Welcome Guest ( Log In | Register )

Forum Announcement

CNY Maintenance and Infrastructure Upgrade - Some forum features will be temporarily unavailable.

20 Pages  1 2 3 > » Bottom

Outline · [ Standard ] · Linear+

> Asset Allocation Investing using US ETF, Basic approach to asset Allocation ETF

views
     
TSdreamer101
post Jun 10 2013, 06:25 AM, updated 5y ago

10k Club
Group Icon
Elite
15,855 posts

Joined: Jan 2003
Folks,

In this thread, I provide the basic step to step approach on how to use US ETF to do asset Asset Allocation investing.

http://www.investopedia.com/terms/a/assetallocation.asp


The basic assumption here is the person has access to US brokerage and can any US stock including ETF.

https://personal.vanguard.com/us/funds/snap...ntExt=INT#tab=3

https://personal.vanguard.com/us/funds/snap...ntExt=INT#tab=3

The ETF to be used in this illustration are VT and BND.

If a person is convinced that they can time the market to buy and sell, this is not the approach that you want. This thread is for people that want a simple low maintenance approach to investing.

Dreamer

This post has been edited by dreamer101: Jun 10 2013, 06:27 AM
gark
post Jun 10 2013, 09:57 AM

10k Club
********
Senior Member
12,534 posts

Joined: Mar 2009
From: Penang, KL, China, Indonesia....
I have VOO bought in several tranches since 2008/2009, have returned ~80% to date. laugh.gif Management fees are rock bottom.

My opinion is that in developed market, index fund perform better than investment managers. For less develop market, investment fund managers is better since there is more market manipulation, insider trades, info leak etc etc. wink.gif

Index funds are one of the many tools for portfolio management. In fact if one buys carefully, you can have a very balanced portfolio based on ETF. Also ETF is a great tool to buy obscure stocks, which is otherwise out of your reach. You want to buy Nigeria or Bangladesh Stock Index ETF.. you can do so.... tongue.gif

This post has been edited by gark: Jun 10 2013, 10:05 AM
TSdreamer101
post Jun 10 2013, 09:22 PM

10k Club
Group Icon
Elite
15,855 posts

Joined: Jan 2003
Folks,

In an asset portfolio, most of the return are determined by the stock versus bond ratio. So, for the first step of asset allocation is to determine the stock versus bond ratio.

This has to be decided by each individual. The followings are some of the guideline

A) The stock/bond ratio should be between 80/20 to 20/80. If you go above and below that ratio, you are talking too much or too little risk and do not get the optimal return.

B) Risk versus Return tradeoff.

1) If you take on higher percentage of stock allocation, your portfolio will be more volatile. You need to take the "50% test". Historically, stock can drop 50% of its value at any point of time. Can you stop yourself from selling when that happen??

2) Do you NEED to take risk?? If you have ENOUGH money, you do not need to take on higher percentage of stock allocation.

C) Age in bond rule -> A simple rule is to take you age and use that as your bond ratio.

D) All else fail, do a 60/40 asset allocation. Those are the standard ratio use by insurance company for their investment.

E) When in doubt, lower the stock ratio. The strategy only work if you can yourself from selling in a market crash. If you cannot sleep at night with your aset allocation, reduce you stock exposure...

F) Emergency fund is not part of your asset allocation. You need at least 3 to 6 months of emergency fund. You may keep longer if you feel your income is unstable.

Dreamer


MNet
post Jun 10 2013, 10:16 PM

10k Club
********
All Stars
10,925 posts

Joined: May 2007




u all use which US broker?
jutamind
post Jun 10 2013, 10:54 PM

Regular
******
Senior Member
1,600 posts

Joined: Jul 2007
which US broker recommended to use?

i think the barrier is that if you are a small timer investor, the cost of trading is probably higher than the investment amount...but i might be wrong here...

but, i'm interested in knowing more on how to invest with US online brokers, especially on funds transfer/payment
TSdreamer101
post Jun 10 2013, 11:26 PM

10k Club
Group Icon
Elite
15,855 posts

Joined: Jan 2003
QUOTE(jutamind @ Jun 10 2013, 10:54 PM)
which US broker recommended to use?

i think the barrier is that if you are a small timer investor, the cost of trading is probably higher than the investment amount...but i might be wrong here...

but, i'm interested in knowing more on how to invest with US online brokers, especially on funds transfer/payment
*
jutamind,

The rule of thumb for trading cost is less than 1%. Assuming USD $10 per trade, that means the invest amount should be at least USD $1K.

Dreamer

MNet
post Jun 10 2013, 11:32 PM

10k Club
********
All Stars
10,925 posts

Joined: May 2007




Take a look at the ETF/Mutual fund performance, at MY mutual fund market also can get that kind of return.

why need the hassle to invest in US mutual fund/etf?
TSdreamer101
post Jun 11 2013, 12:29 AM

10k Club
Group Icon
Elite
15,855 posts

Joined: Jan 2003
QUOTE(MNet @ Jun 10 2013, 11:32 PM)
Take a look at the ETF/Mutual fund performance, at MY mutual fund market also can get that kind of return.

why need the hassle to invest in US mutual fund/etf?
*
MNet,

1) VT invest on 4,500 largest companies in the world. It is highly diversified. It is protected against any single country failure like Malaysia. Annual expense = 0.19%

2) BND invest on the whole US bond market. Annual expense = 0.1%

Their costs and diversification is unmatched by offering in Malaysia.

<<MY mutual fund market also can get that kind of return.>>

3) Return is NOT the main goal of this approach. The main goal is Risk Adjusted Return with minimal expense and maintenance.

Dreamer

TSdreamer101
post Jun 11 2013, 12:34 AM

10k Club
Group Icon
Elite
15,855 posts

Joined: Jan 2003
Folks,

Let's assume that you pick 60/40 at step 1. Your brokerage expense is $10 per trade and you have approximately USD $10K to invest. Furthermore, let's assume that VT is at $50 per share and BND is at $80 per share.

At 60/40, you will invest $6K at VT and $4K at BND.

For VT, you buy $6,000 / $50 = 120 shares.

For BND, you buy $4,000 / $80 = 50 shares..

Given that you trading cost is $10, you will invest the amount of at least $1K to keep your trading cost down.

Dreamer
kaiserwulf
post Jun 11 2013, 07:20 AM

Regular
******
Senior Member
1,110 posts

Joined: Oct 2008


+1 rclxms.gif

If buying US ETFs from here, subject to upkeeping charges. How do you deal with it? It will eat into profits yes? unsure.gif

QUOTE(dreamer101 @ Jun 10 2013, 06:25 AM)
Folks,

In this thread, I provide the basic step to step approach on how to use US ETF to do asset Asset Allocation investing.

http://www.investopedia.com/terms/a/assetallocation.asp
The basic assumption here is the person has access to US brokerage and can any US stock including ETF.

https://personal.vanguard.com/us/funds/snap...ntExt=INT#tab=3

https://personal.vanguard.com/us/funds/snap...ntExt=INT#tab=3

The ETF to be used in this illustration are VT and BND.

If a person is convinced that they can time the market to buy and sell, this is not the approach that you want.  This thread is for people that want a simple low maintenance approach to investing.

Dreamer
*
TSdreamer101
post Jun 11 2013, 07:44 AM

10k Club
Group Icon
Elite
15,855 posts

Joined: Jan 2003
QUOTE(kaiserwulf @ Jun 11 2013, 07:20 AM)
+1  rclxms.gif

If buying US ETFs from here, subject to upkeeping charges. How do you deal with it? It will eat into profits yes? unsure.gif
*
kaiserwulf,

If you open an US Brokerage A/C online and buy the ETF through that A/C, what kind of maintenance charge are you referring to??

Dreamer
jutamind
post Jun 11 2013, 08:14 AM

Regular
******
Senior Member
1,600 posts

Joined: Jul 2007
Dreamer,

Which online broker do you use? What's the commission rate and how to fund your trading amount?
TSdreamer101
post Jun 11 2013, 08:39 AM

10k Club
Group Icon
Elite
15,855 posts

Joined: Jan 2003
QUOTE(jutamind @ Jun 11 2013, 08:14 AM)
Dreamer,

Which online broker do you use? What's the commission rate and how to fund your trading amount?
*
jutamind,

https://forum.lowyat.net/topic/2027841/+2760

I use TD Ameritrade for stock trading. I am US Resident. Hence, I can invest on Vanguard directly without using ETF. You should ask people on above thread. I believe they either open the US A/C directly on line or open A/C on Etrade at Singapore.

Dreamer
creativ
post Jun 11 2013, 08:53 AM

Getting Started
**
Junior Member
204 posts

Joined: May 2008
Dreamer,
THANK YOU for starting this thread! thumbup.gif
kaiserwulf
post Jun 11 2013, 09:41 AM

Regular
******
Senior Member
1,110 posts

Joined: Oct 2008


Good post. Always buy direct to keep costs low.

Looks like being a US resident is not in my target for a long time. Btw, how do taxes affect you if you are US resident compared to a non?

QUOTE(dreamer101 @ Jun 11 2013, 08:39 AM)
jutamind,

https://forum.lowyat.net/topic/2027841/+2760

I use TD Ameritrade for stock trading.  I am US Resident.  Hence, I can invest on Vanguard directly without using ETF.  You should ask people on above thread.  I believe they either open the US A/C directly on line or open A/C on Etrade at Singapore.

Dreamer
*
TSdreamer101
post Jun 11 2013, 11:07 AM

10k Club
Group Icon
Elite
15,855 posts

Joined: Jan 2003
QUOTE(kaiserwulf @ Jun 11 2013, 09:41 AM)
Good post. Always buy direct to keep costs low.

Looks like being a US resident is not in my target for a long time. Btw, how do taxes affect you if you are US resident compared to a non?
*
kaiserwulf,

Check out the US stock thread on tax issue. I am not familiar with those issues. I believe as a non-US resident, you may have additional advantage of not having to pay capital gain tax for your stock gain. And, your gain is not taxable by Malaysian government too.

<<Good post. Always buy direct to keep costs low.>>

That statement is not necessary true with Vanguard ETF. Vanguard ETF is actually lower cost than Vanguard mutual fund in most cases. The only difference is I do not have to pay trading cost to buy mutual fund versus ETF.

https://personal.vanguard.com/us/funds/snap...ntExt=INT#tab=3

Total bond market mutual fund expense ratio = 0.20%

https://personal.vanguard.com/us/funds/snap...ntExt=INT#tab=3

Total International mutual expense = 0.22%

Dreamer

This post has been edited by dreamer101: Jun 11 2013, 11:14 AM
MGM
post Jun 11 2013, 01:57 PM

Look at all my stars!!
*******
Senior Member
9,895 posts

Joined: Oct 2010
QUOTE(kaiserwulf @ Jun 11 2013, 09:41 AM)
Good post. Always buy direct to keep costs low.

Looks like being a US resident is not in my target for a long time. Btw, how do taxes affect you if you are US resident compared to a non?
*
Taken from investopedia.com:

The tax implications for a foreign investor will depend on whether that person is classified as a resident alien or a non-resident alien. To be considered a non-resident alien, a person must meet several guidelines. First of all, the person cannot have had a green card at any time during the relevant tax reporting period (e.g 2005) and cannot have resided in the U.S. for more than 183 days in the past three years, including the current reporting period. However, non-U.S. citizens who hold green cards and have been in the U.S. for more than 183 days are classified as resident aliens for tax purposes and are subject to different guidelines than non-resident aliens.

If you fall under the non-resident alien category and the only business you have in the U.S. is in investments (stocks, mutual funds, commodities) within a U.S. dollar-denominated brokerage firm or other agent, you are subject to the following tax guidelines. In terms of capital gains, non-resident aliens are subject to no U.S. capital gains tax, and no money will be withheld by the brokerage firm. This does not mean, however, that you can trade tax free - you will likely need to pay capital gains tax in your country of origin. In terms of dividends, non-resident aliens face a dividend tax rate of 30% on dividends paid out by U.S. companies. However, they are excluded from this tax if the dividends are paid by foreign companies or are interest-related dividends or short-term capital gain dividends. This 30% rate can also be lower depending on the treaty between your home country and the U.S., so it is important that you contact your brokerage firm to verify the rate. If you are a resident alien and hold a green card or satisfy the resident rules (183 days), you are subject to the same tax rules as any U.S. citizen.
xuzen
post Jun 11 2013, 02:27 PM

Look at all my stars!!
*******
Senior Member
4,274 posts

Joined: Oct 2008


Annual Expense Ratio (AER) of 0.1% or 0.2% is simply WOW!

In Bolehland these type of figures are dream only.

The lowest AER one can go in Bolehland is around 1%, that is by becoming agent on your own and reinvest your commission.

Xuzen




gark
post Jun 11 2013, 02:39 PM

10k Club
********
Senior Member
12,534 posts

Joined: Mar 2009
From: Penang, KL, China, Indonesia....
For those who are interested in ETF... but worry about trading cost and 30% withholding tax ton dividends there are ways to avoid this.

Buy offshore US ETF listed in SGX and HKEX, you will not be charged the 30% withholding tax since both countries have no tax on dividends. You choices are more limited, but you can still find the most of the more popular ETF's.

Also a lot of broker have commission free trades on US ETF, this might be able to offset your witholding tax. Then sell your holdings before dividend and re-buy ex-dividend once the price is adjusted. Otherwise don't bother (like me) as most US ETF dividend is <3%.

Or you can buy Offshore Vanguard funds , as non-US resident but the minimum purchase is $10,000.

This post has been edited by gark: Jun 11 2013, 02:47 PM
gark
post Jun 11 2013, 02:40 PM

10k Club
********
Senior Member
12,534 posts

Joined: Mar 2009
From: Penang, KL, China, Indonesia....
QUOTE(xuzen @ Jun 11 2013, 02:27 PM)
Annual Expense Ratio (AER) of 0.1% or 0.2% is simply WOW!

In Bolehland these type of figures are dream only.

The lowest AER one can go in Bolehland is around 1%,  that is by becoming agent on your own and reinvest your commission.

Xuzen
*
I hold VOO, Vanguard S&P 500 ETF, and my MER is 0.05%-0.06%.... tongue.gif

This post has been edited by gark: Jun 11 2013, 02:42 PM

20 Pages  1 2 3 > » Top
 

Switch to:
| Lo-Fi Version
0.0438sec    4.81    6 queries    GZIP Disabled
Time is now: 27th January 2020 - 12:21 PM