Planning to retire in Montenegro (Europe), which ETFs to invest in?

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LICinvestor
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Planning to retire in Montenegro (Europe), which ETFs to invest in?

Post by LICinvestor »

Hi guys,

I live in Australia and all my investments are in listed investment companies (ASX200 index huggers). I'm planning to retire in Montenegro, Europe in 5-10 years and I realise I should invest in some sort of world index (to diversify) which is domiciled in Europe (to manage currency risk).

What would be some good low cost world ETFs that would be worth considering? Any tax considerations I should be aware of?

Many thanks 😀
TedSwippet
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Re: Planning to retire in Montenegro (Europe), which ETFs to invest in?

Post by TedSwippet »

LICinvestor wrote: Thu Sep 16, 2021 6:56 pm What would be some good low cost world ETFs that would be worth considering? Any tax considerations I should be aware of?
The following wiki articles offer some ETF suggestions, and given that Montenegro has no US tax treaties, explain why you will want to avoid the US domiciled ETFs discussed outside of this forum, and instead use these non-US domiciled ones:

- Building a non-US Boglehead portfolio - Bogleheads
- Nonresident alien investors and Ireland domiciled ETFs - Bogleheads
Topic Author
LICinvestor
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Re: Planning to retire in Montenegro (Europe), which ETFs to invest in?

Post by LICinvestor »

TedSwippet wrote: Fri Sep 17, 2021 2:18 am
LICinvestor wrote: Thu Sep 16, 2021 6:56 pm What would be some good low cost world ETFs that would be worth considering? Any tax considerations I should be aware of?
The following wiki articles offer some ETF suggestions, and given that Montenegro has no US tax treaties, explain why you will want to avoid the US domiciled ETFs discussed outside of this forum, and instead use these non-US domiciled ones:

- Building a non-US Boglehead portfolio - Bogleheads
- Nonresident alien investors and Ireland domiciled ETFs - Bogleheads
Thanks so much for your reply!

I was thinking to invest solely in the Irish domiciled FTSE All-World UCITS ETF(VWRL). Eventually my allocation will be in 10 years 50/50 ASX200/VWRL.

How do I actually buy vwrl from Australia?

Considering I am Montenegrinand AU citizen, and that most likely I'll retire in MNE, is there anything else I'm missing here? MNE had a treaty with Ireland whereby dividends will be taxed 10% in Ireland and 9% in MNE.
Topic Author
LICinvestor
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Joined: Thu Feb 25, 2021 11:50 pm

Re: Planning to retire in Montenegro (Europe), which ETFs to invest in?

Post by LICinvestor »

Also, i was advised to invest in a European etf to manage currency risk (euro is currency in MNE). Does this make sense? I'd rather invest in world index or sp500.
TedSwippet
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Re: Planning to retire in Montenegro (Europe), which ETFs to invest in?

Post by TedSwippet »

LICinvestor wrote: Sat Sep 18, 2021 6:41 am I was thinking to invest solely in the Irish domiciled FTSE All-World UCITS ETF(VWRL). Eventually my allocation will be in 10 years 50/50 ASX200/VWRL.
Do take a look at whatever you hold that is not VWRL but based in Australia. Sometimes funds regularly sold to Australian investors are actually US domiciled funds (for example, VTS). While you are resident/domiciled in Australia this isn't a problem, but once you leave Australia and move to Montenegro you then lose coverage of the US/Australia treaties.
LICinvestor wrote: Sat Sep 18, 2021 6:41 am How do I actually buy vwrl from Australia?
If you can access the London Stock Exchange, you can buy it there. Also, multiple European exchanges, for example Euronext. The trading currency will vary; GBP, EUR, and USD among others, and you'll want to pick the one that's easiest for you to access. For what it's worth, there's no rush to hold this fund until you move to Montenegro. Up to the move, you'll be fine with Australia based funds, or even US domiciled ones. It's just the move to Montenegro that fundamentally changes your US treaty status.
LICinvestor wrote: Sat Sep 18, 2021 6:41 am Considering I am Montenegrin and AU citizen, and that most likely I'll retire in MNE, is there anything else I'm missing here? MNE had a treaty with Ireland whereby dividends will be taxed 10% in Ireland and 9% in MNE.
Ireland specifically exempts dividend paid to non-Irish residents by Ireland domiciled ETFs from Irish dividend withholding tax, so you don't need to consider any details of a tax treaty between Ireland and Montenegro. Covered in the wiki:

Nonresident alien investors and Ireland domiciled ETFs - Bogleheads
LICinvestor wrote: Sat Sep 18, 2021 6:45 am Also, i was advised to invest in a European etf to manage currency risk (euro is currency in MNE). Does this make sense? I'd rather invest in world index or sp500.
In general, the currency in which an ETF operates is immaterial to you. The only thing you have to consider is the currency (or currencies) of the assets held by the ETF, and the relationship between that (or those) and the currency in which you will spend the money:

Non-US investors and ETF currencies - Bogleheads

In other words, you'd see no long-term difference in performance if you held VWRL or an equivalent (unhedged) Australian domiciled all-world fund or ETF.

The one area where it can make sense to concentrate on EUR based investment is bonds. The general rule of thumb is to either use bonds based in the currency in which you will spend, or use global bonds that are (ideally) hedged to that currency. You haven't mentioned bonds, so it's not clear whether or not you have other bond-like investments, or if you just plan to not hold them for other reasons. (If you do, then a simple option is to use something from the Vangard LifeStrategy ETF range.)
Last edited by TedSwippet on Sun Sep 19, 2021 9:47 am, edited 1 time in total.
Topic Author
LICinvestor
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Re: Planning to retire in Montenegro (Europe), which ETFs to invest in?

Post by LICinvestor »

TedSwippet wrote: Sat Sep 18, 2021 7:24 am
LICinvestor wrote: Sat Sep 18, 2021 6:41 am I was thinking to invest solely in the Irish domiciled FTSE All-World UCITS ETF(VWRL). Eventually my allocation will be in 10 years 50/50 ASX200/VWRL.
Do take a look at whatever you hold that is not VWRL but based in Australia. Sometimes funds regularly sold to Australian investors are actually US domiciled funds. While you are resident/domiciled in Australia this isn't a problem, but once you leave Australia and move to Montenegro you then lose coverage of the US/Australia treaties.
LICinvestor wrote: Sat Sep 18, 2021 6:41 am How do I actually buy vwrl from Australia?
If you can access the London Stock Exchange, you can buy it there. Also, multiple European exchanges, for example Euronext. The trading currency will vary; GBP, EUR, and USD among others, and you'll want to pick the one that's easiest for you to access. For what it's worth, there's no rush to hold this fund until you move to Montenegro. Up to the move, you'll be fine with Australia based funds, or even US domiciled ones. It's just the move to Montenegro that fundamentally changes your US treaty status.
LICinvestor wrote: Sat Sep 18, 2021 6:41 am Considering I am Montenegrin and AU citizen, and that most likely I'll retire in MNE, is there anything else I'm missing here? MNE had a treaty with Ireland whereby dividends will be taxed 10% in Ireland and 9% in MNE.
Ireland specifically exempts dividend paid to non-Irish residents by Ireland domiciled ETFs from Irish dividend withholding tax, so you don't need to consider any details of a tax treaty between Ireland and Montenegro. Covered in the wiki:

Nonresident alien investors and Ireland domiciled ETFs - Bogleheads
LICinvestor wrote: Sat Sep 18, 2021 6:45 am Also, i was advised to invest in a European etf to manage currency risk (euro is currency in MNE). Does this make sense? I'd rather invest in world index or sp500.
In general, the currency in which an ETF operates is immaterial to you. The only thing you have to consider is the currency (or currencies) of the assets held by the ETF, and the relationship between that (or those) and the currency in which you will spend the money:

Non-US investors and ETF currencies - Bogleheads

In other words, you'd see no long-term difference in performance if you held VWRL or an equivalent (unhedged) Australian domiciled all-world fund or ETF.

The one area where it can make sense to concentrate on EUR based investment is bonds. The general rule of thumb is to either use bonds based in the currency in which you will spend, or use global bonds that are (ideally) hedged to that currency. You haven't mentioned bonds, so it's not clear whether or not you have other bond-like investments, or if you just plan to not hold them for other reasons. (If you do, then a simple option is to use something from the Vangard LifeStrategy ETF range.)
Thanks so much for your reply! You helped me so much because I find all this very confusing.

Wouldn't it make sense for me to buy etf that invests in European companies? I'm just not keen to do it because historical returns look pretty low compared to asx200 and all world.

You say i don't need to rush and buy VWRL until I move to MNE. I could buy Australian domiciled all world index VGS until then however once I move to MNE Australia will withold 30% tax on those dividends. So wouldn't it make sense to buy VWRL now so I dont need to sell VGS when I move to MNE?

I'm not planning to hold bonds. I basically only hold Australian all economy index. I'm not even keen to buy world index because ASX200 had had superior returns over world index over last 120 years. Is this too much of a risk?
protagonist
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Re: Planning to retire in Montenegro (Europe), which ETFs to invest in?

Post by protagonist »

I'm curious what made you choose Montenegro....just because I never met anybody who retired there. Care to share?
Topic Author
LICinvestor
Posts: 29
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Re: Planning to retire in Montenegro (Europe), which ETFs to invest in?

Post by LICinvestor »

protagonist wrote: Sat Sep 18, 2021 7:55 pm I'm curious what made you choose Montenegro....just because I never met anybody who retired there. Care to share?
Well these are my thoughts, for now at least:
- cost of living is 50% less than in Australia,
- beautiful coast, amazing vibrant beaches,
- nice mountains, good skiing in winter,
- you can get anywhere in Europe within 1-2hrs of flying,
- travelling around Europe would be quite affordable I think,
- I have an apartment in MNE meaning I can sell my properties here and use the cash for shares,
- I'm 40 now and lower living costs in MNE mean I can retire very comfortably there within the next 5-10 years. It would take longer to retire in Australia and even then I wouldn't be nearly as financially comfortable as in MNE.

Have a look at the pics of MNE here. By the way, you can retire there too if you buy a property over there.
https://www.istockphoto.com/photos/montenegro

You can compare the costs of living between your country and MNE here. You may be surprised 😀

https://www.numbeo.com/cost-of-living/comparison.jsp
protagonist
Posts: 9279
Joined: Sun Dec 26, 2010 11:47 am

Re: Planning to retire in Montenegro (Europe), which ETFs to invest in?

Post by protagonist »

LICinvestor wrote: Sat Sep 18, 2021 9:40 pm
protagonist wrote: Sat Sep 18, 2021 7:55 pm I'm curious what made you choose Montenegro....just because I never met anybody who retired there. Care to share?
Well these are my thoughts, for now at least:
- cost of living is 50% less than in Australia,
- beautiful coast, amazing vibrant beaches,
- nice mountains, good skiing in winter,
- you can get anywhere in Europe within 1-2hrs of flying,
- travelling around Europe would be quite affordable I think,
- I have an apartment in MNE meaning I can sell my properties here and use the cash for shares,
- I'm 40 now and lower living costs in MNE mean I can retire very comfortably there within the next 5-10 years. It would take longer to retire in Australia and even then I wouldn't be nearly as financially comfortable as in MNE.

Have a look at the pics of MNE here. By the way, you can retire there too if you buy a property over there.
https://www.istockphoto.com/photos/montenegro

You can compare the costs of living between your country and MNE here. You may be surprised 😀

https://www.numbeo.com/cost-of-living/comparison.jsp
Very interesting. Have you spent any time there? I would strongly suggest doing so as more than just a tourist before committing.

I bought a place on an island in Venezuela in 1991 when I was in my late 30s with the intention of retiring there. As a windsurfer I saw the potential of it developing into a world class windsurfing destination , which it did in the late 90s . When I purchased my condo there, Venezuela was the richest and most stable "democracy" in Latin America, and I could leave my home in New England early morning, drive to NYC, take a 4 1/2 hr nonstop flight to within 10 minutes of my condo and be sailing the same afternoon.

Well, you can imagine how that turned out. Not that I am sorry....I got a good 25 years or so out of it before Venezuela totally imploded. In fact I keep dutifully paying my ~$3.50/month condo fees in case the situation changes.....

One caveat....if you don't speak the language FLUENTLY (I imagine it is closely related to Serbocroatian?) you will never fully integrate into society and most of your friends will be expats. Getting fluent in a language later in life is very hard. My Spanish got to be quite good, I taught English and music (volunteer) to local kids and did other volunteer projects, but I was never fluent enough to feel like a "local". That might not bother you....depends on your own personality I suspect.

I was curious about Montenegro because I know expats all over the world but never knew anybody there, or anyone who even mentioned it. In the 1970s I hitchhiked through Montenegro (which was then part of Tito's Yugoslavia) on my way from France to Istanbul. I didn't stop but I do recall the landscape was quite spectacular.
gubernaculum
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Re: Planning to retire in Montenegro (Europe), which ETFs to invest in?

Post by gubernaculum »

Isla de Margarita?
Topic Author
LICinvestor
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Re: Planning to retire in Montenegro (Europe), which ETFs to invest in?

Post by LICinvestor »

protagonist wrote: Sat Sep 18, 2021 10:57 pm
LICinvestor wrote: Sat Sep 18, 2021 9:40 pm
protagonist wrote: Sat Sep 18, 2021 7:55 pm I'm curious what made you choose Montenegro....just because I never met anybody who retired there. Care to share?
Well these are my thoughts, for now at least:
- cost of living is 50% less than in Australia,
- beautiful coast, amazing vibrant beaches,
- nice mountains, good skiing in winter,
- you can get anywhere in Europe within 1-2hrs of flying,
- travelling around Europe would be quite affordable I think,
- I have an apartment in MNE meaning I can sell my properties here and use the cash for shares,
- I'm 40 now and lower living costs in MNE mean I can retire very comfortably there within the next 5-10 years. It would take longer to retire in Australia and even then I wouldn't be nearly as financially comfortable as in MNE.

Have a look at the pics of MNE here. By the way, you can retire there too if you buy a property over there.
https://www.istockphoto.com/photos/montenegro

You can compare the costs of living between your country and MNE here. You may be surprised 😀

https://www.numbeo.com/cost-of-living/comparison.jsp
Very interesting. Have you spent any time there? I would strongly suggest doing so as more than just a tourist before committing.

I bought a place on an island in Venezuela in 1991 when I was in my late 30s with the intention of retiring there. As a windsurfer I saw the potential of it developing into a world class windsurfing destination , which it did in the late 90s . When I purchased my condo there, Venezuela was the richest and most stable "democracy" in Latin America, and I could leave my home in New England early morning, drive to NYC, take a 4 1/2 hr nonstop flight to within 10 minutes of my condo and be sailing the same afternoon.

Well, you can imagine how that turned out. Not that I am sorry....I got a good 25 years or so out of it before Venezuela totally imploded. In fact I keep dutifully paying my ~$3.50/month condo fees in case the situation changes.....

One caveat....if you don't speak the language FLUENTLY (I imagine it is closely related to Serbocroatian?) you will never fully integrate into society and most of your friends will be expats. Getting fluent in a language later in life is very hard. My Spanish got to be quite good, I taught English and music (volunteer) to local kids and did other volunteer projects, but I was never fluent enough to feel like a "local". That might not bother you....depends on your own personality I suspect.

I was curious about Montenegro because I know expats all over the world but never knew anybody there, or anyone who even mentioned it. In the 1970s I hitchhiked through Montenegro (which was then part of Tito's Yugoslavia) on my way from France to Istanbul. I didn't stop but I do recall the landscape was quite spectacular.
Thanks mate, that was very insightful. Sounds like you still had great time in Venezuela.

I was born and raised in MNE. I left to Australia when I was 28 for better work opportunities. Best decision I ever made as pay in mne is very low.
Topic Author
LICinvestor
Posts: 29
Joined: Thu Feb 25, 2021 11:50 pm

Re: Planning to retire in Montenegro (Europe), which ETFs to invest in?

Post by LICinvestor »

protagonist wrote: Sat Sep 18, 2021 10:57 pm
LICinvestor wrote: Sat Sep 18, 2021 9:40 pm
protagonist wrote: Sat Sep 18, 2021 7:55 pm I'm curious what made you choose Montenegro....just because I never met anybody who retired there. Care to share?
Well these are my thoughts, for now at least:
- cost of living is 50% less than in Australia,
- beautiful coast, amazing vibrant beaches,
- nice mountains, good skiing in winter,
- you can get anywhere in Europe within 1-2hrs of flying,
- travelling around Europe would be quite affordable I think,
- I have an apartment in MNE meaning I can sell my properties here and use the cash for shares,
- I'm 40 now and lower living costs in MNE mean I can retire very comfortably there within the next 5-10 years. It would take longer to retire in Australia and even then I wouldn't be nearly as financially comfortable as in MNE.

Have a look at the pics of MNE here. By the way, you can retire there too if you buy a property over there.
https://www.istockphoto.com/photos/montenegro

You can compare the costs of living between your country and MNE here. You may be surprised 😀

https://www.numbeo.com/cost-of-living/comparison.jsp
Very interesting. Have you spent any time there? I would strongly suggest doing so as more than just a tourist before committing.

I bought a place on an island in Venezuela in 1991 when I was in my late 30s with the intention of retiring there. As a windsurfer I saw the potential of it developing into a world class windsurfing destination , which it did in the late 90s . When I purchased my condo there, Venezuela was the richest and most stable "democracy" in Latin America, and I could leave my home in New England early morning, drive to NYC, take a 4 1/2 hr nonstop flight to within 10 minutes of my condo and be sailing the same afternoon.

Well, you can imagine how that turned out. Not that I am sorry....I got a good 25 years or so out of it before Venezuela totally imploded. In fact I keep dutifully paying my ~$3.50/month condo fees in case the situation changes.....

One caveat....if you don't speak the language FLUENTLY (I imagine it is closely related to Serbocroatian?) you will never fully integrate into society and most of your friends will be expats. Getting fluent in a language later in life is very hard. My Spanish got to be quite good, I taught English and music (volunteer) to local kids and did other volunteer projects, but I was never fluent enough to feel like a "local". That might not bother you....depends on your own personality I suspect.

I was curious about Montenegro because I know expats all over the world but never knew anybody there, or anyone who even mentioned it. In the 1970s I hitchhiked through Montenegro (which was then part of Tito's Yugoslavia) on my way from France to Istanbul. I didn't stop but I do recall the landscape was quite spectacular.
Thanks mate, that was very insightful. Sounds like you still had great time in Venezuela.

I was born and raised in MNE. I left to Australia when I was 28 for better work opportunities. Best decision I ever made as pay in mne is very low.
TedSwippet
Posts: 5181
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Planning to retire in Montenegro (Europe), which ETFs to invest in?

Post by TedSwippet »

LICinvestor wrote: Sat Sep 18, 2021 6:17 pm Wouldn't it make sense for me to buy etf that invests in European companies? I'm just not keen to do it because historical returns look pretty low compared to asx200 and all world.
That would be creating a 'home currency bias', effectively a 'home country bias'. It's a constant topic of conversation around here (example: link), not least for US investors, some of whom seem rigid and unshakeable in their belief that the US not only has been, but also always and forever will be, the best performing market on the planet.

A 'home country bias' reduces your geographical diversification.
LICinvestor wrote: Sat Sep 18, 2021 6:17 pm You say i don't need to rush and buy VWRL until I move to MNE. I could buy Australian domiciled all world index VGS until then however once I move to MNE Australia will withold 30% tax on those dividends. So wouldn't it make sense to buy VWRL now so I dont need to sell VGS when I move to MNE?
It might. I'm looking at this purely from the perspective of avoiding US tax traps; I know nothing about how Australia taxes work. To know for sure, you would have to understand not only how Australia will or will not tax dividends paid to residents of Montenegro, but also how it will tax dividends from holdings of Ireland domiciled ETFs while you are still resident in Australia.
LICinvestor wrote: Sat Sep 18, 2021 6:17 pm I'm not planning to hold bonds. I basically only hold Australian all economy index. I'm not even keen to buy world index because ASX200 had had superior returns over world index over last 120 years. Is this too much of a risk?
Nobody but you can make that determination. Age, risk profile, other assets, willingness to take a job again if markets sour for an extended period, whether or not you have a 'bond-like' state or other social security pension, and so on, are all factors.

Personally, I've held bonds for more than a decade, and they've been okay so far. At present, interest on bonds is not appealing, and I've not bought more for a while, replacing them instead with a CD ladder. The one thing that both bonds and (to a lesser extent) a CD ladder do provide is a store of 'dry powder' that you can rebalance into stocks if/when the next crash or downturn materialises.
protagonist
Posts: 9279
Joined: Sun Dec 26, 2010 11:47 am

Re: Planning to retire in Montenegro (Europe), which ETFs to invest in?

Post by protagonist »

LICinvestor wrote: Sat Sep 18, 2021 11:49 pm
protagonist wrote: Sat Sep 18, 2021 10:57 pm
LICinvestor wrote: Sat Sep 18, 2021 9:40 pm
protagonist wrote: Sat Sep 18, 2021 7:55 pm I'm curious what made you choose Montenegro....just because I never met anybody who retired there. Care to share?
Well these are my thoughts, for now at least:
- cost of living is 50% less than in Australia,
- beautiful coast, amazing vibrant beaches,
- nice mountains, good skiing in winter,
- you can get anywhere in Europe within 1-2hrs of flying,
- travelling around Europe would be quite affordable I think,
- I have an apartment in MNE meaning I can sell my properties here and use the cash for shares,
- I'm 40 now and lower living costs in MNE mean I can retire very comfortably there within the next 5-10 years. It would take longer to retire in Australia and even then I wouldn't be nearly as financially comfortable as in MNE.

Have a look at the pics of MNE here. By the way, you can retire there too if you buy a property over there.
https://www.istockphoto.com/photos/montenegro

You can compare the costs of living between your country and MNE here. You may be surprised 😀

https://www.numbeo.com/cost-of-living/comparison.jsp
Very interesting. Have you spent any time there? I would strongly suggest doing so as more than just a tourist before committing.

I bought a place on an island in Venezuela in 1991 when I was in my late 30s with the intention of retiring there. As a windsurfer I saw the potential of it developing into a world class windsurfing destination , which it did in the late 90s . When I purchased my condo there, Venezuela was the richest and most stable "democracy" in Latin America, and I could leave my home in New England early morning, drive to NYC, take a 4 1/2 hr nonstop flight to within 10 minutes of my condo and be sailing the same afternoon.

Well, you can imagine how that turned out. Not that I am sorry....I got a good 25 years or so out of it before Venezuela totally imploded. In fact I keep dutifully paying my ~$3.50/month condo fees in case the situation changes.....

One caveat....if you don't speak the language FLUENTLY (I imagine it is closely related to Serbocroatian?) you will never fully integrate into society and most of your friends will be expats. Getting fluent in a language later in life is very hard. My Spanish got to be quite good, I taught English and music (volunteer) to local kids and did other volunteer projects, but I was never fluent enough to feel like a "local". That might not bother you....depends on your own personality I suspect.

I was curious about Montenegro because I know expats all over the world but never knew anybody there, or anyone who even mentioned it. In the 1970s I hitchhiked through Montenegro (which was then part of Tito's Yugoslavia) on my way from France to Istanbul. I didn't stop but I do recall the landscape was quite spectacular.
Thanks mate, that was very insightful. Sounds like you still had great time in Venezuela.


Yes, it was a great ride!!
I was born and raised in MNE. I left to Australia when I was 28 for better work opportunities. Best decision I ever made as pay in mne is very low.
Ah, well, to quote from The Wizard of Oz, "That is a horse of a different color!"
So I imagine you speak the language fluently and if you are not already a citizen you can become one very easily.
Wonderful. Ignore everything I said above.
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