New lump sum allocation advice. Tentative plan to moving abroad. [Thailand]

For investors outside the US. Personal investments, personal finance, investing news and theory.
Sister forums: Canada, Spain (en español)
---------------
Post Reply
Topic Author
AkhBgh
Posts: 5
Joined: Thu Jan 20, 2022 7:40 pm
Location: Thailand

New lump sum allocation advice. Tentative plan to moving abroad. [Thailand]

Post by AkhBgh »

Hi everyone, I would like to ask for some advice regarding how to do with allocation since I just received a lump sum money. I am married and has one baby.

I have a tentative plan to bring spouse and kid to either New Zealand, Australia or Canada (study diploma or post-grad for 1-2 years then work there).

I recently got gift money and need to have asset allocation that fits the undecided life situation.
_______________________________________________________________

Country of Residence: Thailand, has 15% dividend tax treaty but no estate tax treaty with US.
International Lifestyle: maybe.
Currency: Base currency is THB. All amount described here is converted to USD.
Annual spending: $20-25k (now it varies a lot since we just have baby)
Annual income: $30k
Emergency funds: $150k. (reserve in case I'm moving to NZ/AU/CA.)
Debt: No debt.
Age: 30-35
Desired Asset allocation: 60% stocks / 40% bonds (I previously target 70/30 but never have this much money and with high valuation, I'm not so sure)
Desired allocation to stocks outside your of country of residence: 70-90% of stocks (not sure)
_______________________________________________________________

Current retirement assets ~$500k
I just got gift money so mostly it is still 77% cash. The rest are local/DM/EM/Vietnam stocks/ETFs.

Before receiving the proceeds, I tried to diversify around 30% cash, 20% Thai stock, 25%DM, 25%EM. I previously buy US ETFs and stocks and keep US investment below $60k. Now I'm opening IBKR account to buy UCITS ETFs. I gradually become more into passive investment over time.

For the equity part, I plan to go with VWRA and tilt some with VFEA as I'm in an EM country myself. (I understand that VWRA already have some EMs)

But for bonds part, I'm not sure how to split between local and global bonds. Local long term bonds also doesn't have much to offer. So I have choice as follows:
AGGG (0.10%) unhedged
AGGU (0.10%) USD hedged
ABF Thailand Bond Index ETF ~8.36yr duration (0.24%) 2% bid/ask spread
KKP Fixed Income Plus - THB Short Term Bond Fund <1 yr duration (0.27%)

ABFTH has no volume and 2% gap bid/ask spread so I will have to live with local short term fixed income funds. I also want to diversify currency so for global one I choose AGGG.

Target allocation is as follows:
5% cash
15% KKP Fixed Income Plus - THB Short Term Bond Fund (0.27%)
20% AGGG (0.10%)

50% VWRA (0.22%)
10% VFEA (0.22%)
_______________________________________________________________

Questions:
1. Please give me some advice regarding allocation. Am I too conservative? What would you recommend allocation for each bond and stock funds?

2. Will having only 20% local currency be too risky? There is MSCI ACWI THB-hedge feeder fund (feeder has 0.69% expense) if we need to hedge equity portion or use Thai SET50 Index Fund (0.64%).

3. Should I go with 2% bid-offer spread ABFTH (THB Long Term Bond ETF) or stick with lower cost THB short term bond fund?

4. Will AGGG or AGGU fits a person living in Thailand better? I have read previous posts and still think there is no unanimous opinion for non-USD/EUR base currency? Thailand mostly do import/export with US, China and Japan.

5. I'm not sure if the emergency fund amount is too much? (Given the possibility of moving to another country.)

6. As Vietnam is growing and FDIs is shifting to them. (Thailand become less attractive.) Any thoughts on adding 5% of Vietnam VN30 Index ETF (0.80%) to hedge my country competitiveness?

7. Any other feedback is welcome and much appreciated.

Thank you :happy
Last edited by AkhBgh on Fri Apr 08, 2022 9:33 am, edited 2 times in total.
Laurizas
Posts: 519
Joined: Mon Dec 31, 2018 3:44 am
Location: Lithuania

Re: [Thailand] New lump sum allocation advice. Tentative plan to moving abroad.

Post by Laurizas »

AkhBgh wrote: Fri Jan 28, 2022 3:53 pm 1. Please give me some advice regarding allocation. Am I too conservative? What would you recommend allocation for each bond and stock funds?
60/40 is conservative, most people your age I know are 100 % stocks, but asset allocation is very personal and your 60/40could make sense having in mind the size of your portfolio.
AkhBgh wrote: Fri Jan 28, 2022 3:53 pm 2. Will having only 20% local currency be too risky? There is MSCI ACWI THB-hedge feeder fund (feeder has 0.69% expense) if we need to hedge equity portion or use Thai SET50 Index Fund (0.64%).
Vanguard research says one should not hedge stocks, only bonds.
AkhBgh wrote: Fri Jan 28, 2022 3:53 pm 5. I'm not sure if the emergency fund amount is too much? (Given the possibility of moving to another country.)
Maybe too much. My EF is a year's expenses.
AkhBgh wrote: Fri Jan 28, 2022 3:53 pm 6. As Vietnam is growing and FDIs is shifting to them. (Thailand become less attractive.) Any thoughts on adding 5% of Vietnam VN30 Index ETF (0.80%) to hedge my country competitiveness?
5 % will not move a needle, simplify.
AlohaJoe
Posts: 6609
Joined: Mon Nov 26, 2007 1:00 pm
Location: Saigon, Vietnam

Re: [Thailand] New lump sum allocation advice. Tentative plan to moving abroad.

Post by AlohaJoe »

AkhBgh wrote: Fri Jan 28, 2022 3:53 pm But for bonds part, I'm not sure how to split between local and global bonds. Local long term bonds also doesn't have much to offer. So I have choice as follows
I wouldn't bother with bonds given your age and uncertainty about where you'll be in a few years.
2. Will having only 20% local currency be too risky?
It's "risky" but probably not "too risky" given you are age. You have an emergency fund and are saving a fair amount relative to your income, so it isn't like you'll be selling anytime soon. When you're living in a minor currency (I'm in Vietnam so I sympathise) there are no good options and sometimes you just have to suck up the currency risk.

Usually the best option is some kind of local currency term deposit. But I'm hesitant to put large amounts in that (I've never had more than about one year's worth of expenses in local currency) and I expect you are too.
4. Will AGGG or AGGU fits a person living in Thailand better? I have read previous posts and still think there is no unanimous opinion for non-USD/EUR base currency?
I don't think there's a lot of benefit to hedging to USD when your local currency isn't in USD. I think it would only make sense if you usually view your portfolio in USD and you're hoping that bonds will reduce volatility in your overall portfolio so you don't panic during times of market stress.
5. I'm not sure if the emergency fund amount is too much? (Given the possibility of moving to another country.)
It is probably too much. Usually the emergency fund should be sized to fit a given emergency. That is, consider that it is insurance. What bad event are you trying to insure against? For many people the emergency fund is mostly "short term unemployment but I expect to find a job in 3-6 months" so they hold 3-6 months in their emergency fund. Having more than a year of emergency fund is hard to justify. That said, you might want to base your emergency fund size on a year of Australian/NZ/whatever expenses instead of your current expenses. I've known many people who have moved to a new country and it is often hard to initially settle in. Finding a job, housing, etc.
6. As Vietnam is growing and FDIs is shifting to them. (Thailand become less attractive.) Any thoughts on adding 5% of Vietnam VN30 Index ETF (0.80%) to hedge my country competitiveness?
I live in Vietnam and I would not invest in Dragon Capital or any other Vietnam specific fund. :D
User avatar
andrew99999
Posts: 1021
Joined: Fri Jul 13, 2018 8:14 pm

Re: [Thailand] New lump sum allocation advice. Tentative plan to moving abroad.

Post by andrew99999 »

AlohaJoe wrote: Fri Feb 04, 2022 8:13 am
AkhBgh wrote: Fri Jan 28, 2022 3:53 pm But for bonds part, I'm not sure how to split between local and global bonds. Local long term bonds also doesn't have much to offer. So I have choice as follows
I wouldn't bother with bonds given your age and uncertainty about where you'll be in a few years.

I find many bogleheads unnecessarily conservative in their thoughts with bonds, but for someone with such a large windfall and not being used to having that much of their money in a very volatile asset, I would not recommend 100% equities. I would err on the side of caution in the first year or two as they get used to maket swings with such an amount of money where panicking can cost them so dearly. They can readjust in a year or two as their comfort and education in market volatility grows.
Topic Author
AkhBgh
Posts: 5
Joined: Thu Jan 20, 2022 7:40 pm
Location: Thailand

Re: [Thailand] New lump sum allocation advice. Tentative plan to moving abroad.

Post by AkhBgh »

Thank you Laurizas, AlohaJoe and andrew99999 for replies and I really appreciated it.
Laurizas wrote: Fri Feb 04, 2022 7:49 am 60/40 is conservative, most people your age I know are 100 % stocks, but asset allocation is very personal and your 60/40could make sense having in mind the size of your portfolio.
AlohaJoe wrote: Fri Feb 04, 2022 8:13 am I wouldn't bother with bonds given your age and uncertainty about where you'll be in a few years.
andrew99999 wrote: Fri Feb 04, 2022 8:23 pm I find many bogleheads unnecessarily conservative in their thoughts with bonds, but for someone with such a large windfall and not being used to having that much of their money in a very volatile asset, I would not recommend 100% equities. I would err on the side of caution in the first year or two as they get used to maket swings with such an amount of money where panicking can cost them so dearly. They can readjust in a year or two as their comfort and education in market volatility grows.
People in my country tend to be very conservative on stocks allocation because of 1997 Asian financial crisis. My parents still give advice to not invest in stocks almost at all. Reading bogleheads advice to allocate more stock is really helpful for me to change that mindset. But I will need some time to cope with new portfolio and thank you for understanding. After 1-2 years, I will reevaluate the allocation and may be getting more aggressive.

For bond parts, I think I will mostly go with AGGG (unhedged) then.
AlohaJoe wrote: Fri Feb 04, 2022 8:13 am
AkhBgh wrote: Fri Jan 28, 2022 3:53 pm2. Will having only 20% local currency be too risky?
It's "risky" but probably not "too risky" given you are age. You have an emergency fund and are saving a fair amount relative to your income, so it isn't like you'll be selling anytime soon. When you're living in a minor currency (I'm in Vietnam so I sympathise) there are no good options and sometimes you just have to suck up the currency risk.

Usually the best option is some kind of local currency term deposit. But I'm hesitant to put large amounts in that (I've never had more than about one year's worth of expenses in local currency) and I expect you are too.
Considering exchange rate history of many countries, I kinda get your point. I will keep that in mind.
Laurizas wrote: Fri Feb 04, 2022 7:49 am
AkhBgh wrote: Fri Jan 28, 2022 3:53 pm5. I'm not sure if the emergency fund amount is too much? (Given the possibility of moving to another country.)
Maybe too much. My EF is a year's expenses.
AlohaJoe wrote: Fri Feb 04, 2022 8:13 am It is probably too much. Usually the emergency fund should be sized to fit a given emergency. That is, consider that it is insurance. What bad event are you trying to insure against? For many people the emergency fund is mostly "short term unemployment but I expect to find a job in 3-6 months" so they hold 3-6 months in their emergency fund. Having more than a year of emergency fund is hard to justify. That said, you might want to base your emergency fund size on a year of Australian/NZ/whatever expenses instead of your current expenses. I've known many people who have moved to a new country and it is often hard to initially settle in. Finding a job, housing, etc.
If I'm going abroad, the plan will be to study diploma or post-grad degree for 1-2 years to comply with 1-3 year work visa and specific job qualification. So I reserve the amount for living expense and tuition fee for 2 years. Maybe that's not an emergency fund but a college fund :D

If I'm not going, then maybe dropping to 1-2 years expense is safe for me. I'm not sure how people do when having only 3-6 months in emergency fund. I remember that in case of mass layoffs in 1997 Asian financial crisis and also recent covid-19, many people in some fields may not be able to find comparable jobs in 1 year. (And in our country, we don't really have unemployment support.) If they get in situation like this, will they just sell bonds portion in retirement/investing portfolio (and if stocks goes down at the same time then effectively reducing stock rebalance amount)?
AlohaJoe wrote: Fri Feb 04, 2022 8:13 am I live in Vietnam and I would not invest in Dragon Capital or any other Vietnam specific fund. :D
Could you please tell me the reason. Is it because the transparency of Vietnam stock market?
Last edited by AkhBgh on Sun Feb 06, 2022 5:07 pm, edited 1 time in total.
Laurizas
Posts: 519
Joined: Mon Dec 31, 2018 3:44 am
Location: Lithuania

Re: [Thailand] New lump sum allocation advice. Tentative plan to moving abroad.

Post by Laurizas »

AkhBgh wrote: Sun Feb 06, 2022 10:10 am People in my country tend to be very conservative on stocks allocation because of 1997 Asian financial crisis. My parents still give advice to not invest in stocks almost at all.
If there were to familiarize with world's stock market history and the concept of diversification, they would probably change their mind.
Post Reply