX

    I will probably look to adjust the balance of the portfolio every 5 years or so (i.e. buy and forget).

    Does the above look like a suitable plan? Does anyone have any suggestions for other ETFs to consider? Alternatively, have I overcomplicated/over-diversified, and stick to maybe one or two funds for each segment.... criticisms are more than welcome!

    PS - In addition, I note that DeGiro have a list of "Free" ETFs whereby the first trade per month per fund is comission free, although these are all denominated in Euro, so I am thinking that potential currency exchange losses are likely to negate any benefit from comission free trading (particularly as I will likely be making trades only a couple of times a year)?


  2. #2

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    On the bond side - if you're willing to take on some risk - LQDE and IEMB ... Also, I do think your portfolio is conservative and not "relatively more risky".

    Firemin likes this.

  3. #3
    tck
    tck is offline

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    So, I've been working on something at it's a little buggy still, but instead of testing it forever by I thought I could try it out on posts like this on the forum. I made some further assumptions on your situation detailed below, but feel free to check out the testing page here to actually input your real numbers if you're not comfortable sharing on the forum:

    Assumptions/Input Parameters:

    Age: 38
    Salary per Month: HKD 90,000
    Lifestyle Spending: HKD 30,000
    Mortgage Payments: HKD 240,000 per year for next 20 years
    Tuition for Child A: HKD 170,000 per year from 2020 - 2031
    Tuition for Child B: HKD 170,000 per year from 2023 - 2034
    Uni for Child A: HKD 100,000 per year from 2031 - 2034
    Uni for Child B: HKD 100,000 per year from 2034 - 2037

    Assets:
    HKD 65,000 Stocks
    HKD 15,000 Property
    HKD 20,000 Bonds

    https://spaeglass-nightly.pandawork....6-a557cec15f70

    This site is still a test so there are lots of bugs and limitations and typos, please feel free to report (though I'm working on a ton of them now) in case I missed any.



    Not too bad. 90% chance of success. If we increase lifestyle pending from 30k a month to 40k a month though, that drastically drops to 50% chance of success.

    Some notes about your above mentioned allocation at 65%, 20%, and 15% for stocks, bonds and property respectively, the output using historical ETF data for VT, AGG, and RWO yield the following metrics. (I will try allow a user to specify tickers in a later update)



    Note the Worst Drawdown the user could potentially experience. It's a little extreme, but basically i took the worst 10th percentile year in the monte carlo simulation and reported that, though it might be overly pessimistic as it's almost 5 standard deviations away from the mean ><.

    If you were on the other hand to go super risky with 90% stocks, 5% bonds, 5% property, your outputs look like this



    Slightly better if you can stomach the increased volatility and worse drawdown.

    Anyway, lots of wild assumptions but it would be great for me if you gave my site a shot and had any feedback. Also, numbers aren't inflation adjusted if you get wildly huge values at age 100 after all that compounding.

    PS: I didn't include the value of the home that your mortgage payments would be getting you equity in, this is mainly savings + investment growth line. You're actual situation given the cash outflow is actually for equity will be much better than the above simulations.

    Last edited by tck; 29-01-2020 at 10:56 PM.
    AsianXpat0, Firemin and pin like this.

  4. #4

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    Considering we have a substantial cash reserve,
    So you mean 100k HKD or more than that!! And Approx how much of your regular savings can you spare to invest on a regular basis.. Why i asked because on the one hand your post is quite open but it falls short of giving any idea about future cash flow.. I think more than allocation ratios or particular ETFs, what is important is how much can you spare for dollar cost averaging when prices go down, more so when you are entering in historically high market..
    e.g. Someone putting one time lump-sum at the peak of 2007-8 and no further investment would have hardly made any money last decade's boom, i haven't checked exact numbers but you get the idea...

  5. #5

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    Thanks all for the suggestions so far. @tck I will have a look in more detail at your site with some more conservative/realistic numbers (and obviously I am aware past perfomance no guarantee etc etc)....

    Quote Originally Posted by nivantj
    So you mean 100k HKD or more than that!! And Approx how much of your regular savings can you spare to invest on a regular basis.. Why i asked because on the one hand your post is quite open but it falls short of giving any idea about future cash flow.. I think more than allocation ratios or particular ETFs, what is important is how much can you spare for dollar cost averaging when prices go down, more so when you are entering in historically high market..
    e.g. Someone putting one time lump-sum at the peak of 2007-8 and no further investment would have hardly made any money last decade's boom, i haven't checked exact numbers but you get the idea...
    I guess I should have said "emergency cash reserve".

    As for regular savings for investments to take advantage of dollar cost averaging, I realise I wasn't particualrly clear on that. There is the GBP100 / HK$1000 pm per child (although as part of regular savings account this would be invested on an annual basis when transferred out), plus contributions from my bonus (paid twice a year) and my wife's gratuity (paid every 2 years). In an ideal situation, I would be looking at making additional investments (varying amounts) every 2-3 months on average throughout the year (as I assume making smaller, monthly investments will potentially cost more in transaction fees, although I have yet to confirm this on DeGiro for the likely amounts involved). That being said, we don't see any significant increases in future outgoings either here or in the UK, and both my wife and my salaries currently rise annually with inflation, so hopefully we can both start putting aside a bit more each month...

  6. #6

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    Curious to hear if you have ever been risk profiled at a bank like HSBC. What was your risk number/characteristics like?


  7. #7

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    I guess I should have said "emergency cash reserve".
    If 100k is your emergency cash reserve, are you really sure about investing it in stock market, never mind historically high/low..

  8. #8

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    Quote Originally Posted by nivantj
    If 100k is your emergency cash reserve, are you really sure about investing it in stock market, never mind historically high/low..
    Sorry, again not being clear. The 100k is what I have saved up/put aside over the last few years which I now intend to invest (rather than earn a pittance in interest). The emergency cash reserve (i.e. the get out of HK and survive for at least 3-6 months in UK on one/no salary) is completely separate...as is GBP10k in the kids savings accounts.

    Curious to hear if you have ever been risk profiled at a bank like HSBC. What was your risk number/characteristics like?
    No I haven't - I guess it is something I could think about but I don't want to then have to sit through a presentation where they try to sell me their own investment products (plus I try to avoid any and all contact with HSBC since it took 3 separate visits for me to open an account when I first arrived in HK, and a 2hr visit for my wife to open one!)

  9. #9

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    Quote Originally Posted by Firemin
    No I haven't - I guess it is something I could think about but I don't want to then have to sit through a presentation where they try to sell me their own investment products (plus I try to avoid any and all contact with HSBC since it took 3 separate visits for me to open an account when I first arrived in HK, and a 2hr visit for my wife to open one!)
    You can do it online if you have an account - to be honest any bank or broker where you have an open account should have a risk profile for you.

    If you have an HSBC account - https://www.hsbc.com.hk/wealth-management/?noembed

    Explanations: https://www.hsbc.com.hk/wealth-manag...rance/?noembed

  10. #10

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    Sorry, again not being clear. The 100k is what I have saved up/put aside over the last few years which I now intend to invest (rather than earn a pittance in interest). The emergency cash reserve (i.e. the get out of HK and survive for at least 3-6 months in UK on one/no salary) is completely separate...as is GBP10k in the kids savings accounts.
    Ok got it, now its upto you how you want to breakdown initial investment, Go 50% lumpsum & save 50% for DCA/ Go all in or any other ratio depending on how much more you can add in on regular basis.. Personally, if my time-horizon in HK is 5-10 yrs, i would rather put my first investment in the market where i live/earn/spend for many reasons..