Opportunity cost: Donation vs fund or property

Honestly I think us choosing to donate 250k instead of “investing” 500k may end up being more profitable by the time we get citizenship (or even first cards :joy:) given that we can actually invest the money,

letting 500k stagnate for a decade in PT doesnt sound great. And I would be surprised if any GV oriented funds did better than break even. They know what kind of fish they have on the line…

Same goes for buying hotel rooms. Nobody has really tested selling theirs / the buy-backs yet, good luck.

Realty was probably the safest choice but my wife and I didn’t want to own property (housing in particular) in another country that is just going to sit (and we dont want to be landlords either.). Just more than we want to worry about.

350k invested in IMGA is doing fine. Marginal costs there are low - so far it has performed about half as well as SPX. Even 8 years of that is ˜112k USD assuming 400k invested at the start

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Actually “investing” was only 350k when we applied (thankfully), and our VC fund is doing rather well. Probably won’t work out as profitable as full amount in US market ETF over the same period but if you want to compare apples to apples with 250k donation and 100k invested, I don’t think you can call it stagnating. That said, I think what you did should get more credit than it has, and I agree it is much less hassle than property. We considered the donation route but my background is in tech so VC was an interesting path for us.

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No credit required, it was just our preference to “donate less” vs “lock up more”! Everyone elses paths seem to be working for them.

The opportunity cost has been, and will continue to be, very significant. The processing delays pushed the shareholders of our fund to extend the life of the fund another two years. So even if the wait for citizenship is shortened, our money remains tied up. What we lose by tying up the money so long is huge. Well beyond what it would have cost to donate. Still glad we’re doing this for all the same reasons we had at the start, but every step of the way has been another punch in the gut and the wallet.

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True, this is why we went for the cheapest hotel option - 280k in a share of a hotel being renovated in a low density area.

The opportunity cost vs plain old S&P 500 is steep. We hope to at least get our capital back due to the buy back, but if we don’t at least we had much less to lose than putting 500k into a fund.

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As an unsophisticated investor, am I missing something here?.. :face_with_monocle:

S&P 500 @ Dec 31, 2021 = 4,776
S&P 500 @ Dec 31, 2023 = 4,769

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You can’t take a snapshot of 1 year. It’s time in the market that matters and buying consistently. It works. I’ve been doing it for a decade.

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Sure, I get that, but we seem to be talking here above specifically about the GV “investment” vs. S&P. So I took the end of 2021 as an indicator of when people invested in GV en masse.
Can’t see any difference :slight_smile:
In fact GV most likely is doing better for some.

Now as you say 10 years - let’s ask the GV investors who applied in 2014.
Probably their then-€500k properties now worth x2-3 times more, no?

Well said tommigun. You can do an apples to apple comparison if you take the same time frame of your GV AND assume that you are long term passive investor in S&P ETF.

I will admit to being lazy and using last year’s numbers not since I first invested, I think that’s generous to IMGA though

Since my investment in ~November 2021

IMGA 2021: 5.884 (according to my records)
SPX 2021: ˜4600

IMGA now: 7.087
SPX now: ~4900

IMGA return: (7.087-5.884)/5.884 = ~20.5%
SPX return: (4900-4600)/4600 = ~6.5%

Not counting EURUSD changes

So on the face of it, IMGA has done better, but I suspect it’s just an outlier year. I don’t think, in general, Portuguese indexes will outperform the SPX, so I think assuming ˜4% returns a year post inflation is reasonable. But hey, maybe I’m lucky and will be wrong!

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Not sure what’s going on here, why are we divulging from the topic of this thread? Irrespective of what anyone claims with their frustrations or more, Portugal remains to be an attractive investment destination for Real Estate in particular as the demand hasn’t been receding from the locals, CPLPs and the new Non-CPLP immigrants alike Period. Even with uncertain global market conditions.

Small point… to compare, you should include dividends in the S&P return - in the Portugal index-trackers dividends are reinvested.

In my case, taking total returns including dividends, and in GBP terms, from my investment date of 23/9/21, my BPI Portugal investment is +24.1%, compared to +23.4% for the S&P, +21.9% for IMGA, +15% for the PSI20, +11% for Nasdaq and +10.5% for Stoxx 50. Pretty happy with that to be honest.

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Excellent point, thank you. I forgot since I just auto reinvest mine. Good data points!

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FWIW, and while I imagine what you say is true for many, I think some of them were created with a reasonable plan and are actually making money. I would say primarily because the principals have real skin in the game, something more than a token EUR1-2mm or the like.

While one of mine is losing small, the other is actually doing a respectable consistent 6-7%, AND it’s acting as a USD/EUR hedge in my portfolio - which if one is considering moving to Europe, is kinda important. (They threw a LOT of their own capital in. That was a major factor in my choice.)

So it isn’t all of them.

But unless you have a lot of experience in evaluating PE, from the outside, it can look like a real crap shoot.

And focusing on returns vs SP is only one way of viewing the world. Diversification and all that.

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Im more optimistic about the stock market in the future than in the cherry picked but relevant two years of sadness. Real estate hasnt really been a good option in that time period, so we can ignore that.

Sounds like I was way off on my read of the PT funds, or at least IMGA. Glad to hear it.

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This is a little in the weeds but I think we’re talking about two different calculations of opportunity cost here - predictive and retrospective. In general, if you’re making a prediction of the opportunity cost to assess if an investment is worthwhile, you use average returns over longer time frames than two years, otherwise you’re just gambling on the market. Looking at cherry-picked data from two years in hindsight gives you a distorted view of probabilities. Average yields for S&P500 low cost funds are higher than they were in 2021-3. And worth noting that, historically, when markets have slumped, it’s followed by a corrective rebound. There’s obviously a greater risk if you’re expecting a Portuguese fund to match or outperform SPY over a period as short as 5 years. In short term, market indices are more volatile than long term. But whenever you run the numbers your most reasonable assumption is that SPY will grow at historical average. And that is the opportunity cost you use to make your decision, with knowledge that expecting SPY match average yields gets riskier the shorter your time horizon.

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But Jeff, SPX IS diversified!

Honestly not sure if I’m being sarcastic here or not lmao

its got microsoft AND apple!

@ohbee That is just my kind of nerdy humor

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