Czech Rep - Expat Portfolio Review

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Topic Author
xpatinprague
Posts: 4
Joined: Wed Mar 31, 2021 6:34 pm

Czech Rep - Expat Portfolio Review

Post by xpatinprague »

Hi everyone!

I'm new to the forum and, firstly, I wanted to thank you all for the contributions you've made, they are quite enlightening.

I have already read Bogle on Mutual Funds and Bogleheads' Guide. Also, I have been reading various posts here, but I still have some doubts that I would like you to clear, if possible.

Country of Residence: Czech Republic

International Lifestyle: I am an expat in Czech Republic, 33yo, planning to stay here for some years, probably 5 but who knows if longer. My girlfriend is Polish so if we move, it will be within Europe. No children yet, maybe in 2 years.

Income in CZK.

Currency: EUR (seems the best idea). 4500 EUR, to be precise. Thinking of making monthly contributions around 260-380 EUR

Emergency funds: 6 months of expenses

Debt: No debt.

Boglebot suggestions:

1.

70% IWDA iShares Core MSCI World
10% EIMI iShares Core MSCI EM IMI
20% AGGH/EUNA iShares Core Global Aggregate Bond (EUR Hedged)

2. (In case I go with USD)

80% VWRA Vanguard FTSE All-World
20% AGGU iShares Core Global Aggregate Bond (USD Hedged)

Given the current regulations and all important factors, would you say there is a great difference between those two options? What are the pros and cons of these in your perspective?

Another relevant topic is the brokers. Reading some threads here, I've learnt about DeGiro, Interactive Brokers, Lynx, but this is the part I'm more uncertain of.

As European residents, and specifically Czech if it's not much to ask, do you have any recommendations in terms of fees, easy-to-use platform and transparency, among other relevant elements?

I have a bank account (with Equabank) in CZK, one in USD and one in EUR, so I assume I could use the USD/EUR account without any issues, if the FX rate is better in my bank than the one of the broker.

Thanks for your kind assistance.
Have a great day!
User avatar
typical.investor
Posts: 5263
Joined: Mon Jun 11, 2018 3:17 am

Re: Czech Rep - Expat Portfolio Review

Post by typical.investor »

Welcome to the forum!

For clarification, what do you mean by an “expat”?

Are you a “US person” for IRS tax purposes (citizen, resident or green card holder)?

If so, your fund choices are generally considered not appropriate due to US PFIC taxation.
mrekvy491
Posts: 58
Joined: Wed Jul 29, 2020 10:43 am

Re: Czech Rep - Expat Portfolio Review

Post by mrekvy491 »

Welcome! Fellow Czech expat here. There were a few posts from Czech expats so you could search with the keyword “czech” here to see the details.

The consensus would be to invest only in VWCE (same as VWRA, but in EUR listed in Eurozone) using Degiro until you reach certain milestone ( like x years of income or mortgage seed money) and think later. Not the best time to add bonds, and you have a long investing time window.

The fund currency does not matter in terms of yield, but EUR is cheaper to transfer due to the SEPA transfers being free. So you can just use EUR listed ETFs. VWCE should do the trick. FX is cheapest on Revolut, so you can make a Revolut account and then send the EUR to your broker.

There is no capital gains tax if you hold the asset for more than 3 years, so accumulating ETFs should be your choice. (I added the tax related info here as TedSwippet mentioned the tax issue below)

I don’t use Degiro so I am not sure, but VWCE may cost you trading commission. In that case it may be better to go for the IWDA and EMIM combo. I heard that those are commission free.

Interactive brokers is also a good platform, but they charge you 10 USD per month if the portfolio value is less than 100k USD. It is free to have a Degiro account but there can be trading fees depending on the ETF you trade.

So to summarise:

Currency : EUR, exchange on Revolut
Broker : Degiro
Use of profit : Accumulating
Ticket : VWCE or IWDA+EMIM depending on commission. You could also look for V3AA which is a brand new ESG, all world, all cap ETF if you are into ESG investing.
Bond : AGGH if you want bond

You could also go for VNGA80, which is basically VWCE(80%) + AGGH (20%) that is rebalanced automatically.

You can just get this one and call it a day if you want to have 20% bond.
Last edited by mrekvy491 on Thu Apr 01, 2021 3:16 am, edited 6 times in total.
TedSwippet
Posts: 5181
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Czech Rep - Expat Portfolio Review

Post by TedSwippet »

Welcome.
xpatinprague wrote: Wed Mar 31, 2021 7:40 pm Boglebot suggestions:

1.

70% IWDA iShares Core MSCI World
10% EIMI iShares Core MSCI EM IMI
20% AGGH/EUNA iShares Core Global Aggregate Bond (EUR Hedged)

2. (In case I go with USD)

80% VWRA Vanguard FTSE All-World
20% AGGU iShares Core Global Aggregate Bond (USD Hedged)

Given the current regulations and all important factors, would you say there is a great difference between those two options? What are the pros and cons of these in your perspective?
Unless planning a move to the US or a country where the currency is pegged to USD, hedging bonds to USD would probably be inappropriate, so option 1 looks better to me. Although there's nothing to stop you mixing these, so 80% VWRA and 20% AGGH/EUNA. In terms of market returns, both of these portfolios will perform broadly the same. Any differences will be minor, and unknowable without hindsight anyway.

Other thoughts. Check closely into your local tax rules to see if you gain anything out of using accumulating ETFs rather than distributing ones; this is possible in some countries, but not all. And on brokers, nothing from me I'm afraid. Maybe ask around your friends, colleagues, and local forums if any to see if anyone in a similar situation to your own has already found the best route to these ETFs.
Topic Author
xpatinprague
Posts: 4
Joined: Wed Mar 31, 2021 6:34 pm

Re: Czech Rep - Expat Portfolio Review

Post by xpatinprague »

Thanks for your insights. Really appreciate it. :happy :thumbsup
Topic Author
xpatinprague
Posts: 4
Joined: Wed Mar 31, 2021 6:34 pm

Re: Czech Rep - Expat Portfolio Review

Post by xpatinprague »

typical.investor wrote: Wed Mar 31, 2021 8:25 pm Welcome to the forum!

For clarification, what do you mean by an “expat”?

Are you a “US person” for IRS tax purposes (citizen, resident or green card holder)?

If so, your fund choices are generally considered not appropriate due to US PFIC taxation.
Hi, thanks for your message.

No, I'm from Chile, actually. Been living in CZ for 2+ years now.

I understand that CZ have this 15% treaty with US AND no capital gain is charged if you hold your equities for more than 3 years, according to what I've read in this forum. Anyway, I think that an ETF domiciled in Ireland would be more convenient, if I understod correctly.
Topic Author
xpatinprague
Posts: 4
Joined: Wed Mar 31, 2021 6:34 pm

Re: Czech Rep - Expat Portfolio Review

Post by xpatinprague »

mrekvy491 wrote: Thu Apr 01, 2021 2:45 am The consensus would be to invest only in VWCE (same as VWRA, but in EUR listed in Eurozone) using Degiro until you reach certain milestone ( like x years of income or mortgage seed money) and think later. Not the best time to add bonds, and you have a long investing time window.

The fund currency does not matter in terms of yield, but EUR is cheaper to transfer due to the SEPA transfers being free. So you can just use EUR listed ETFs. VWCE should do the trick. FX is cheapest on Revolut, so you can make a Revolut account and then send the EUR to your broker.
Got it. Will have a look at Revolut's FX rate. Had forgotten about it.
There is no capital gains tax if you hold the asset for more than 3 years, so accumulating ETFs should be your choice. (I added the tax related info here as TedSwippet mentioned the tax issue below)
Yeah, I read about these 3-year test of time in another thread. Thanks for comfirming that.
So to summarise:

Currency : EUR, exchange on Revolut
Broker : Degiro
Use of profit : Accumulating
Ticket : VWCE or IWDA+EMIM depending on commission. You could also look for V3AA which is a brand new ESG, all world, all cap ETF if you are into ESG investing.
Bond : AGGH if you want bond

You could also go for VNGA80, which is basically VWCE(80%) + AGGH (20%) that is rebalanced automatically.

You can just get this one and call it a day if you want to have 20% bond.
Thanks for the advice. I will read carefully about these funds. ESG is something I'd like to have but myabe now I will just start with the usual suspects. I think I absorved too much info these days so I just wanna give my brain a little break, hahaha.

DeGiro it is, then.

I really appreciate all the info you've shared here. Have a wonderful weekend!
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