Let’s talk about investing for your future. One of those things you know you should be doing, but probably aren’t.
This is a companion discussion topic for the original entry at https://nomadgate.com/investment-strategy-digital-nomads-expats/
This is a companion discussion topic for the original entry at https://nomadgate.com/investment-strategy-digital-nomads-expats/
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I’ll trow the first stone 
I remember Bogle, Shiller and Dalio stating you should expect future US returns in the 4-5% range. I would also accordingly use a withdrawal rate of 3-3.5%
First of all thanks a lot for your article @tkrunning , it’s probably one of the best, most well-structured article I’ve read for a long time. It definitely made my day, especially considering that most of the articles out there are targeted towards US citizens and finding all this information for non-US citizens in a condensed article like this are immensely valuable!
I have a lot of questions for you but I’ll start small, hope that can also help the rest of the community .
You’ve probably already read from me in this article but I’ll redo a quick intro of my tax situation:
I’m currently a resident of French Polynesia, a non-EU/non-US country with no income tax and no tax treaties with the US. Hence I’m entitled to pay a 30% withholding tax on all my US holdings. I’m currently investing in US securities thought my Interactive broker brokerage account in order to achieve FI someday. My main currency is USD as I’m a freelancer working for a US client.
So far I’ve been investing only in some good dividend yield US stocks (ABBV, AVGO, XOM, D, UNM, MSM, TXN, etc…) and I told myself that there was no “easy way” around the 30% withholding tax and I just had to live with it (ofc there are ways to avoid/reduce it but it involved creating complex structures in the US or in the EU if I remember correctly). Also, I can buy them without having to do any currency conversion to the EUR or other currencies.
Another reason why I invested in US stocks instead of EU/Non-US is that it’s much easier to access resources on the internet when you want to know basic things such as the dividend yield/growth/payout ratio/management and all the financial info you could ever need before making the investment. I found that lacking when it comes to international investing. Most of the time I would find myself looking at 5 different websites to find the info I want for a particular company or ETF and sometimes I can’t even find it… For instance, I’m using SeekingAlpha heavily for my US stocks, are you aware of any equivalent for the non-US stocks? (or at least for the ETFs you shared in your article: Vanguard FTSE All-World UCITS ETF / iShares Core MSCI World ETF USD Acc / Vanguard FTSE Developed World UCITS ETF…)
Now thanks to your article I discovered that I could invest in US companies, in USD, through Ireland based ETFs… I didn’t know that stuff even existed…
So if I get this right and I invest in say: Vanguard FTSE All-World UCITS ETF, I won’t be entitled to any withholding taxes?
What other Irish ETFs would you recommend for growth dividend portfolios? Any resources focusing on that?
Last question: Do you think I should sell my US stocks (only at a profit ofc) and instead reallocate my money only in ETFs (and more precisely in Non-US ETFs)?
While investing in individual stocks looks great in the short run I’m afraid I’ll find myself monitoring my stocks too often for dividend policy changes and after owning a bunch of stocks my investment won’t be “passive” anymore as I’ll allocate a significant portion of my time for monitoring which I guess, doesn’t apply to ETFs.
Thanks a lot!
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@hamsteroo If you’re talking about articles like this, that’s talking about the next decade. Of course, it’s not unlikely that we see some sort of correction at some point in the next decade (e.g. return to more normal P/E ratios) which is why Bogle is predicting a ~4% return. Perhaps he’s right, perhaps he’s not. He even stresses in that article that it’s just a guess (although a qualified one).
I don’t know about you, but my investment horizon is several decades, perhaps half a century, and such “short term” fluctuations—even if they do happen—I don’t think that should cause me to consider a 4% withdrawal rate too optimistic over the long run. But that’s just my opinion. If you feel safer operating with a 3% safe withdrawal rate it just means you should save up a bit more before “retiring” or make due with a bit less money during retirement.
@Tuatini For a lot of the EU based funds you can use JustEFT’s ETF Screener to find most or all of the information you’ll need.
Yes, you don’t pay any withholding taxes. The fund itself pays 15% on its US holdings.
I personally avoid tilting my portfolio to any specific type of stock (growth etc), so that’s not something I’ve looked into. But if you know an index of such stocks, you can look for ETFs following that index on JustETF.
Personally I would do that (assuming you mean non-US domiciled ETFs, not ETFs that exclude the US market). I have no interest spending the time and energy needed to even have a remote chance at beating the markets over the long run. If you enjoy the process, then that might change the answer for you.
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That, this Why the 4% rule doesn't work - Monevator and the so-called sequence of returns (i.e. you can be hit by the low return decade once you are in retirement then followed by a recession, etc) It's not fair! Sequence of returns risk - Monevator
@Tuatini I was going to post a reply but I see that @tkrunning has said almost everything I intended to. I would add a recommendation for the following sections of the Bogleheads wiki:
https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles
https://www.bogleheads.org/wiki/Non-US_investor%27s_guide_to_navigating_US_tax_traps
https://www.bogleheads.org/wiki/Nonresident_alien%27s_ETF_domicile_decision_table
https://www.bogleheads.org/wiki/Nonresident_alien_with_no_US_tax_treaty_%26_Irish_ETFs
Also, in doing calculations about the rate of return, don’t forget to consider the effect of inflation, which at the moment is very low but may not stay such forever.
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Hi @tkrunning ! Great article! I’m always on the lookout for nomad-specific advice so this was great!
Here’s something that wasn’t covered: I’m from Argentina, and starting in February I won’t be a tax resident anymore. I also have an EU passport which I’m planning to start enjoying next year but I’ve never lived in any EU country yet.
Now, since I won’t be a resident of any country in Feb, how would this work if I want to avoid becoming a resident of any other country? As far I understand, to open a bank account (even TransferWise or N26) I need to be a resident. Is the Estonian e-residence the only option?
I don’t think becoming a resident (and paying taxes for a year) is worth it to start investing.
Thoughts?
Thanks again for the article and your site!
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@golds.aj When it comes to bank/investment account openings you often don’t need to prove your residency. If you travel to Europe and have access to an address for a while I don’t think you’d have any problems getting e.g. an N26 account.
With an N26 account it’s easy to open a DEGIRO account as well, and TransferWise should be fine as well (if they ask for address proof you can probably use an N26 statement).
You will probably be asked for country of tax residency (this is for AEOI/CRS reasons), and if I were in your shoes I’d just put the country of the address where you open your accounts, or one of your citizenship countries (Argentina or the EU country where you’re a citizen). You’ll be asked for an ID code, and if you don’t have that for that country I’d just add my date of birth, passport number, or something like that.
Note that Estonian e-residency isn’t a personal tax residency so that won’t help you—although if you have an Estonian company that is by default an Estonian tax resident (so might help you with getting a corporate account with Interactive Brokers).
@tkrunning Oh, really? I had been told by TransferWise that I needed an ID with my address on it. I was also confused by your post on how to open an N26 account that says I have to be a resident and show an ID (I guess the ID doesn’t need to be linked to the address where you are living at the moment?) How to Open an N26 Bank Account—from Anywhere | Nomad Gate
Cool, I’ll go with this route, then.
Thanks!
Yeah, there’s no need for the ID to have an address on it. N26 doesn’t verify your address other than sending your card there—by activating your card you’ve “proved” your address.
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I have found this series of articles to be most comprehensive re: SWR: The Safe Withdrawal Rate Series – A Guide for First-Time Readers – Early Retirement Now There are two different calculators too which I have yet to try.
I am a location independent, i.e. I’m not registered in Germany anymore and don’t stay more than 6 month in a country so I do not have to pay taxes as I’m not a resident anywhere. What’s the best way to invest into ETFs in this situation? Are there even ways to avoid paying tax alltogether or do you have to be a resident somewhere to invest?
Your ability to invest in ETFs will be hindered by not being able to provide the basic information for KYC requirements. The best option depends on your needs and comfort levels. What I can recommend is that you obtain residence in either a territorial tax country or a tax heaven. First consider which brokers you are open to use, then look at countries that they operate in that favor your plan/needs.
In practice I think you should be able to invest in ETFs without much problems.
Do you still have a bank account in Germany? Then you should easily be able to sign up for a DEGIRO account.
You’ll of course have to provide an address when signing up, but they won’t ever mail you anything there. As long as you have officially de-registered from Germany it shouldn’t cause any issues if you keep the address of a friend or a family member on the account.
I doubt you’ll ever be asked to prove the address, but if you are, a simple bank statement should do the trick.
By the way, this is the most complete article I’ve found. Thank you for sharing this information with us.
I have a point that if you’re currently living in Ireland, investing in Non-EU/Irish domiciled ETF’s might be better a better option if you’re planning to move to another country, and follow a buy&hold philosophy. See if it makes sense, considering of course a non-us citizen:
So, in Ireland you’re taxed 41% for all dividends/or capital gain (CGT) for EU/Irish ETFs, tough for other ‘offshore’ ETF’s (e.g. US, Singapore, etc) you pay up to 52% (Income Tax, USC, PRSI) of taxes in dividends, and 33% in CGT when selling your position. So it seems EU ETF’s seems better for taxes.
Here’s the thing: for EU/Irish ETF’s, there’s a deemed disposal every 8 years, that means that even if I have an accumulating ETF and I don’t want to sell it (thinking in long-term investment), I would still have to pay 41% of taxes on the CGT every 8 years due to this this deemed sale. Now, if I invest in a non-EU accumulating ETF, I won’t be subject to deemed disposal as it operates under the CGT regime, so I can let my investment run on without paying any taxes until I sell it. Imagining that in 20 years I move to another country where the CGT is lower than 33%, I would even pay even less taxes.
Is my thinking correct? Then, I have some questions if anyone knows this:
a) After growing my capital in an ETF, and I decide to move to a distributing dividend, what’s usually the best way to do that, selling a few every month when approaching my golden age?
b) If I move to another country that only taxes me for capital growth after moving to that country, would that mean I wouldn’t pay taxes at all in my initial investments?
Thanks !!
Hi @tkrunning! First of all hats off! Fantastic article with great depth. I have read it at least 4 times. I hope you can answer my following additional questions that go into detail.
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If I understand your article correctly, as a perpetual traveler without residency and German citizenship it is best to invest in distributing ETFs because I am not tax liable in any country and hence do not have pay tax on my capital gains. If I decide at a later stage to move and settle back in Germany, I will have saved tax by choosing distributing ETFs over accumulating ETFs. Is this correct?
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Next to the 183 day rule there is another rule in Germany where you can be tax liable in Germany even without residence and below 183 if you have ‘essential economic interests’. 1 out of 3 options of having such is if you have assets that are worth more than 154 000 Euro. In your article you say ‘The domicile of a fund is where it is registered’. I am trading with a German broker and limit my assets on there at/below the 154k limit. Do you think only ETFs/stocks with German domicile will count as ‘German assets’ or does it entail all assets sitting in this German broker account? And going further, can I trade with a non-German broker ETFs with German domicile without increasing my assets in Germany and risking to go above the 154k limit or should I stick to only Irish domiciled ETFs?
I hope these questions somewhat make sense
Thanks you so much in advance!
Truth is simple:
For long term investment,
gold is the best profitable,
no correlation between profit and spending time for investment,
darts (or monkey) portfolio beats professonal investers and managers,
Interest(dividend) never overcomes inflation,
if you would like to win the game, cut investment costs and never ask professional advisers who work forever taking your money.
Hi Thomas -
Great website and lots of useful resources.
To add something for your readers - the Fixed Income Index Funds / Bond ETFs for European Investment Portfolios is somewhat light on typical places where you can find such information for US Financial Independence Community (Bogleheads, FIRE Blogs)
I have done some extensive analysis of Bond ETFs for Europe and UK that your readers may find helpful including Government and Aggregate Bond ETFs.
I will be growing this space with resources related to Investment Portfolios for the community from an European / UK angle including asset allocation and Equity Index Funds:
Hope this helps,
Raph
Yeah, there’s no need for the ID to have an address on it. N26 doesn’t verify your address other than sending your card there—by activating your card you’ve “proved” your address.
Yes, that happened when I opened a Monese account. They tried to use my phone GPS location to confirm address, but it was impossible. However, all was okay when I received and activated the card.