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  • FIRST POST
    • chiang mai
    • By chiang mai 11th Sep 17, 2:20 AM
    • 31Posts
    • 4Thanks
    chiang mai
    Expat Investments
    • #1
    • 11th Sep 17, 2:20 AM
    Expat Investments 11th Sep 17 at 2:20 AM
    I live overseas and am no longer UK resident for tax purposes, that means I can't get onshore IFA advice so after a long period of learning I now do my own investing, But I do have an active long-standing UK bank account and an investment portfolio on City based platform, both parties know I am an expat and are OK with my status.

    I'm now getting ready to build a portfolio which I'm going to post below in order to get comment and critique. Because I'm resident overseas my investment focus is perhaps different from many UK residents in that I'm happy to spread my investment risk far and wide with only 20% invested in the UK, my risk tolerance is balanced/medium and I'm near retirement age. The intended portfolio is 60/40 and valued at 50k in total and looks like this:

    Bonds/Gilts
    iShares £ (index-linked) Gilts UCITS ETF GBP
    Fidelity Institutional (Index Linked) Bond Inc
    Twenty Four AM Dynamic Bond Fund
    Fidelity Money Builder (fixed interest)
    Royal London Extra Yield (fixed interest)

    Equities:
    Baillie Gifford International
    Fundsmith Equity T
    Lindsell Train Global Equities.
    Baillie Gifford Japanese
    Baillie Gifford Managed B
    Jupiter European
    Lindsell Train UK Equities
    Schroder Small Cap Discovery
    Stewart Asia Pacific Leaders
    Henderson China Opportunities

    ....and the geographic spread like this:

    UK 22%
    US 14%
    EU 19%
    Asia 10%
    Japan 10%
    India 2%
    Taiwan 2%
    China 9%
    Aus/NZ 1%
    Emerg. 6%
    Other 3%

    If you have any comments I'll be pleased to hear them.
Page 1
    • AnotherJoe
    • By AnotherJoe 11th Sep 17, 7:59 AM
    • 7,237 Posts
    • 7,749 Thanks
    AnotherJoe
    • #2
    • 11th Sep 17, 7:59 AM
    • #2
    • 11th Sep 17, 7:59 AM
    Far too many investments for £50k.
    As in probably 5x.

    You also don't say what the aim of this portfolio is and if you'll be growing it through additional savings or will live off the income or will be spending it down over a period . No offence but £50k isn't much if it's meant to last 30 years.
    • greenglide
    • By greenglide 11th Sep 17, 10:37 AM
    • 2,840 Posts
    • 1,819 Thanks
    greenglide
    • #3
    • 11th Sep 17, 10:37 AM
    • #3
    • 11th Sep 17, 10:37 AM
    only 20% invested in the UK,
    Many UK residents would consider 20% UK to be too much.

    Do you intend to return to UK?

    UK 22% but US 14%. Any reason?
    • bostonerimus
    • By bostonerimus 11th Sep 17, 1:14 PM
    • 868 Posts
    • 437 Thanks
    bostonerimus
    • #4
    • 11th Sep 17, 1:14 PM
    • #4
    • 11th Sep 17, 1:14 PM
    Where are you tax resident? You need to be aware of both UK and local tax issues with your investments.

    IMO you have far to many funds. It looks like you've gone down the list of popular funds and bought each one. Depending on your age I'd go for a simple cap weighted world equity and bond portfolio and you can do that with just a couple of funds.
    Misanthrope in search of similar for mutual loathing
    • AnotherJoe
    • By AnotherJoe 11th Sep 17, 1:35 PM
    • 7,237 Posts
    • 7,749 Thanks
    AnotherJoe
    • #5
    • 11th Sep 17, 1:35 PM
    • #5
    • 11th Sep 17, 1:35 PM
    Just to add, you say your risk level is "medium" but this looks like a very risky portfolio to me, hardly offset by the bonds at all because its so risky (and plenty of people are now saying that bonds have their own risks and wont act as the buffer they used to). Just because you have 40% bonds doesn't mean that gives you free reign to make some very 'out there' punts on the 60% equity if you want to be medium risk.

    Plus 22% in the UK is far too high for me, you have 14% in the worlds biggest economy (USA) and thats only 2/3 of the UK level - a bold call. Even before Brexit, do you really think its a good idea to have 50% more UK shares than USA?

    If it wasnt for your presumed aversion to USA I'd say just buy VLS60 and then top up with a far east fund, that woudl match what you have planned without a lot of work going forward.
    • cashbackproblems
    • By cashbackproblems 11th Sep 17, 2:32 PM
    • 1,702 Posts
    • 659 Thanks
    cashbackproblems
    • #6
    • 11th Sep 17, 2:32 PM
    • #6
    • 11th Sep 17, 2:32 PM
    that fund list is basically HL wealth 150!


    I would look at index trackers 5-6 will give you good coverage and take away the need to hold multiple funds and at a much cheaper cost. As mentioned 20% is too high in the UK if a long term portfolio, I have 0% (but a few FTSE 100 stocks). You have put 30% for example in a EM tracker covering the whole region.


    Can I ask which broker you use as many do not allow expats unless you still maintain property etc in the UK.
    • chiang mai
    • By chiang mai 11th Sep 17, 2:36 PM
    • 31 Posts
    • 4 Thanks
    chiang mai
    • #7
    • 11th Sep 17, 2:36 PM
    • #7
    • 11th Sep 17, 2:36 PM
    My apologies for not replying individually, let me see if I can pick up all the points in a single post:

    This portfolio is spare UK cash that's doing nothing, I have separate pension and investment income including investments locally in Asia. The aim of this portfolio is simply to make unproductive funds productive.

    I use Transact as my platform, I already have a drawdown pension with them and this portfolio is an extension of that portfolio - I've held a number of the above funds for a few years.

    I'm light on the US because the US looks too expensive currently.

    I haven't seen HL or anyone else's wealth list of funds, I use Trustnet and Morningstar plus some local resources. I've tried to select each fund based on its own merits , volatility level and geographic spread, 95% are first quartile funds.

    There's only 6% in Emerging Markets, not 30%. Plus other aspects of China and Asia are covered separately.

    The volatility level on all the equity funds is under 12, Morningstar X-ray rates the portfolio as the low end of Medium risk.

    I'm tax resident in Thailand but offshore income is not taxable here unless remitted in the year it is earned.

    The optimal number of funds for me was ten but I decided to spread it further because I'm likely to add to the amounts assigned to each fund, in the future. My existing drawdown portfolio contains eleven funds, nine of which are mentioned above.

    The portfolio has been constructed using for guidance the performance of my existing drawdown portfolio, and, collective thinking from an investment forum locally, over a period of about three months. One of the key objectives used in its construction was to spread across markets globally.
    Last edited by chiang mai; 11-09-2017 at 2:55 PM. Reason: for completeness
    • cashbackproblems
    • By cashbackproblems 11th Sep 17, 3:06 PM
    • 1,702 Posts
    • 659 Thanks
    cashbackproblems
    • #8
    • 11th Sep 17, 3:06 PM
    • #8
    • 11th Sep 17, 3:06 PM
    sorry that should say "you could put for example 30% in EM"
    • chiang mai
    • By chiang mai 11th Sep 17, 3:10 PM
    • 31 Posts
    • 4 Thanks
    chiang mai
    • #9
    • 11th Sep 17, 3:10 PM
    • #9
    • 11th Sep 17, 3:10 PM
    To add:

    When I was in the UK earlier this year I gave my requirements to two separate IFA's who both came back with 40% equity portfolios of which 70% were UK centric and I'm not interested in anything like that. Locally we've been having the debate whether 20% UK is too high or not and we concluded it isn't, but there again we don't Brexit doom and gloom being thrown at us daily by our local media. Inescapably the UK is a major financial market and I/we're not convinced Brexit means that will simply dissolve as we go forward.

    As for the asset allocation: it's correct to say that the bond market looks risky but not all bonds are created equal, I've been very pleased with the performance of my linkers and a Fidelity bond fund I hold during the past two weeks as NK troubles have hit the headlines and the markets, both have climbed over 9% each and more than compensated for the losses of three of my equity funds. And I/we think that inflation and interest rate increases are still some way off so there's plenty of time to switch later when the need arises.

    FWIW my drawdown portfolio returned 8% after fees last year. My fees are IFA fees 0, platform fees, 0.50% whilst trading fees are negligible as long as trades are made during the same month.
    Last edited by chiang mai; 11-09-2017 at 3:22 PM.
    • bostonerimus
    • By bostonerimus 11th Sep 17, 3:23 PM
    • 868 Posts
    • 437 Thanks
    bostonerimus
    Does Thailand have any restrictions on the overseas funds you can own......will it tax remitted funds as capital gains and dividends or as income. The treaty states that Thailand can tax UK dividends, but as you say local law might not actually do that, but I'd advise you take a quick look at the double taxation treaty and understand how you'll do your taxes in the UK and Thailand.

    I cannot agree with your investing philosophy.....particularly for a comparatively small sum like 50k.....I'd just dump it all in something like VLS100, you get global diversification in a single fund.
    Misanthrope in search of similar for mutual loathing
    • chiang mai
    • By chiang mai 11th Sep 17, 3:29 PM
    • 31 Posts
    • 4 Thanks
    chiang mai
    Again, Thailand doesn't tax overseas income unless it's remitted in the year it was earned. This is a UK based portflio which will utilise the UK personal exemption limit.

    Thailand doesn't have restrictions on which funds a resident foreigner can own.

    I am non-resident UK for tax purposes and have been so for 15 years.

    We can agree to disagree on the investment approach, the world would be a boring place if we all agreed on everything!

    BTW I just looked at VLS and whilst that does provide global equity coverage, it also provides 23% coverage of UK equities but with no chance to reduce that allocation without selling the entire fund. One of the benefits of compartmentalised allocation is that a region can be sold and replaced without disturbing the remaining geography and that's attractive to me.
    Last edited by chiang mai; 11-09-2017 at 3:42 PM.
    • TCA
    • By TCA 11th Sep 17, 3:59 PM
    • 1,297 Posts
    • 734 Thanks
    TCA
    This is a UK based portfolio which will utilise the UK personal exemption limit.
    Originally posted by chiang mai
    Assuming you're talking about the UK personal allowance, there has been talk of scrapping the entitlement of non-resident British citizens. It wouldn't surprise me in the slightest, so perhaps something to consider if that matters to you.
    • bostonerimus
    • By bostonerimus 11th Sep 17, 4:46 PM
    • 868 Posts
    • 437 Thanks
    bostonerimus
    Assuming you're talking about the UK personal allowance, there has been talk of scrapping the entitlement of non-resident British citizens. It wouldn't surprise me in the slightest, so perhaps something to consider if that matters to you.
    Originally posted by TCA
    This is true. Right now you have to file a R43 to claim the income allowance and the OP should do that so they can get their HMRC taxes right. Also it's worth knowing how Thailand will tax any remitted funds. Of course there is the 5 year CGT rule for UK non-residents.

    If the OP want's to have a lower UK equity exposure it's easy to do with a globally weighted equity fund and they could also add in some extra SE Asia if they want to be a little locally over weighted.
    Last edited by bostonerimus; 11-09-2017 at 5:06 PM.
    Misanthrope in search of similar for mutual loathing
    • chiang mai
    • By chiang mai 11th Sep 17, 8:11 PM
    • 31 Posts
    • 4 Thanks
    chiang mai
    Yes we're aware of that potential move and have been watching carefully, our Plan B, if that happens, is to switch to Luxemborg, but in the meantime.......!
    • chiang mai
    • By chiang mai 11th Sep 17, 8:17 PM
    • 31 Posts
    • 4 Thanks
    chiang mai
    The tax rules here are odd, to say the least! I have a personal allowance I can use which is quite generous, plus income is taxed on a sliding scale that starts quite low. The big problem the tax people have is trying to prove that money bought into the country at any point in time was savings or earned income and PWC Thailand tells us we're pretty safe on that front since it's almost impossible to distinguish between the two. That fact notwithstanding I would likely keep any profit outside of Thailand since I manage my local and foreign currencies in their country of origin.

    And the 5 year CGT rule doesn't worry me since I've already been outside the UK for 15 years and am unlikely to return on a permanent basis.

    The way Transact operates is my draw-down pension is set up to be paid without Uk being tax and my tax coding is on their system - the new investment portfolio would simply be an extension of my pension portfolio and would use the same tax details,
    Last edited by chiang mai; 11-09-2017 at 8:23 PM.
    • bostonerimus
    • By bostonerimus 11th Sep 17, 8:56 PM
    • 868 Posts
    • 437 Thanks
    bostonerimus
    The big problem the tax people have is trying to prove that money bought into the country at any point in time was savings or earned income and PWC Thailand tells us we're pretty safe on that front since it's almost impossible to distinguish between the two.
    Originally posted by chiang mai
    Wow, I'm amazed at that advice. I'd expect someone like PWC to tell you to fully and correctly disclose the type and origin of all income so that it can be correctly taxed. Surely it's the tax payers obligation to correctly file their taxes and any knowing mischaracterization of income or gains would be tax fraud.
    Misanthrope in search of similar for mutual loathing
    • mapk
    • By mapk 11th Sep 17, 9:28 PM
    • 142 Posts
    • 61 Thanks
    mapk
    Of course there is the 5 year CGT rule for UK non-residents.
    Originally posted by bostonerimus
    I wonder if you could explain this rule - or perhaps provide a link for further info..
    • TCA
    • By TCA 11th Sep 17, 10:08 PM
    • 1,297 Posts
    • 734 Thanks
    TCA
    http://www.litrg.org.uk/tax-guides/armed-forces-and-tax/other-tax-issues/capital-gains-tax-armed-services/capital-gains-ta-0
    • chiang mai
    • By chiang mai 12th Sep 17, 12:18 AM
    • 31 Posts
    • 4 Thanks
    chiang mai
    Thailand is not the UK, here, less than 2% of the population file tax returns and as a non-Thai I am not required to file a return unless I wish to recalim tax already paid. But since I am retired and my long stay visa forbids me to work here, the only Thai based income I can possibly have is from in-country investments, the tax on which is fully recorded by the banks and is paid at source. Overseas earnings such as pension and investment income is of no interest, no pun intended, to the Thai tax authoriities and PWC knows this hence the advice is appropriate.

    There is a process that can be used for account management involving FIFO/FILO etc. This assumes for accounting purposes that funds entering an account first must be the first to be withdrawn, ergo, where investment income is mixed with savings this rule can be applied to determine whether it is investment income or savings that iare being remitted overseas.

    If the UK does emove the personal tax allowance from people such as myself, one answer may be to buy only accumulation units since as a non-resident I am not liable to capital gains. Ditto in Thailand, I am CG exempt hence there is no income to be taxed,
    Last edited by chiang mai; 12-09-2017 at 12:43 AM.
    • chiang mai
    • By chiang mai 12th Sep 17, 12:39 AM
    • 31 Posts
    • 4 Thanks
    chiang mai
    Let me just say thank you for the replies I've received to my OP, I find it really helpful to understand the persepctive of other investors, especially those that are onshore UK.

    From what you've written your concerns are:

    The large number of funds;
    A perception of higher than desired risk and poor balance with bonds;
    Potentially overweight UK, given Brexit concerns;
    uncertainty regarding the tax position in UK and Thailand;
    Potentially underweight US.

    I hope I've managed to explain my rationale in response to those points but thank you once again for identyfing them. My concerns are a lack of suitable safe bond type alternatives in order to balance against the equity holdings, good options are far and few between currently. A second concern is finding funds that hold a good percentage of investments in China but also have decent alternate country holdings, it seems it's all or very little with the China related funds.
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