Index Investing & Financial Independence For Expats: Getting Started Guide

A SIMPLE, PRACTICAL, AND EFFECTIVE INVESTMENT APPROACH FOR REGULAR PEOPLE
Index Investing &

Financial Independence
for Expats
Getting Started Guide

Index Investing & Financial Independence for Expats
Revision History
Version Change Description Date

1.0 Initial release June 30, 2020
Author: Elie Irani.
Contributing authors: Sébastien Aguilar and Steve Cronin.
Reviewers: Sébastien Aguilar, Steve Cronin and Demos Kyprianou.
Foreword by Andrew Hallam.
Cover design: Sébastien Aguilar.
Document layout: Elie Irani.
Special thanks to Dorota Aguilar, Heidi-Jane Hill, and Jen Lincoln.
The most recent version of this guide can be downloaded from

https://www.simplyfi.org/getting-started-guide
www.simplyfi.org Getting Started Guide | i

Disclaimer
No warranty is made with respect to the accuracy, completeness, suitability or validity of any
information in this guide (the ‘Publication’) and therefore SimplyFI.org shall not be liable for any
errors, omissions or any losses or damages (personal or otherwise) incurred as a consequence,
directly or indirectly, of the use or application of any of the contents in this Publication. All
information is presented on an “as-is” basis.
By reading this Publication, you agree that any or all parties associated or affiliated with
SimplyFI.org (the ‘Parties’) are not, and in no way present themselves as, professional financial
advisors, consultants or coaches, that you are not pursuant to any kind of financial transaction,
and this Publication is not, and does not contain advice or instruction of any kind, but is merely
presented for the purposes of discussion and entertainment. You hereby agree to release,
waive, defend, indemnify and hold the Parties harmless from any claims, damages, or liability
arising from the use of this Publication or from following any links contained within it.
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Foreword
If you’re looking for a guide to financial independence, you’ve come to the right place. The
SimplyFI community in the UAE has worked hard to build resources and knowledge that they
are sharing with others. If everyone continues to do the same, we’ll spread the rules of wealth
that we should have learned in school.
― Andrew Hallam
Author: Millionaire Expat: How To Build Wealth Living Overseas (Wiley 2018, 2020) and
Millionaire Teacher (Wiley 2011, 2017).
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Introduction
“In a dark place we find ourselves… and a little more knowledge might light
our way.”
― Master Yoda, Star Wars: Episode III, Revenge of the Sith
In the expat world, in a galaxy far, far away, many professionals are working hard to make a
living away from their home country in the hopes of a better future. In their quest for a better
tomorrow, they might have discovered the Force of investing as a way to build wealth and
achieving financial independence.
However, many factors could lure you as an expat investor into the destructive Dark Side of
the Force: Fear which makes you behave irrationally, Greed which tempts you to pursue some
deceiving “get rich quick” schemes (or more accurately scams), or even Ignorance which
might get you into some investments or financial products that might not be suitable for you.
We at SimplyFI (no, that’s not a typo), consider ourselves as eternal apprentices, learning the
ways of the Light Side of the Force from the best Jedi1 masters in the galaxy (i.e. renown best-
selling authors, individual investment advocates, academic researchers, and personal finance
gurus), many of which are referenced throughout this guide. Building on the knowledge and
experience acquired over the years, we have decided to summarize what we have learned
in a single informational guide. We hope this will empower you to take better control of your
finances and avoid the most common mistakes so you could invest like a Jedi (i.e. without fear
or greed).
There is plenty of investment literature out there (books, blogs, etc…), so why another guide?
Well, we understand that the average person might not want to read boring investment books,
and then try to filter the good from the bad and the ugly. We are also aware that the mere
idea of investing might feel overwhelming to the absolute beginner. Therefore, we have put
together a simple, easy, and practical concise guide that can be read in a couple of hours or
even less. It helps the beginner investor make sense of the necessary terminology, walks the
reader through some core principles on index investing, and describes the steps to building a
solid investment plan with clear objectives towards financial independence. The guide also
provides an actionable step-by-step playbook for starting on the investment journey, building
& managing an investment portfolio, while avoiding the most common investment mistakes.
Since we are personal finance enthusiasts and not qualified investment professionals, we
understand that you might not want to take our word at face value (in fact, we even
encourage you not to!). Therefore, we made sure to include plenty of external references and
resources so that you can do your own research or just in case you want to learn more about
any particular topic.
This guide is broken down into several self-contained digestible sections or parts. To make the
best out of your reading experience, we recommend that you read these parts in sequence,
1In case you have never watched any of the Star Wars movies, a Jedi is a member of a
mystical knightly order, trained to guard peace and justice in the galaxy.
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but feel free to jump back and forth through the different sections as you see fit. Here’s how
the document is structured:
In Part 1 “Core Concepts”, we define some basic terms, explore a few investment choices,
and walk you through our adopted investment philosophy. We also provide you with some key
facts so you could better understand the market dynamics and invest without fear.
In Part 2 “Your FI Playbook”, we provide you with a clear and simple investment framework as
well as some practical and actionable steps you can easily implement to get your finances in
order and start on your investment journey.
In Part 3 “Behavioral Mistakes”, we discuss some psychological biases that might mess with
your head and make you second-guess your strategy. These natural predispositions tend to
jeopardize a well laid-out plan and wreck your financial future. We show you how to keep
them in check.
In Part 4 “Portfolio Construction”, we provide some criteria to look for when choosing your ETFs
(i.e. investment funds) and present a few sample portfolios that you could use as inspiration for
building your own.
In Part 5 “Protect Your Wealth”, we explore a few other aspects related to your financial well-
being during your wealth accumulation phase, such as life and medical insurance, as well as
estate planning. We also provide some guidelines for withdrawing from your portfolio during
your retirement years.
In Part 6 “Getting Some Guidance”, we explore a few different ways to get started with index
investing: from a hands-on DIY approach to a completely hands-off approach using a fee-
only advisor, and everything in between.
In Part 7 “Additional Resources”, we have compiled plenty of external references that we have
found useful: from blogs & websites, podcasts & videos to best-selling books.
Finally, in “Frequently Asked Questions” we have addressed some of the most commonly asked
questions on our Facebook group.
As with everything we do, this guide has been developed by our team of volunteers to serve
the community and is made available to you free of charge. With that said, if you find the
guide useful, please share it with at least 3 friends or colleagues. The simple practical
knowledge in it might change their lives as much as it might change (or has already changed)
yours.
― SimplyFI board members.
“Pass on what you have learned.”
― Master Yoda
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Contents
Part 1. Core Concepts ..........................................................................................................................1
1.1. SimplyFI: Who We Are and What We Do ..............................................................................1
1.2. About The Bogleheads® .........................................................................................................1
1.3. What is Financial Independence? ........................................................................................1
1.4. How Much Money Do You Need To Become Financially Independent? .....................2
1.5. Investment Choices ..................................................................................................................2
1.5.1. Stocks ......................................................................................................................................2
1.5.2. Bonds.......................................................................................................................................2
1.5.3. Real Estate .............................................................................................................................3
1.5.4. Mutual Funds (Unit Trusts) ....................................................................................................3
1.5.5. Exchange Traded Funds .....................................................................................................3
1.5.6. Hedge Funds .........................................................................................................................4
1.5.7. Gold ........................................................................................................................................4
1.5.8. Commodities .........................................................................................................................4
1.5.9. Cryptocurrencies ..................................................................................................................4
1.6. Bogleheads® Investment Philosophy ....................................................................................5
1.6.1. Develop A Workable Plan ..................................................................................................5
1.6.2. Invest Early And Often .........................................................................................................7
1.6.3. Never Bear Too Much Or Too Little Risk ............................................................................8
1.6.4. Never Try To Time The Market .............................................................................................9
1.6.5. Use Index Funds ....................................................................................................................9
1.6.6. Keep Costs Low.................................................................................................................. 10
1.6.7. Diversify ................................................................................................................................ 11
1.6.8. Minimize Taxes .................................................................................................................... 11
1.6.9. Keep It Simple..................................................................................................................... 12
1.6.10. Stay The Course ................................................................................................................. 12
1.7. Key Facts About Financial Markets .................................................................................... 13
1.7.1. The Stock Market Always Rises Over Time .................................................................... 13
1.7.2. Nobody Can Accurately Predict The Market In The Short Term .............................. 13
1.7.3. On Average, Market Corrections Have Happened Once A Year .......................... 14
1.7.4. On Average, Only 1 In 5 Corrections Turn Into A Bear Market ................................. 14
1.7.5. On Average, Bear Markets Have Happened Every 3 To 5 Years ............................. 14
1.7.6. Bear Markets Always Turn Into Bull Markets .................................................................. 14
1.7.7. Staying Invested Is The Wisest Thing To Do.................................................................... 15
Part 2. Your FI Playbook ..................................................................................................................... 16
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2.1. Pay Off Your Credit Card Debt ........................................................................................... 17

2.2. Set Up An Emergency Fund ................................................................................................. 17
2.3. Develop An Investment Plan ............................................................................................... 17
2.4. Open A Brokerage Account................................................................................................ 18
2.5. Transfer Money To Your Brokerage Account .................................................................... 18
2.6. Buy Your ETFs ........................................................................................................................... 18
2.7. Rebalance Your Portfolio...................................................................................................... 20
2.7.1. When To Rebalance ......................................................................................................... 20
2.7.2. How To Rebalance............................................................................................................ 20
2.7.3. Rebalancing Example ...................................................................................................... 21
2.8. Ignore Financial News ........................................................................................................... 21
2.9. Avoid Common Mistakes ..................................................................................................... 21
2.9.1. Panic Selling In A Market Crash ...................................................................................... 22
2.9.2. Stopping Contributions In A Declining Market............................................................. 22
2.9.3. Speculation ......................................................................................................................... 22
2.9.4. Chasing Performance ...................................................................................................... 22
2.9.5. Working With The Wrong Financial Advisor .................................................................. 23
Part 3. Behavioral Mistakes ............................................................................................................... 24
3.1. Overconfidence..................................................................................................................... 24
3.2. Greed ....................................................................................................................................... 24
3.3. Fear Of Regret ........................................................................................................................ 24
3.4. Loss & Risk Aversion ................................................................................................................ 25
3.5. Anchoring ................................................................................................................................ 25
3.6. Recency Bias........................................................................................................................... 25
3.7. Confirmation Bias ................................................................................................................... 25
3.8. Negativity Bias ........................................................................................................................ 26
3.9. Action Bias ............................................................................................................................... 26
3.10. Inertia/Procrastination ........................................................................................................... 26
Part 4. Portfolio Construction ............................................................................................................ 27
4.1. ETF Selection ............................................................................................................................ 27
4.2. Sample Portfolios .................................................................................................................... 27
4.2.1. Global 2-Fund Portfolio For Non-Americans ................................................................. 28
4.2.2. Global 2-Fund Portfolio For Americans .......................................................................... 28
4.2.3. Global Islamic Portfolio For Non-Americans ................................................................. 28
Part 5. Protect Your Wealth .............................................................................................................. 29
5.1. Life Insurance .......................................................................................................................... 29
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5.1.1. Term Life Insurance............................................................................................................ 29

5.1.2. Permanent Total Disability & Critical Illness Covers ..................................................... 29
5.1.3. How Much Life Insurance Do You Need?..................................................................... 30
5.1.4. Term Life, PTD & CI Providers ........................................................................................... 30
5.2. Medical Insurance ................................................................................................................. 30
5.3. Estate Planning ....................................................................................................................... 30
5.4. Withdrawing From Your Portfolio In Retirement................................................................ 31
5.4.1. Constant Dollar Withdrawal Strategy ............................................................................ 31
5.4.2. Constant Percentage Withdrawal Strategy ................................................................. 31
Part 6. Getting Some Guidance ...................................................................................................... 33
6.1. DIY Index Investing ................................................................................................................. 33
6.1.1. SimplyFI ................................................................................................................................ 33
6.1.2. Andrew Hallam .................................................................................................................. 34
6.1.3. Bogleheads® ...................................................................................................................... 34
6.2. DIY Index Investing With Guidance Or Coaching ........................................................... 34
6.2.1. DeadSimpleSaving – Steve Cronin................................................................................. 34
6.2.2. PlanVision – Mark Zoril ....................................................................................................... 35
6.3. Index Investing With A Robo-Advisor.................................................................................. 35
6.3.1. Sarwa ................................................................................................................................... 35
6.3.2. Wealthface ......................................................................................................................... 35
6.3.3. Wahed Invest ..................................................................................................................... 35
6.4. Index Investing With A Fee-Only Financial Advisor .......................................................... 35
6.4.1. AES International................................................................................................................ 36
6.4.2. The Fry Group ..................................................................................................................... 36
6.5. Summary Table ....................................................................................................................... 36
Part 7. Additional Resources............................................................................................................. 38
7.1. Blogs.......................................................................................................................................... 38
7.2. Podcasts................................................................................................................................... 39
7.3. YouTube Channels ................................................................................................................. 40
7.4. Books......................................................................................................................................... 40
Frequently Asked Questions ................................................................................................................... 42
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PART 1. CORE CONCEPTS

1.1. SimplyFI: Who We Are and What We Do
SimplyFI is a non-profit community of personal finance and investing enthusiasts who help and
empower each other to achieve financial independence.
We are not professional advisors. What we share is based on our personal experiences. This
means we're not trying to sell you anything. Instead, we volunteer to organize meetups where
we can all learn from each other.
We're not getting paid, nor get commissions or kickbacks from any sources. We run this group
100% as volunteers because we believe it is important.
We are the official UAE chapter of the Bogleheads® and follow their simple and effective
guiding principles for investing in the stock market.
We are also the official UAE chapter of ChooseFI, a podcast that empowers its community to
take action towards financial independence.
1.2. About The Bogleheads®

Bogleheads®, a term intended to honor Vanguard founder and individual investor advocate
John “Jack” Bogle, are investing enthusiasts who follow Bogle’s investment advice and
philosophy, which is primarily about buying and holding low-cost index funds.
1.3. What is Financial Independence?

Financial Independence (FI) is the status of having enough passive income to pay for all your
living expenses for the rest of your life, without depending on any paying job or work.
Passive income is generated by your assets such as a rental property, a business you own, or
an investment portfolio, without the need for you to trade your time and effort for money.
“FI is not about retiring early or retiring at all really. It’s all about having the
freedom and flexibility to design your life in alignment with your values. You can
work on things important to you. You can work at your own pace. Or you can
choose not to work at all. FI gives you the power to decide. It allows you to use
your money as a tool to live a rich life, freeing yourself from the need to go to
a job.”
― Chris Mamula, Choose FI: Your Blueprint to Financial Independence
The 3 building blocks of Financial Independence are:
▪ Spend less
▪ Earn more
▪ Invest the difference
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1.4. How Much Money Do You Need To Become Financially

Independent?
To become financially independent, your investments need to generate enough income to
cover all of your living expenses. A study performed in 1998 at Trinity University found that if you
withdraw an inflation-adjusted 4% of your investment portfolio’s value per year (net of fees and
taxes), your investment portfolio is very likely to sustain your desired lifestyle/expenses for about
30 years in retirement1. This 4% is also known as the safe withdrawal rate (SWR).
Using this 4% rule of thumb as a guideline and working the math backward, it can be
concluded that you would need to accumulate 25 times (=1/4%) your projected yearly
expenses in retirement2 (adjusted for inflation) to become financially independent:
Your FI number = 25 x Your Total Yearly Expenses (adjusted for inflation).
To learn more about the topic, check out this excellent article by Andrew Hallam:
https://en.swissquote.lu/expat-investing/retirement/how-much-money-do-you-need-to-retire
1.5. Investment Choices

There are several types of assets (aka asset classes) that you can invest in. We shall quickly
introduce the most common asset classes below for the sake of completeness, but it is not
necessary nor recommended to invest in all of them:
1.5.1. Stocks
A stock (aka equity) is a security that represents the ownership of a fraction of a company
such as Apple, Coca-Cola, or Nestle. This entitles the owner of the stock to a proportion of the
corporation's assets and profits equal to how much stock they own. Units of stock are called
shares. Stocks usually appreciate in value over time and some of them even pay regular
dividends, which refer to the distribution of a portion of the company’s earnings paid to its
shareholders.
1.5.2. Bonds
A bond is a fixed income instrument that represents a loan made by an investor to a borrower
(typically a company or a government). Bonds typically pay a fixed regular interest to the
investor and have a maturity date at which point the principal amount must be paid back in
full to the lender.
Note: since the traditional interest-paying structure of a bond is not permissible under Sharia
law, Muslims have an alternative to bonds known as “Sukuk”, which is an Islamic financial
certificate (similar to a bond), that complies with Islamic Sharia. The issuer of a Sukuk sells an
investor group a certificate and then uses the proceeds to purchase an asset, of which the
investor group has partial ownership. The issuer must also make a contractual promise to buy
back the Sukuk at a future maturity date at par value.
1 Over 30 years rolling period, a portfolio of 50% stocks and 50% bonds with 4% yearly
withdrawals had a success rate of 96% without fees, 84% success rate with 1% fees, and 65%
success rate with 2% fees.
2 For the sake of simplicity, you can use your current yearly expenses as a rough approximation.

1.5.3. Real Estate

There are different ways of investing in real estate: from more active methods (i.e. being a
landlord) to slightly less active (i.e. having a real estate agent handling it for you), to REITS (Real
Estate Investment Trusts). It really depends on your goals.
You can search through past posts in the SimplyFI Facebook group for some help. There is a
great presentation on real estate investment on our website:
https://www.simplyfi.org/post/2017/10/13/dubai-meetup-17-real-estate-experience-in-
purchasing-uk-property-by-heidi-matt-and-an
1.5.4. Mutual Funds (Unit Trusts)

A mutual fund (called a unit trust in the UK) is a type of financial vehicle made up of a pool of
money collected from many investors to invest in securities like stocks, bonds, and/or other
assets. Mutual funds are usually operated by professional money managers, who allocate the
fund's assets and attempt to produce capital gains or income for the fund's investors.
We are not huge fans of actively managed funds because there is a lot of evidence that over
the long term, the vast majority of actively managed funds underperform the market, namely
due to the high associated management expenses that will cause a drag on investment
performance. See section 1.6.6 “Keep Costs Low” for more info.
1.5.5. Exchange Traded Funds

An Exchange Traded Fund is a basket of stocks or bonds that is traded just like a stock on an
exchange such as the London Stock Exchange or the New York Stock Exchange. Most ETFs
track an index such as the S&P 5001, FTSE 1002, MSCI World3, or many others.
Index tracking ETFs are undoubtedly the best and preferred investment vehicle for expats as
they offer multiple advantages. ETFs are:
▪ low-cost with management charges typically between 0.03% to 0.60%

▪ transparent and typically widely diversified
▪ liquid and easily traded on major stock exchanges
▪ accessible (they only require low starting capital)
▪ tax efficient
For more info about ETFs, check out the below references:
▪ https://www.bogleheads.org/wiki/Investing_FAQ_for_the_Bogleheads%C2%AE_forum#W
hat_is_an_ETF.3F
▪ https://www.justetf.com/uk/academy/what-is-an-etf.html
1 An index that tracks 500 of the largest US companies. This index is maintained by Standard &
Poor.
2 Pronounced “Footsie 100”, this is an index that tracks 100 of the largest UK companies,
maintained by the FTSE (Financial Times Stock Exchange) Russel company.

3 An index composed of more than 1600 stocks from 23 developed countries, maintained by
Morgan Stanley Capital International.

1.5.6. Hedge Funds

Hedge funds, just like mutual funds, pool money from (usually high net-worth) investors, but
unlike mutual funds, they are not transparent and might use highly complex financial
instruments such as derivatives and alternative investments. Hedge funds can bet on either
direction of the market (i.e. up or down) and charge hefty fees (typically 2% of assets under
management) in addition to 20% of profits.
Due to their associated high fees and the fact that they tend to underperform the market over
the long term, it is not recommended to invest in hedge funds. For more info, check out the
below article:
https://www.theglobeandmail.com/investing/article-etf-strategies-can-beat-hedge-funds-
during-good-times-and-bad/
1.5.7. Gold
“Gold gets dug out of the ground in Africa, or someplace. Then we melt it
down, dig another hole, bury it again, and pay people to stand around
guarding it. It has no utility. Anyone watching from Mars would be scratching
their head.”
― Warren Buffet
Gold is known to be very volatile and its price fluctuates quite a bit. Every once in a while, gold
prices soar and investors start piling in. However, every single time that this happened, the price
has ultimately collapsed. Over the long term, gold has barely kept up with inflation. With that
said, gold is considered highly speculative as opposed to being an “investment”.
Gold can be bought in its physical form, or more conveniently in the form of an ETF (or more
accurately an ETC – for Exchange Traded Commodity), but most investors would be better
served with a classic portfolio of stocks and bonds. The few possible exceptions might include:
▪ Sharia-compliant investors with no access to Sukuk funds could hold some gold in their
portfolio in addition to cash as a replacement for bonds (which are not Sharia-
compliant).
▪ Investors with a non-classic “risk-parity” portfolio such as the Permanent Portfolio or the
Golden Butterfly portfolios. It is important though that they rebalance these portfolios
regularly.
1.5.8. Commodities
Commodities are basic raw materials that are either consumed directly or used to produce
other products. Examples include metals, oil & gas, cotton, grains, livestock, etc…
Commodities’ prices fluctuate up and down, but over the long term, they tend to keep pace
with inflation.
Bogleheads® and SimplyFI members are not usually huge fans of investing in commodities.
1.5.9. Cryptocurrencies
A cryptocurrency is a digital or virtual currency that does not usually exist in physical form. A
cryptocurrency uses strong encryption (cryptography) to secure transactions.

Cryptocurrencies are not part of the Bogleheads® philosophy and buying cryptocurrencies is
considered speculation, not investing. There are other forums and Facebook groups you can
join for these discussions. For more info, check out the following links:
▪ https://en.wikipedia.org/wiki/Cryptocurrency
▪ https://www.investopedia.com/terms/c/cryptocurrency.asp
If you want to speculate, follow Jack Bogle’s advice and put no more than 5% of your portfolio
into speculative “investments”. You can take it from Jack himself in the article below under the
last section - Advice for investors who can’t be satisfied with shutting their eyes, doing nothing,
and letting indexing work in their favor:
https://www.marketwatch.com/story/jack-bogles-advice-to-worried-investors-shut-your-eyes-
and-let-the-indexes-work-2014-11-03
1.6. Bogleheads® Investment Philosophy

Bogleheads® follow a few simple investment principles that have been proven to generate
better returns than those achieved by more “sophisticated” investors. These principles are
derived from Nobel prize-winning financial economics research on topics like Modern Portfolio
Theory1 and the Capital Asset Pricing Model2 (you don’t need to know about any of these
terms unless you are really keen!). The basis of the Bogleheads® principles is the idea that
successful investing is not complicated and can be accomplished by anyone with a small
amount of effort. Moreover, it does not require that you become a financial expert, nor do
you need to follow the economy, financial news or analysts.
The Bogleheads® investment philosophy consists of the following core principles:
1. Develop a workable plan.

2. Invest early and often.
3. Never bear too much or too little risk.
4. Never try to time the market.
5. Use index funds.
6. Keep costs low.
7. Diversify.
8. Minimize taxes.
9. Keep it simple.
10. Stay the course.
For more info, check out the following link:

https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investment_philosophy
1.6.1. Develop A Workable Plan

“If you don't know where you're going, you'll end up someplace else.”
― Yogi Berra
1 https://en.wikipedia.org/wiki/Modern_portfolio_theory
2 https://en.wikipedia.org/wiki/Capital_asset_pricing_model

It is crucial to define clear, realistic goals and design an investment plan that meets your
individual needs. Document this plan (in writing) in a clear, simple, and concise Investment
Policy Statement (IPS).
A sound investment policy statement can help you stay focused and avoid temptations such
as reacting impulsively to market changes, panic selling, etc… In brief, the IPS documents the
key decisions related to the investment objectives, time horizon, risk, portfolio asset allocation,
contribution, and rebalancing strategy. Below is an example Investment Policy Statement:
Investment objectives ▪ Reach Financial Independence at age 55

▪ Have an annual income of $50,000 from my investment
portfolio
▪ Target portfolio value: 25 x $50,000 = $1,250,000
Investment horizon 30 years: from age 25 to 55
▪ Buy and hold low-cost broad market index ETFs.
Investment philosophy
▪ No individual stocks or sector ETFs.
▪ Invest 30% of my income1.
▪ Rebalance annually.
▪ No market timing: invest consistently regardless of the
market condition.
▪ Ignore the financial news.
I can tolerate up to a 35%2 drop in my portfolio’s value in any
Risk tolerance
given calendar year.
Asset allocation Based on my risk tolerance and the historical returns for stocks
and bonds, my asset allocation shall be as follows:
▪ 80% stocks
▪ 20% bonds
My chosen ETFs are:
ETF selection
▪ 80% Vanguard FTSE All-World UCITS ETF (Acc)
▪ 20% iShares Global Government Bond UCITS ETF (Acc)
Contributions ▪ Save 30% of my monthly income.
▪ Transfer funds to my broker and buy my chosen ETFs
quarterly.
Rebalancing Rebalance once per year on my birthday.
Review my financial plan annually and adjust if my personal
Review process
circumstances change (i.e. marriage, kids, etc…)
▪ Withdraw 4% of my portfolio value on my first retirement
Withdrawal strategy
year.
▪ Withdraw an equivalent amount on subsequent years
(adjusted for inflation).
Table 1. Sample Investment Policy Statement.
To download a sample Investment Policy Statement, visit https://www.simplyfi.org/resources-

and-tips.
"Write down your strategy (investment plan) ― and stay the course."
― Rick Ferri, Protecting Your Wealth
1 Refer to Table 2 for more info about the actual percentage of your income you need to save
& invest to reach your retirement goal.
2 Refer to section 1.6.3 “Never Bear Too Much Or Too Little Risk” for more info about
understanding your risk tolerance.

1.6.2. Invest Early And Often

Investing for the long term using the Bogleheads® philosophy requires discipline. Start as early
as possible (i.e. as soon as you have sorted out any high-interest debt and have established
an emergency fund) to allow compounding1 to work its magic.
Save & invest a percentage of your income regularly (monthly or quarterly). “Pay yourself first”
by investing as soon as you get the money to avoid the temptation of spending the excess
cash.
The ratio of your investment contributions to your income is known as your savings rate. The
higher your savings rate, the sooner you can reach Financial Independence as is shown in
Table 2.
Savings Rate Time until FI

(%) (Years)
5 66
10 51
15 43
20 37
25 32
30 28
35 25
40 22
45 19
50 17
55 14.5
60 12.5
65 10.5
70 8.5
75 7
80 5.5
85 4
90 Less than 3
95 Less than 2
100 0
Table 2. Savings rate & time to FI. Source: Mr. Money Mustache.
For more info on how your savings rate accelerates your time to FI and retirement, read this
excellent blog by Mr. Money Mustache:
https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-
retirement/
1Compounding is the process in which an asset's earnings are reinvested to generate

additional earnings over time.

1.6.3. Never Bear Too Much Or Too Little Risk

Asset allocation is the percentage distribution of an investment portfolio among different asset
classes such as stocks and bonds. Asset allocation is considered to be the primary driver of
investment performance, accounting for roughly 90% of the portfolio’s return.
Stocks are the growth asset class of your portfolio and are necessary to get the expected
return needed to accumulate for retirement or financial independence. But in exchange for
the hope of high return, stocks are very volatile and risky. Many investors learned how risky
stocks can be in 2008 when they fell 50% from their previous highs. Over time, stock prices
roughly follow the trend of the economy, which is to grow. But prices can stagnate or decline
for decade-long periods. This is why having an allocation to bonds is a necessary element of
asset allocation to help in stabilizing the portfolio.
Your risk tolerance is your capacity to stomach “paper losses” that are inevitable during your
investing life. The asset allocation is very personal and depends largely on the need, ability,
and willingness of the investor to take risk. These depend on the investment time horizon and
on both the investor's financial and emotional capacity to tolerate risk and to stay the course.
Increasing the stocks to bonds allocation in a portfolio will increase expected returns but will
also increase volatility and swings in the portfolio.
To know whether an asset allocation is right for your risk tolerance, you need to be brutally
honest with yourself as you try to answer the question, "Will I sell during the next bear market1?”,
which is very hard to accurately assess before you have already gone through one.
The following chart by Vanguard shows various asset allocations between stocks and bonds
(in 10% increments), with the full spectrum of yearly returns including best, worst, and average:
Figure 1. Best, worst, and average returns for various stock/bond allocations, 1926–2016. Source: Vanguard.
Note that this chart is constructed using past performance data and provides only an
illustration of what has happened in the past. In the current economic climate, it is advisable
to have lower expectations for investment returns in the short to medium-term future.
1 A bear market is when the market has dropped by 20% or more from its recent high.

For more information on assessing your risk tolerance and determining your asset allocation,
start with this great overview on the Bogleheads® wiki:
https://www.bogleheads.org/wiki/Assessing_risk_tolerance
1.6.4. Never Try To Time The Market

“The idea that a bell rings to signal when investors should get into or out of the
stock market is simply not credible. After nearly fifty years in this business, I do
not know of anybody who has done it successfully and consistently. I don't even
know anybody who knows anybody who has done it successfully and
consistently.”
― Jack Bogle
Market timing refers to the act of attempting to predict the future direction of the market,
typically through the use of technical indicators or economic data, and then trading (i.e. either
buying or selling) based on that information.
Statistics and academic research have shown time and again that it is nearly impossible to do
it successfully and consistently over an investment lifetime. Therefore, market timing is
considered to be a fool’s game. Just don’t do it!
1.6.5. Use Index Funds

"On average, it's a simple fact that passive indexing always has and always will
outperform active fund management; it's as certain as night follows day in this
uncertain business."
― Jack Bogle
An index fund is a basket of stocks or bonds designed to passively mimic the composition and
performance of a certain financial market index (such as the S&P 500).
Academic research has proven that index funds outperform the vast majority of actively
managed funds over the long term. The S&P Indices Versus Active (SPIVA®) measures the
performance of actively managed funds against their relevant index benchmarks. SPIVA
scorecard reports are issued semi-annually and cover several markets in the United States,
Canada, Europe, Japan, and Australia among others.
These SPIVA scorecards can be downloaded for free from the following link:
https://us.spindices.com/spiva/#/reports.
For references comparing index funds to actively managed funds, check out the below links:
▪ The arithmetic of active management:

https://web.stanford.edu/~wfsharpe/art/active/active.htm
▪ Why do index funds beat most actively managed funds? https://en.swissquote.lu/expat-
investing/smart-investing/why-do-index-funds-beat-actively-managed-mutual-funds
▪ Sure! The experts recommend index funds: https://andrewhallam.com/2010/05/sure-the-
experts-recommend-index-funds-but/
▪ Investment advisors convince 95% of Americans to settle for less:
https://andrewhallam.com/2009/06/investment-advisors-convince-95-of-americans-to-
settle-for-less/

▪ American Funds Says, “We Can Beat Index Funds”: https://assetbuilder.com/knowledge-

center/articles/american-funds-says-we-can-beat-index-funds
1.6.6. Keep Costs Low

"Understanding the impact of fees is important. If you're paying 2 percent in
annual fees each year to have your money managed, you may see this as a
paltry sum. But it isn't. If the markets make 6 percent in a given year and you're
paying 2 percent in fees, then you're giving away 33 percent of your profits to
the financial services industry."
― Andrew Hallam, Millionaire Expat
All investment funds (mutual funds, unit trusts, ETFs) incur regular fund operating costs, which
include investment advisory fees, marketing and distribution expenses, as well as custodial,
legal, and accounting fees. These costs are consolidated and revealed in a fund's total
expense ratio (TER) expressed as a percentage.
Figure 2. How 1% in fees affect a portfolio over an investment lifetime. Source: Bogleheads.org.
The difference between an expense ratio of 0.15% (for a typical ETF) and 1.5% (for a typical
actively managed fund) might not seem like much, but the effect of the compounding over
an investing lifetime is enormous. For example, after 30 years, an actively managed fund with
a 1.5% expense ratio will provide an investor with several hundred thousand dollars less for
retirement than a 0.15% index fund with the same expected growth/return as you can see in
Figure 2. This translates into a decade of extra spending in retirement! The chart also shows
how that additional 1% in fees will reduce your retirement spending by 10 years.
To add insult to injury, most actively managed funds actually underperform index funds. Costs
matter and investors need returns compounding for their own benefit, not the benefit of fund
companies who skim unnecessary fees off the top.

For investors in the UAE as well as in some other countries, the problem is exacerbated by
investment products with hidden fees that can exceed 4% a year. These are very common
among expats as they are sold by the majority of financial advisors. You can read about an
example of such plan and how much it can actually cost an investor over just a few years at
the following link: https://www.simplyfi.org/post/2019/06/23/how-i-lost-25-of-my-investments-
to-a-long-term-savings-plan-fees-and-charges
1.6.7. Diversify
“Diversification is the only free lunch in investing.”
― Harry Markowitz
Diversification is about not keeping all of your eggs in a single basket. Rather than trying to pick
the specific stocks or sectors of the market that may outperform in the future, Bogleheads®
prefer to buy index funds (i.e. ETFs) that are massively diversified. Diversifying across several
asset classes also helps in generating better risk-adjusted returns. For example, a broadly
diversified portfolio can typically be achieved using only two funds:
▪ A global stock ETF with thousands of companies’ stocks from around the world.
▪ A global bond ETF with hundreds of bonds from around the world.
1.6.8. Minimize Taxes

As the applicable tax laws can vary depending on your country of tax residence (and in a
couple of exceptional cases, your country of citizenship), we suggest that you consult with a
competent tax advisor for your particular tax situation.
When investing in ETFs, you might be liable to different kinds of taxes (again depending on
your country of residence and/or your country of citizenship):
▪ Capital Gains Tax (CGT) on your asset appreciation: this is normally not applicable if you
are a UAE tax resident for example.
▪ Tax on dividend and/or interest payment, such as the US Withholding Tax: this is normally
30% of the dividends paid by US stocks and US-domiciled ETFs.
▪ Estate tax (also known as inheritance tax): this can be up to 40% of the total US-situs
assets1 above $60,000 for non-US persons upon their demise.
▪ Tax on net wealth: not applicable for UAE residents but might be levied in other countries.
▪ Tax on stock market transactions: again, not applicable for UAE residents but might apply
in other countries.
For more info, check out the following links:
▪ https://www.bogleheads.org/wiki/Investing_from_outside_of_the_US
▪ https://www.investopedia.com/terms/c/capital_gains_tax.asp
▪ https://en.wikipedia.org/wiki/Withholding_tax
▪ https://www.irs.gov/individuals/international-taxpayers/some-nonresidents-with-us-assets-
must-file-estate-tax-returns
1US situs assets typically include property located in the US, individual stocks of US corporations,
cash held at US brokers and US-domiciled ETFs.

US tax laws include multiple traps for unsuspecting non-US investors that are based outside the
US. US nonresident aliens (NRA), US citizens or green card holders living outside the US, and non-
US citizens living temporarily in the US are all potentially at risk.
To avoid the US tax traps, it is advisable for non-US investors to invest in ETFs that are domiciled
in Ireland as opposed to the popular US-domiciled mutual funds or ETFs discussed often in US-
centered investment literature such as books, blogs, podcasts, etc…
For more info, check out the links below:
▪ https://www.bogleheads.org/wiki/Nonresident_alien_with_no_US_tax_treaty_%26_Irish_ETF
s
▪ https://www.bogleheads.org/wiki/Non-
US_investor%27s_guide_to_navigating_US_tax_traps
The tax situation of each investor is different and could sometimes become very complicated
(i.e. married couples from different nationalities, tax residency, etc…); therefore, it is always
recommended to check with a tax professional for your particular situation and the applicable
taxes.
1.6.9. Keep It Simple

“Simplicity is the master key to financial success. When there are multiple
solutions to a problem, choose the simplest one.”
― Jack Bogle
Simplicity is at the core of our SimplyFI group ethos. As discussed earlier in section 1.6.7
“Diversify”, it is not necessary to own many funds to achieve effective diversification. A simple
portfolio that will most certainly beat the vast majority of investment professionals consists only
of two ETFs:
▪ A single total world stock market index fund.

▪ A global government bond market index fund.
A simple portfolio has many advantages: it almost always lowers trading costs (commissions),
is easier to maintain, and simplifies rebalancing. Besides, it reduces your chances of making a
mistake or second-guessing your choices. It also allows caregivers and heirs to easily take-over
the portfolio when necessary. Best of all, a simple portfolio allows you to spend more time on
the activities that truly matter and less time managing your finances.
1.6.10. Stay The Course

“Investing is simple, but not easy”
― Warren Buffet
Staying the course is by far the most challenging part of the Bogleheads® investing philosophy,
but is essential to its success: it’s not about knowing what to do but it’s about doing what you
know.
Bogleheads® adopt a sound investment plan and then stick to it. When the market returns are
good, this advice is easy to follow. However, during volatility and market downturns, staying
the course is easier said than done. For example, when the financial markets crashed in 2008,

many investors panicked and sold, or at least stopped contributing regularly to their portfolio
during the market downturn. By doing so, they have abandoned their documented plan
which consists of buying, holding, and rebalancing regularly.
Remember that after large market drops, it can be very difficult to continue to follow your pre-
set plan. Even during normal markets, there are always distractions such as dire predictions in
the financial news, or some shiny new asset classes or ETF that have recently outperformed the
broader market, etc…
This is why selecting the right asset allocation for your unique situation is crucial. It needs to be
designed so that you will stick to it in thick and thin. To help you control your emotions, it also
helps to have a written and printed Investment Policy Statement (refer to section1.6.1), stay in
touch with like-minded people (such as the SimplyFI community), and ignore the financial
media. All you need to do is stick to your plan and “stay the course”.
1.7. Key Facts About Financial Markets

As described above, staying the course is understandably the most challenging part of the
investment process as it relates to your emotions and psychology. To help you overcome your
fears, we’re going to explore seven facts about the financial markets that will enable you to
stay the course. Understanding these facts will make you “unshakeable”.
1.7.1. The Stock Market Always Rises Over Time

“The market always, and I mean always, goes up. Not each year. Not each
month. Not each week and certainly not each day. But relentlessly up.”
― JL Collins
The stock market is very volatile and totally unpredictable in the short term. However, over the
long term, the stock market always goes up.
That, however, doesn’t mean that all companies’ stocks will go up. Some stocks will do well
while some others won’t; but in aggregate, the market always goes up over the long term. This
has always been true in the last 120 years or so of market history: despite several setbacks,
including two World Wars, endless political conflicts, epidemics, pandemics, numerous
recessions, depressions, and financial crises, the market has always recovered and continued
relentlessly its upward climb.
1.7.2. Nobody Can Accurately Predict The Market In The Short Term
"There are three kinds of people who make market predictions: those who don't
know, those who don't know that they don't know, and those who know darn
well they don't know but get big bucks for pretending to know"
― Burton Malkiel
The financial industry sells the delusion that, if you are “smart enough” and if you follow the
economy and financial news, you could gain a competitive edge in the market. Nothing
could be further from the truth! Unless if you are wise to this trap, it is easy to fall for it.
Analysts from big-name investment banks or financial media professionals continuously make
predictions about the market direction (until they are eventually right). Some of these “experts”

actually believe their own predictions, some others are just salesmen. Are they clueless or liars?
You decide…
1.7.3. On Average, Market Corrections Have Happened Once A Year

A correction is a drop between 10% and 20% in the stock market from its recent high. Ever since
1900, a correction has happened on average once a year. Moreover, historically, the average
drop was around 13.5% and has lasted around 54 days (again, on average) before the market
recovered.
Therefore, it is important to accept these corrections as regular occurrences in your investing

lifetime and not to freak out when they happen. It might feel uncomfortable when your assets
are impacted by a correction. This is why many investors panic and sell at the worst time. On
the other hand, if you hold tight, the correction would pass before you even realize it.
1.7.4. On Average, Only 1 In 5 Corrections Turn Into A Bear Market

A bear market is when the market drops 20% or more of its recent high. Historically, one in five
corrections (on average) turned into a bear market. In other terms, in 80% of the cases, if you
panic and sell during a correction, you might as well be doing so before the market rebounds
and recovers; therefore, you would have turned a “paper loss” into a real loss. Once you
understand these odds, it will be much easier to remain calm and stay the course.
1.7.5. On Average, Bear Markets Have Happened Every 3 To 5 Years

There were 35 bear markets in total between 1900 and 2020. Therefore, they happened on
average, every 3.5 years. Over the last 75 years ending in 2020, there were 15 bear markets,
which averages at around one bear market every 5 years or so. Note that these are just
averages, so that does not necessarily mean that bear markets were spaced out this way, nor
that there is a recurring predictable pattern for them. Historically, the average drop during a
bear market was 33% and in a couple of cases, the drop exceeded 50%! Moreover, over the
last 75 years, bear markets varied greatly in duration: from a couple of months to nearly a
couple of years, with the average recovery duration being around one year.
What does that mean to you as an investor? If you are investing for the long term, you shouldn’t
be afraid of those bear markets. Just stay the course and continue investing regularly as per
your plan during the market downturn as investing during those recurring bear markets could
help in catapulting you forward towards your financial goals as you can in the following article:
https://andrewhallam.com/2018/10/why-most-investors-should-hope-to-see-stocks-fall/
1.7.6. Bear Markets Always Turn Into Bull Markets

Every single bear market in history has been followed by a bull 1 market. There was no
exception! That means if you are the type that would panic and sell during a bear market, you
might as well miss the bull market and the outstanding recovery that shall follow.
Oh, and don’t be tempted to move out of the market to reinvest back once the turmoil is over.
This simply doesn’t work. We have discussed this at large in section 1.6.4 “Never Try To Time The
Market” and we know that it simply doesn’t work.
1A bull market is the condition of a financial market (i.e. stock market) in which prices are rising
for an extended period of time, typically for months or even years.

1.7.7. Staying Invested Is The Wisest Thing To Do

"There are smart people (and people who aren't so smart) who think they can
jump in and out of the stock market at opportune moments. It seems simple:
Get in before the market rises and out before it drops. This is referred to as
"market timing". But most experts have a better chance of beating Usain Bolt in
a footrace than effectively timing the market over an investment lifetime."
I believe we know by now that market timing doesn’t work and that no one can predict market
movements in the short term. Yet, when the market reaches an all-time high, some investors
tend to get that “fear of heights” and stop investing, or worse, they pull their money and wait
in cash.
Figure 3. Missing out on the best days can be costly.

Hypothetical growth of $10,000 invested in an S&P 500 Index - Jan 1, 1980, to Dec 31, 2018. Source: Fidelity.
Being out of the market and waiting on the sidelines even for a short period can be very costly.
A study conducted by Fidelity (see Figure 3 above) shows that if you have stayed invested
between 1980 and 2018, you would have made the market returns (first column). If, however,
you have pulled your money out and missed 5 of the best trading days over that same period,
your returns will have been reduced by 35% (second column). If you have missed the 50 best
trading days (fifth column), your returns would have been reduced by a whopping 91%!
Moreover, the best trading days tend to be within just a week or two from the worst trading
days. How on earth do you expect to time this correctly? This is why staying invested all the
time (in good times and bad) is the wisest thing to do.
If you would like to learn more about these seven “freedom facts”, read Tony Robbins’ book:
“Unshakable: Your Financial Freedom Playbook”.

PART 2. YOUR FI PLAYBOOK

To start investing for the long term using the Bogleheads® way, you need to follow the following
simple framework:
1. Pay off your credit card debt.

2. Set up an emergency fund.
3. Develop an investment plan.
4. Open a brokerage account.
5. Transfer money to your brokerage account.
6. Buy your ETFs.
7. Rebalance your portfolio.
8. Avoid common mistakes.
9. Ignore the financial news.
Set Up an
Pay Off Credit
Emergency
Card Debt
Fund
Open a Develop an
Brokerage Investment
Account Plan
Avoid Common Mistakes

Ignore Financial News
Transfer
Money
Rebalance Buy ETFs

2.1. Pay Off Your Credit Card Debt

It is crucial to pay off credit card debt as well as any other high-interest debt before you start
investing. The rationale being that credit card interest rates are outrageously high (up to 30%
per year!), hence it would be more sensible to pay that debt instead of investing your cash as
the rate of return of your investments is unlikely to be higher than the interest you’re paying on
your credit card. If you use a credit card, it is advisable to always pay your card balance on
time and in full.
2.2. Set Up An Emergency Fund

An emergency fund is typically a bank account with cash set aside to cover large emergency
expenses due to unexpected events such as:
▪ Job loss
▪ Medical or dental emergencies
▪ Family emergencies
▪ Unexpected home or major car repairs
▪ Etc…
An emergency fund creates a financial cushion that can keep you afloat in a time of need
without having to rely on credit cards or being forced to sell your investments during a market
downturn; therefore, it is important to build your emergency fund before you start investing.
Most experts believe that you should have enough money in your emergency fund to cover
at least 3 to 6 months’ worth of living expenses. If you don’t have an emergency fund in place,
start with a small sum and aim to increase that sum gradually using your savings until you reach
the minimum target of 3 months of expenses before you consider investing.
An emergency fund should be liquid and easily accessible. It is typically kept in a bank
checking or savings account that is accessible from anywhere, including over the counter and
through a debit/ATM card.
With that said, your emergency fund should not be too easy to access so that you don’t get
tempted to dip into it for something which is not really an emergency (and no, that 82 in OLED
TV you’ve been eying for a while doesn’t qualify as an emergency!).
It is usually recommended to have your emergency fund at a completely different bank than
your main checking account. For expats, it might even make sense to have your emergency
fund in an offshore bank so that you can access it in the case of an emergency from either
your country of residence, from your home county, or from anywhere else in the world,
especially if you are forced to leave your current country of residence for whatever reason.
2.3. Develop An Investment Plan

Developing an investment plan involves the following:
▪ Calculating your FI number (refer to section 1.4 “How Much Money Do You Need To
Become Financially Independent?”).
▪ Defining your target retirement date.
▪ Defining your savings rate (refer to section 1.6.2 “Invest Early And Often”).

▪ Defining your asset allocation based on your risk tolerance (refer to section 1.6.3 “Never
Bear Too Much Or Too Little Risk”).
▪ Documenting your plan in a written Investment Policy Statement (refer to section 1.6.1
“Develop A Workable Plan").
2.4. Open A Brokerage Account

To start investing as an expat, you need to open a brokerage account. Most brokers in your
home country will not open accounts for non-residents; therefore, your choice of brokers is
limited to the ones that can serve expats.
Many brokers allow you to open an account fairly easily online. The broker would typically
require that you send some sort of ID, address confirmation as well as some other supporting
documents. Some brokers would require you to send the signed papers by post mail.
There are quite a few brokers that serve expats in the region. Here’s a summary list of some of
the most popular on the SimplyFI Facebook group:
Broker Country Trading Custody Inactivity

Commissions Fees Fees
Interactive Brokers U.S. Very Low No Yes1
Saxo Bank Denmark Low Yes Yes
Swissquote Switzerland Medium Yes Yes
Swissquote Bank Europe2 Luxembourg Low No Yes
Table 3. Brokers summary table.
2.5. Transfer Money To Your Brokerage Account

You can fund the brokerage account by transferring money directly from your bank account,
or, in some cases, by using a local or online exchange house. Usually, the broker will require
that the money comes from a bank account in your name. This process usually takes from a
couple of days to about a week. Most brokers would accept money in all major currencies
(i.e. USD, GBP, EUR, etc…). Always check with your broker before you transfer any money. If at
all possible, try to automate this transfer so that you can “pay yourself first” without having to
think about it.
It is always good to verify the exchange rates as well as the transfer fees with your bank and/or
your exchange house as these could vary significantly between banks and exchange houses.
The cheapest route often involves a third party exchange house, but it also takes longer. Make
sure that all parties involved in the process are safe and reputable.
2.6. Buy Your ETFs

Once you have transferred money to your broker (ideally in your target ETF currency such as
USD, GBP, EUR…), you’re ready to buy your ETFs.
1 The inactivity fee is waived for accounts over USD $100,000.

2 Formerly Internaxx Bank.

Here are the steps for purchasing your ETF (the exact steps could be slightly different for each
broker):
▪ Logon to your brokerage account.

▪ Click or tap on the Trade or Buy button.
▪ Enter your ETF ticker symbol1 (for example “VWRA”). The following is then usually
displayed:
o Full name of your ETF (for example: “Vanguard FTSE All-World USD Acc”)
o The stock exchange the ETF is traded on (i.e. London Stock Exchange).
o The currency your ETF is traded in (i.e. USD).
o The price of your ETF including:
▪ Bid price (the price at which buyers are willing to buy at)
▪ Ask price (the price at which sellers are willing to sell at)
▪ Enter the quantity or the number of shares you want to buy (make sure you have enough
cash to cover your purchase with any related transaction fees).
▪ Select the “Limit” order type. For the sake of completeness, here’s a quick explanation of
the available options:
o Market: executes the buy order ASAP at the real-time current market ask price.
o Limit: allows you to set a limit to the price you are willing to pay
o Stop: wait until the price breaks through a specified level, then execute a
“Market” order.
o Stop Limit: wait until the price breaks through a specified level, then execute a
“Limit” order.
▪ Enter a limit price: to make sure your trade is executed fairly quickly, enter a limit price a
bit higher than the “ask” price.
▪ Select the appropriate “Time in force” or “Timing”. Options might include:
o Day: the order will either be executed on the same day or canceled if not filled.
o Good till canceled: the order will be valid until it is either executed or manually
canceled (this usually has a 3-month validity).
▪ Review your order and verify that all values entered are correct before submitting it.
▪ Submit your order.
Note that it is usually recommended to use a Limit order instead of a Market order. A market
order instructs your broker to buy your ETF at the market real-time price which might fluctuate
quite a bit, especially if there’s some volatility in the market. In some cases, this could lead to
purchasing the ETF shares (or part of) at a price higher than expected. However, with a limit
order, you instruct the broker to buy your selected ETF only if you can get it at or below the
“limit price” you set. A good practice is to set your limit price a bit higher than the “ask price”
so that the order gets fulfilled directly but without the surprises. You do not want to set your limit
price too low (and be greedy) as that could prevent your order from going through. For long
term investors, such small differences on regular contributions have very little impact. You’d
rather get your order through and move on to more interesting things…
For example, if the “ask price” for your ETF is USD 72.5, you can set a limit price of USD 73 or 74.
This should ensure your order goes through immediately and avoids surprises, especially on
large orders.
1 A ticker symbol is a combination of letters and/or numbers used to uniquely identify a security
(i.e. stock, ETF, mutual fund) on a particular stock market.

2.7. Rebalance Your Portfolio

Over time, the actual portfolio assets (ETFs) will deviate from the initial allocation due mainly to
market movements and fluctuations. Rebalancing is the process of bringing back the portfolio
to its original target allocation. Note that it would make sense to rebalance only if the
allocation has drifted significantly from your target allocation.
Rebalancing is an essential aspect of long-term index investing. It helps your portfolio stay on
or close to your target asset allocation, as per your risk profile. Rebalancing may seem counter-
intuitive because you will be selling the asset that appears to be doing well, and buying the
asset that appears to be doing poorly. But in reality, it ensures that you are buying low and
selling high while maintaining the appropriate level of risk exposure. You could think of
rebalancing like playing Robin Hood with your portfolio: you take from the rich and give to the
poor…
2.7.1. When To Rebalance

There are different approaches related to when and how often to rebalance your portfolio.
We describe below 3 simple approaches (you can read about some others in the links down
below). You could combine these methods as you see fit. Rebalancing can be done:
▪ When contributing: When investing new money (i.e. monthly or quarterly), it would be
wise to only buy the fund(s) that are lagging behind your target allocation. This would be
like a “soft rebalancing” and will help in keeping your allocation closer to your target. This
might work when the portfolio is relatively small, but not so well when your portfolio grows
larger in value.
▪ Once a year on a set date: For large portfolios, your regular contributions won’t likely be
enough to keep your portfolio in balance; therefore, you need to manually rebalance
once a year. Just set a date such as your birthday, wedding anniversary, or any other
arbitrary fixed date and rebalance your portfolio on that date.
▪ When your asset classes deviate from their target by an absolute percentage threshold: If
your allocation has drifted by more than a predefined absolute percentage
documented in your Investment Policy Statement (say, 5%) from your target allocation,
then it’s time to rebalance. This is useful during volatile times as it means you could be
rebalancing more than once over a year, or in some cases not rebalancing for a few
years if your allocation hasn’t drifted by more than your set threshold during that time.
2.7.2. How To Rebalance

Here’s the high-level approach for rebalancing your portfolio:
▪ Check current allocation percentages of your ETFs and compare that with your initial
target asset allocation.
▪ Determine the number of ETF shares that you need to buy or sell.
▪ Sell shares of the ETF that is above its target allocation.
▪ Use the cash proceeds to buy shares of the ETF that is below its target allocation.
For more info about portfolio rebalancing, check out the following links:
▪ https://www.bogleheads.org/wiki/Rebalancing
▪ https://www.vanguard.com/pdf/ISGPORE.pdf
▪ https://www.justetf.com/uk/academy/what-is-portfolio-rebalancing.html

2.7.3. Rebalancing Example

Let’s assume that your ETF portfolio target allocation is as follows:
▪ 60% VWRA (Vanguard FTSE All-World – Accumulating)

▪ 40% IGLA (iShares Global Government Bonds – Accumulating)
On your rebalancing day (say, your birthday), you check your asset allocation and you find
out that due to a recent drop in the stock market, your allocation has drifted by 9% from your
initial target of 60%-40% and is now 51% VWRA and 49% IGLA.
Assuming that your preset absolute rebalancing threshold is 5%, a rebalancing is definitely in
order. You would need to sell IGLA shares (i.e. the asset which allocation has increased) and
use the proceeds to buy VWRA shares (i.e. the asset which allocation has decreased) to bring
the allocation back to your initial target.
Assuming that your current portfolio balance is $85,200, you would need to sell 9% of your IGLA
shares, which translates to $85,200 x 9% = $7,668). Now you need to determine the
corresponding number of IGLA shares to sell. Assuming that IGLA is trading for $5.54 on that
day, you would need to sell roughly $7,668 / $5.54 = 1,384 IGLA shares. Once you sell your IGLA
shares, buy as many shares of VWRA with the cash proceeds, and voila, you’re done!
2.8. Ignore Financial News

"We do not have an opinion about where the stock market, interest rates, or
business activity will be a year from now. We've long felt the only value of stock
forecasts is to make fortune-tellers look good. We believe that short-term
market forecasts are poison and should be kept locked up in a safe place,
away from children and also from grown-ups who behave in the market like
children."
― Warren Buffet
Remember that the financial media will always sell some dire news with some market “seers”
predicting where the market, interest rates or inflation will go next. Remember that their guess
is as good as yours or mine and that no one can predict the market in the short term; therefore,
it is best for you to totally ignore the financial news and to “stay the course”.
2.9. Avoid Common Mistakes

Now that you have made your way through the “Core Concepts” as well as “Your FI Playbook”
sections of this guide and you’ve learned to invest the Bogleheads® way in low-cost index
funds, what could possibly jeopardize your plan?
"With a diversified portfolio of low-cost index funds, you will beat 90 percent of
investment professionals over your investment lifetime if you don't do anything
silly."
Here’s a few common mistakes that you would want to avoid so you could be a successful
long-term investor:

2.9.1. Panic Selling In A Market Crash

This is by far the most destructive of all investment mistakes you can do. When the market
drops significantly (and it will do so several times during your investment lifetime as we saw in
section 1.7.5), it would actually feel like a real grizzly bear has mauled you, and therefore, your
emotions will be all over the place. It is at this moment when a large number of investors would
throw the towel and sell everything in an attempt to “protect” their money. What they don’t
realize is that they might be doing this at the worst possible moment before the market
rebounds. Go back and read section 1.7.6 "Bear Markets Always Turn Into Bull Markets” for
more info.
If you’re tempted to sell to cut your losses, it means you have overestimated your risk tolerance
and had the wrong asset allocation to begin with. You want your asset allocation to be
designed so that you do not get tempted to sell during market drops. Refer to section 1.6.3
“Never Bear Too Much Or Too Little Risk”.
2.9.2. Stopping Contributions In A Declining Market

"The stock market is like a grocery store filled with nonperishable items. When
prices fall, stock up on those products. Prices will inevitably rise again."
A lot of investors instinctively stop investing during a market decline, fearing that the market
will drop further and hence prefer to wait in cash until the dust has settled. Contrary to popular
belief, this is not a wise thing to do as no one can predict when the market shall recover.
A market decline is in fact the best thing that could happen to you while you are in the
accumulation phase of wealth-building as it would allow you to buy shares at a discount;
therefore, stick to your regular contributions regardless of what the market is doing. Check out
the following article which explains why investors should rejoice to see the market fall:
https://andrewhallam.com/2018/10/why-most-investors-should-hope-to-see-stocks-fall/
2.9.3. Speculation
“It is not hard to make money in the market. What is hard to avoid is the alluring
temptation to throw your money away on short, get-rich-quick speculative
binges. It is an obvious lesson, but one frequently ignored.”
― Burton Malkiel, A Random Walk Down Wall Street
Don’t buy a particular asset (individual stocks, sector ETF, gold, etc…) just because you
“believe” it’s going to do well in the future. Moreover, don’t stop your contributions because
you think that the market is over-valued and that it will inevitably drop. This is considered
speculation and market timing. Just “stay the course” and buy into your asset allocation at
your pre-scheduled date no matter what the market is doing.
2.9.4. Chasing Performance

"Endless tinkering is unlikely to improve performance, and chasing last period's
stellar achiever is a losing strategy.”
― Frank Armstrong, The Informed Investor

Stop searching for the eluding “best ETF” and just stick with your asset allocation as per your
Investment Policy Statement. Don’t be lured into swapping your ETF with a “better” ETF just
because it has outperformed the ETF that you’re holding. Chasing past performance is like
trying to win a car race while looking at the rear-view mirror.
2.9.5. Working With The Wrong Financial Advisor

"Brokers have a vested interest in hawking expensive products, which might
include actively managed mutual funds, whole life insurance policies, variable
annuities, and wrap accounts. These products typically pay them a onetime
sales commission or, even better (for them), ongoing annual fees.
― Tony Robbins, Unshakable: Your Financial Freedom Playbook
No matter how fancy their title might sound (financial planner, wealth manager, financial
architect, etc…), the vast majority of financial advisors are actually brokers who receive
commissions for selling financial products. This is not to demonize the brokers out there, as many
of them probably have good intentions, but the financial industry is flawed with some serious
and undeniable conflict of interest.
On the other side of the spectrum, there is that rare breed of advisors that are true “fiduciaries”,
which means they are held by the highest ethical standards by putting their client’s best
interest front and center. These are so hard to find in the expat world so that you could
probably count them on a single hand. We explore some of these reputable advisors in Part 6
“Getting Some Guidance”.
In Part 3 “Behavioral Mistakes”, we explore some additional behavioral mistakes and biases
that you have to keep in check to avoid ruining a well laid out financial plan.

PART 3. BEHAVIORAL MISTAKES

3.1. Overconfidence
"The harsh truth is, I can't pick winning individual stocks and you can't either.
Nor can the vast majority who claim they can. It is extraordinarily difficult,
expensive and a fool's errand. Having the humility to accept this will do
wonders for your ability to accumulate wealth."
― JL Collins, The Simple Path to Wealth
Overconfidence is the most common behavioral mistake and undoubtedly the most difficult
to overcome. Many investors believe that they are quite competent when they can speak the
same financial jargon as the financial analysts and other pundits on TV, or when they know the
fundamentals of choosing stocks based on fundamental1 or technical2 analysis. Armed with
this “knowledge”, the investor might want to pick individual stocks, sectors or countries/regions
in an attempt to “beat the market”.
What he fails to realize is that there are millions of investors with the same knowledge, including
professional money managers with fingers on the pulse of the economy with virtually unlimited
resources such as full-time researchers and analysts.
You must realize that beating the market by picking stocks is not an easy task that can be
accomplished with a little extra work. You can save time, effort, and get better returns over
the long term by investing in a broad market index fund.
3.2. Greed
Greed and the desire to gamble is ingrained in investors, which explains why some would like
to speculate and are always on the quest of get-rich-quick schemes. The financial industry
uses this against us. That’s why brokers sometimes provide free or low-cost trades to lure us in.
They also provide some “market insights” that supposedly help us in “picking the winners”.
The best way to win in investing and achieve sustainable long-term returns is to avoid the
temptation to swing for the fences. Remember: it’s a marathon, not a sprint.
"The stock market is a device for transferring money from the impatient to the
patient."
― Warren Buffet
3.3. Fear Of Regret

Regret comes from the emotional reaction people get when they conclude they’ve made an
error in judgment. In some cases, the decision is correct, but the outcome is negative.
1 Fundamental analysis is about measuring a stock intrinsic value by examining the company
balance sheet and financial situation.
2 Technical analysis is about analyzing stock charts in an attempt to identify trends and patterns
in stock price movements.

Since most investors don’t separate correct process decisions from outcomes, the feedback
leads to further errors in a negative feedback loop. Investors can become paralyzed if they
focus on an anticipated outcome rather than following their established process.
Again, awareness is key to fighting this behavior. You need to establish a plan that is logical
and simple and stick to it. Occasionally a result may not turn out as hoped, but an undesirable
outcome should not be blamed on a good decision-making process. Therefore, there should
be no regret. In the long run, the plan will be rewarded; so again, “stay the course”.
3.4. Loss & Risk Aversion

Loss aversion refers to the tendency to prefer avoiding losses over acquiring gains. For instance,
investors experience more pain over losses than they feel pleasure over the same amount of
gain. Investors who experience loss aversion will focus obsessively on one investment that’s
losing money.
Risk aversion is the natural result of loss aversion. Risk aversion is the reluctance of a person to
accept an investment with an uncertain payoff (i.e. stocks) rather than an investment with a
more certain, but possibly lower, expected payoff (i.e. bonds).
3.5. Anchoring
When new or unfamiliar situations are presented, people attempt to link or “anchor” the new
information to a familiar reference point even though it may have no relationship to the new
situation. This tendency may cause investors to base decisions on irrelevant past experience
or an illogical reference point.
Overcoming the anchoring problem is relatively easy: you just need to explore the facts from
a different perspective or to seek input from other investors who don’t necessarily agree with
you.
3.6. Recency Bias

“Investors project out into the future what they have most recently been seeing.
That is their unshakable habit.”
― Warren Buffet
One of the most common investing mistakes is the belief that the current trend will continue.
This is based on a phycological disposition of giving more weight to recent experiences when
we’re evaluating the odds for something happening in the future. This bias creates a euphoria
during a bull market when investors pile up to buy a certain stock, sector, region or fund has
been doing well recently. It is the same bias that causes investors to abandon their plan when
a fund they own has not done well lately.
The solution for the recency bias is again to "stay the course” and to avoid chasing
performance by jumping back and forth between high flying stocks or ETFs.
3.7. Confirmation Bias

This is a tendency for seeking confirmation or additional information that supports your own
beliefs.

Overcoming confirmation bias requires you to actively seek and welcome opinions that
contradict your own as well as finding qualified people who disagree with you.
3.8. Negativity Bias

Negativity bias is the natural human tendency to recall negative experiences more vividly than
positive ones. While this bias has helped human survival thousands of years ago, it doesn’t
really help in the modern days and certainly not in the investing world.
Investors feel the pain of loss twice as much as the pleasure of gain. This negativity bias pushes
investors to sell during a correction and/or bear market: they would rather go to cash than
experience the pain of the negative experience of the paper loss.
The solution to combat the negativity bias is to be aware of it, recognize it, and destroy it
before it destroys your financial future.
3.9. Action Bias

Action bias is a natural tendency to take action for reasons that might seem valid at first sight.
For instance, during times of market volatility, when investors see that their portfolio is losing
value, they might feel compelled to take some action to stop the bleeding and hence they
end up selling, possibly at the worst time.
The solution to this bias is to simply stick to the plan and “stay the course”.
“Don't do something; just stand there!”
― Jack Bogle
3.10. Inertia/Procrastination
Procrastination is very common, and it leads to investors neglecting to take necessary action.
For instance, when overwhelmed with information, beginner investors tend to procrastinate
and end up not investing at all. Some others would get caught in paralysis by analysis while
searching for the “perfect portfolio” or the “perfect ETF” and hence they end up not doing
anything at all.

PART 4. PORTFOLIO CONSTRUCTION

4.1. ETF Selection
There are a few factors to consider when choosing your ETFs:
▪ Investment strategy: start by looking for ETFs that best represent your chosen asset class
and index (i.e. FTSE All-World, MSCI World, Global Government Bonds, etc…).
▪ TER (Total Expense Ratio): approximate expense ratio for the ETF expressed as a
percentage. The lower this expense ratio, the better.
▪ Fund Size (aka Assets Under Management or AUM): the larger the fund, the better. It is
generally best to avoid funds that are smaller than $200 millions in size. Larger funds
usually have better liquidity (i.e. larger trading volume) which lowers the bid-ask spread.
▪ Fund age: Preferably, look for ETFs that have been around for at least 3 years.
▪ Replication method: how the ETF tracks its index. Several replication methods exist:
o Physical Replication: the fund owns all the underlying assets of the index. This is the
most preferred replication method.
o Physical (optimized): the fund owns a representative sample of the underlying
assets to mimic the index while keeping costs low. This is an acceptable
replication method.
o Synthetic: uses derivatives to simulate the index. It is best to avoid synthetic ETFs.
▪ Income treatment: how the ETF treats dividends. The choice of income treatment is purely
based on your own preference:
o Distributing: Distributing ETFs pay interests or dividends in cash into the brokerage
account.
o Accumulating: Accumulating ETFs automatically reinvest dividends and interests
into the fund (which appreciates in value).
▪ Fund domicile: the location where the fund is located. We favor ETFs domiciled in Ireland
for non-Americans as they are not subject to US estate taxes and get preferential rates for
US dividend withholding taxes. However, Americans can go for the US-domiciled funds
discussed in most investment books, blogs, and other literature.
▪ Reputable ETF provider: always choose ETFs from well-known fund providers. Our favorites
include Vanguard, iShares (BlackRock), and SPDR (State Street).
You can search, evaluate, and compare ETFs for your portfolio, using an ETF screener such as
www.justetf.com (for non-Americans) or www.etf.com (for Americans).
4.2. Sample Portfolios

Below are example portfolio models for three kinds of risk appetites. You could choose to be
more conservative, more aggressive, or fine-tune your asset allocation as you see fit. The
sample portfolios given here are purely for illustrative purposes. Please do your own research
and due diligence before you construct your ETF portfolio. Refer back to section 1.6.3 to
determine your risk tolerance and corresponding asset allocation.
Also, note that some of the ETFs in the sample portfolios below might be listed on several
exchanges and in different currencies. The ticker symbol might vary depending on the chosen
exchange and currency.

4.2.1. Global 2-Fund Portfolio For Non-Americans

ETF Asset Class TER Cautious Balanced Aggressive
Vanguard FTSE All-World UCITS Stocks 0.22% 40% 60% 80%
ETF (Acc)
iShares Global Government Bonds 0.20% 60% 40% 20%
Bond UCITS ETF (Acc)
Table 4. Sample Portfolio 1.
4.2.2. Global 2-Fund Portfolio For Americans

Vanguard Total World Stock ETF Stocks 0.08% 40% 60% 80%
Vanguard Total World Bond ETF Bonds 0.06% 60% 40% 20%
4.2.3. Global Islamic Portfolio For Non-Americans

iShares MSCI World Islamic UCITS Stocks 0.60% 35% 50% 60%
ETF
iShares MSCI Emerging Markets Stocks 0.85% 5% 10% 20%
Islamic UCITS ETF
iShares Physical Gold ETC Gold 0.19% 15% 15% 5%
Cash Cash - 45% 25% 15%

PART 5. PROTECT YOUR WEALTH

Congratulations on starting your investing journey to financial independence using the
Bogleheads® investment philosophy. This section further explores some additional
considerations for protecting your wealth during the accumulating phase as well as some
withdrawal strategies for your retirement phase.
You might have started saving and investing for your future, but what about the unknowns?
The truth is, we don’t have full control over the future and therefore we need to plan for the
unexpected:
▪ What if you’re suddenly unable to continue to work due to an unexpected illness or

disability?
▪ What happens to your wealth and assets when you inevitably pass away (hopefully after
a very long and happy life)?
The following sections address a few points you need to take care of so that you are well
covered during the accumulation phase and the withdrawal (retirement) phase of your
investment lifetime.
5.1. Life Insurance

5.1.1. Term Life Insurance
Do you need life insurance? The answer to that question depends entirely on your personal
situation and preferences. The general rule of thumb is, if you have any dependents (i.e.
spouse, children, or anybody else) that rely on your paycheck, then you might want to
consider life insurance.
Term Life Insurance is the most cost-effective and most appropriate type of life insurance for
most (if not all) people; however, this is not a policy that is often recommended by most
insurance brokers because, well, it pays the smallest commission.
With a term insurance policy, you are typically covered for 5, 10, 15, 20, 25, or 30 years. At the
end of the term, the policy ends, and you don’t get any money back. This is an argument that
many insurance brokers will use to convince to go instead for a “whole life insurance”. Don’t
fall for that! We typically are not fans of whole life insurance as it is a combined insurance &
saving plan using some ridiculously expensive actively managed funds that are most likely
going to underperform the market. Never mix insurance with investments in a single product.
Period.
5.1.2. Permanent Total Disability & Critical Illness Covers

Your most valuable asset is undeniably your health and your ability to earn. Therefore, even if
you don’t have any dependents, you would still need to support yourself in the unfortunate
event of permanent or total disability (PTD), or critical illness (CI). These unfortunate
eventualities might prevent you from working either permanently or for an extended period.
Therefore, you might want to consider having appropriate PTD and CI covers, which are usually
packaged with a Term Life Insurance policy.

5.1.3. How Much Life Insurance Do You Need?

One popular rule of thumb is that you need a cover of between 10 and 20 times your annual
salary, but there is really no “one size fits all” answer as each person’s situation is different. It
depends on many factors such as your age, earning potential, the time before you can
achieve financial independence, your current financial obligations, etc…
Therefore, it is advisable to consult with a competent insurance advisor; just make sure though
he doesn’t convince you to go instead for a “whole life insurance” policy which includes a
“savings” component. If he does, you can smile, thank him politely and look for another
insurance advisor.
5.1.4. Term Life, PTD & CI Providers

Some popular global insurers that provide term life insurance with PTD and CI riders include:
▪ Friends Provident International

▪ Zurich International
▪ Metlife
5.2. Medical Insurance

Most employers provide some medical insurance that covers your in-patient and out-patient
medical care. If your employer doesn’t provide such insurance, you can purchase one on your
own. Again, many factors come into play when defining the level of medical coverage that
you need, so it is always advisable to consult with a qualified insurance agent. Some global
medical insurance providers include:
▪ Aetna
▪ Allianz
▪ BUPA
▪ Cigna
5.3. Estate Planning

This is by far the most unpleasant topic when it comes to financial planning as no one would
really like to think about his own demise. Estate planning (or inheritance planning) is about
putting a plan in place for distributing your assets when you eventually leave this world. This
shall spare your next of kin from going through a lengthy and sometimes expensive legal
probate process.
I can already hear some of you thinking to themselves “I’m still young, so this is not relevant to
me” or “I don’t have much, so I really don’t care” or even “I’m not married and don’t have a
family”. Even if you are all this, I’m sure you still have someone you care about such as a father,
mother, sibling, cousin, friend, or even charity or NGO.
There are several aspects related to estate planning, but for the sake of simplicity, we’re going
to focus on the cornerstone aspect which is your will. A will is a legal document usually drafted
by a lawyer which covers some key questions such as:
▪ Who are your beneficiaries and who gets what from your assets?
▪ Who shall be the guardian of your children?
▪ Who shall be the executor of your will?

Start talking to a lawyer who’s a listed will draftsman and consider drafting and registering a
will. Now is always a good time…
5.4. Withdrawing From Your Portfolio In Retirement

Fast forward to your retirement day: you have reached your goal and accumulated enough
assets to be financially independent. Your portfolio’s value is 25x or more of your yearly
expenses at retirement, and it’s time to live by withdrawing from your portfolio. When that day
comes, it is said that you have reached the withdrawal or decumulation phase of your
investment life. So, now what? Do you sell everything and cash your retirement fund?
Absolutely not! Inflation will then eat your nest egg alive! So, how should you do it?
When the time comes for you to start taking withdrawals from your retirement portfolio, you
don’t sell everything. Instead, you only sell a small portion of your portfolio every year, while
the rest remains invested. There are several withdrawal methods you could use, the most
popular are discussed below:
5.4.1. Constant Dollar Withdrawal Strategy

This is probably the most popular withdrawal strategy. The Trinity Study briefly discussed earlier
in section 1.4 had as objective to determine what would be a safe annual withdrawal rate,
which is the yearly withdrawal rate at which the retiree is not likely to run out of money during
retirement.
Here’s how it works:
▪ On your first retirement year, you take your first yearly withdrawal based on a percentage
of your investment portfolio value (the Trinity Study suggests 4% under certain conditions).
▪ In the second year, your withdrawal amount will not be based on a percentage, but
instead, you return to the first year’s withdrawal amount and adjust it upwards for
inflation.
▪ For the third and each subsequent year, you go back to the previous year’s withdrawal
amount and then adjust it upward using the current rate of inflation.
For example, let’s assume that you have accumulated $1,250,000 in retirement. In your first
retirement year, you sell and withdraw 4% of your portfolio, which is $1,250,000 x 4% = $50,000.
In the second retirement year, assuming the inflation is at 3%, you shall withdraw the previous
year’s withdrawal amount adjusted for inflation, so your second-year withdrawal shall be
$50,000 x 1.03 = $51,500. In your third retirement year, assuming that inflation is at 2%, your
withdrawal shall be $51,500 x 1.02 = $52,530. You got the idea…
The advantage of this method is that your withdrawals are predictable and maintain the same
real spending power after inflation. The disadvantage is, if the market starts a prolonged
downturn just before or during your first few years of retirement, your assets could be
substantially or entirely depleted as you continue to take a larger inflation-adjusted withdrawal
each year.
5.4.2. Constant Percentage Withdrawal Strategy

This strategy consists of withdrawing the exact same absolute percentage annually based on
your current portfolio balance. For example, if you accumulated $1,250,000 in retirement, you
shall withdraw $1,250,000 x 4% = $50,000 on your first retirement year. In the second year,

assuming your portfolio’s value has grown to $1,284,000, you shall withdraw $1,284,000 x 4% =
$51,360. Let’s assume that on your third retirement year, your portfolio’s balance dropped due
to a market correction and is now $1,109,376. Applying the constant percentage, you shall
withdraw $1,109,365 x 4% = $44,375.04.
The advantage of this strategy is its simplicity: you just multiply your portfolio balance each
year by your withdrawal percentage and you then sell/withdraw that amount from your
portfolio. Your portfolio’s balance might still decrease in value, depending on market
conditions and the rate of withdrawal you choose, but you will never run out of money. The
disadvantage though, is that your withdrawal amounts will fluctuate with your portfolio’s value
and market conditions. Therefore, if you choose this withdrawal strategy, you have to be
flexible with your yearly expenses and be able to adjust your spending during those times
where the market drops.
You can read more about these withdrawal strategies as well as some others on the
Bogleheads® wiki: https://www.bogleheads.org/wiki/Withdrawal_methods.

PART 6. GETTING SOME GUIDANCE

We know there is a lot of confusing and conflicting information out there, and sometimes
trawling through it all could feel endless and overwhelming.
There are four different ways of getting started with low-cost index investing. While we have
shown them here in order of our preference, the most important thing is that you learn to invest
efficiently for the long term and actually do get started!
FULL DIY DIY WITH COACHING AUTOMATED WITH MANAGED BY FEE-ONLY

ROBO-ADVISOR FINANCIAL ADVISOR
§ SimpyFI’s favorite § Accelerated learning and § Easiest way to get started § Full wealth management
§ Not complicated but DIY implementation § Implementation and financial advice for a
requires significant learning § Get guidance from outsourced to automated 1-2% fee.
§ Many resources and experienced investor or flat platform § Can provide support on a
support from the SimplyFI fee-only financial coach or § Limited financial advice wide range of issues
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help you can be a drag on long- large portfolio and
term returns complex situation
Figure 4. Different ways to get started with index investing.
More details on the relative merits of these 4 ways to get started with index investing can be
found later in this section. Below, we list the key resources for each way:
6.1. DIY Index Investing

SimplyFI supports DIY (Do It Yourself) index investing because it is simple and much easier than
what the financial industry wants you to believe. You don’t need a degree in finance to do
this. All you need is to learn the key concepts (as described in this guide) and get some
guidance from the community. If you need more help, then you could always consider a
coach/guide or a robo-advisor.
6.1.1. SimplyFI
We have an amazing community of DIY investing enthusiasts dedicated to helping each other!
All powered by a team of volunteers! Please let us know if you want to contribute.
▪ Most of the day-to-day conversation takes place in the SimplyFI Facebook group. Please
read the rules and use the search function before posting or asking a question.
▪ SimplyFI Blog has some great resources, including:
o The power of investing with the rule of 72 and the middle-class millionaire.
o A summary of the 10 Bogleheads investing principles (see Bogleheads® below for
more details)
o Why you should avoid long-term savings plans sold in the UAE
o How does financial independence work and how to plan for it
o A framework to help expats think about happiness, insurance and investing

▪ SimplyFI used to run Bogleheads® investing workshops. The full workshop material is
available here.
6.1.2. Andrew Hallam

Andrew Hallam is a best-selling author and educator. With his writing and teaching, he has
pioneered the revolution for expat investors and helped countless expats to avoid or escape
long-term savings plans, learn about index investing, and get the returns they deserve.
▪ His book Millionaire Expat simply is a must-read for any expat wanting to take control of
their finances. We recommend the kindle version to get the latest update.
▪ He writes regularly on his website and for AssetBuilder.
▪ He recently started a YouTube Channel with great content for expat investors.
Note that SimplyFI is not affiliated with Andrew Hallam. We just happen to have similar goals in
spreading the word of index investing.
6.1.3. Bogleheads®
We draw our investing philosophy from the Bogleheads®, a group of DIY investors following the
simple and effective investing principles pioneered by Jack Bogle, the founder of Vanguard.
SimplyFI is the UAE chapter of the Bogleheads®.
▪ If you are new to investing, we highly recommend you read their Getting Started page
and the Bogleheads® Investing Philosophy.
▪ Next, you should read the Bogleheads® investing start-up kit for non-US investors. It can
be a heavy read, but the whole wiki is full of great information. Make sure you bookmark
this so that you can come back to it later.
▪ The forum also has a section dedicated to questions on investing from the UAE.
6.2. DIY Index Investing With Guidance Or Coaching

With guidance and coaching, you get to learn DIY investing for a fixed fee. This is a great way
to get started faster and build your own DIY skills along the way.
6.2.1. DeadSimpleSaving – Steve Cronin

DeadSimpleSaving.com provides excellent guidance and coaching for expat investing. Make
sure you check out The Unbiased Guide to Offshore Investing for Expats.
Steve Cronin teaches expats how to plan, save, and invest by themselves towards financial
independence, overcoming their fears and specific challenges. Friendly and effective.
The two main options are:
▪ Individual coaching (online or in-person), where you get to work directly with Steve
▪ Expat Saving & Investing online weekend workshop (2 days, every other Friday &
Saturday), where Steve & Demos take you through all aspects of expat planning, saving
and investing over 10+ hours and answer all your questions. Suitable for total beginners
and more experienced investors.
Disclaimer: This business is run by a SimplyFI Board Member.

6.2.2. PlanVision – Mark Zoril

With 25 years of experience in the financial services industry, Mark Zoril helps expats from all
around the world to invest in index funds. He is an Accredited Investment Fiduciary and
believes that, in general, the financial industry massively overcharges for investment and
insurance products, as well as for financial guidance and consultations.
He is one of the only financial advisors we know of that charges a small flat fee for his services.
He shows expat investors how to navigate brokerage sites, how to make their purchases and
he recommends which index ETFs they should buy.
His services are in such high demand that there is often a waiting list before being able to work
with him. He’s growing his team to be able to accommodate for that increase in demand.
Here is how to get started with Mark Zoril. If you have any questions, chances are you will find
the answer in his FAQ.
Note that SimplyFI is not affiliated with PlanVision.
6.3. Index Investing With A Robo-Advisor

Robo-advisors typically offer automated investment in low-cost index funds for an ongoing fee
between 0.5% and 1% per year.
SimplyFI is not affiliated with any robo-advisor. Please check their credentials and do your own
due diligence.
6.3.1. Sarwa
Sarwa was the first robo-advisor to launch in the UAE in 2018. Similar to other robo-advisors,
Sarwa uses an online sign-up process to gauge an investor’s risk tolerance and then assigns
them an investment portfolio, ranging from more conservative to higher risk ones. Their
portfolios are built with ETFs (Exchange-Traded Funds) and they also offer halal and socially
responsible options. Sarwa charges a small ongoing fee that goes down for larger portfolios.
They are a good option to consider for anyone not interested in managing their investment
themselves.
6.3.2. Wealthface
Wealthface was launched in the UAE in 2020 and also offers low-cost ETF portfolios to UAE
residents for a small ongoing fee. They have an office in Abu Dhabi.
6.3.3. Wahed Invest

Wahed Invest could be an interesting option to consider if you’re looking for an Islamic robo-
advisor. They are based in the US but they have a representative office in the DIFC and serve
clients in the UAE.
6.4. Index Investing With A Fee-Only Financial Advisor

Financial advisors provide comprehensive financial advice and investment management
services and will charge an ongoing fee of 1% to 2% of Assets Under Management (AUM) on
top of their fund fees. You might also want to consider working with fee-only advisors for things

beyond index investing such as taxes, estate planning, and for more complex financial
situations.
It is specifically recommended that you DO NOT work with any financial advisors that receive
commissions for recommending financial products, even if they offer you free advice. Refer to
section 2.9.5 “Working With The Wrong Financial Advisor”.
SimplyFI is not affiliated with any financial advisor. Please check their credentials and do your
own due diligence.
6.4.1. AES International

AES International has highly qualified, expat-focused, and commission-free advisors with deep
expertise in pensions and resolving complex situations. Emphasis on long-term investing with
access to quality funds from renowned Dimensional Fund Advisors (DFA). AES caters to clients
with portfolios above £250,000.
6.4.2. The Fry Group

The Fry Group offers tax, wealth and estate planning for expats and commission-free
investment advice, mainly based on passive index investing but could also include some
actively managed funds.
6.5. Summary Table

The following table summarizes the 4 different ways discussed earlier in this part:
Approach Pros Cons Who is it for?

Full DIY index ▪ DIY index investing ▪ Requires time to You don’t mind
investing research and learn
is not complicated spending time and
▪ There are a lot of ▪ Can appear learning on your
overwhelming at
resources to help own (or with the
first
you learn what you community) as you
▪ Can lead to
need to know know your financial
“analysis paralysis” knowledge is your
▪ It is not for
best asset.
everyone as it
requires
dedication to
learning
DIY index ▪ Facilitates and ▪ Small fixed cost, You want to learn
investing with accelerates your often well worth it from experienced
guidance / learning as you get solid investors and
coaching ▪ Removes most guidance coaches, to follow a
knowledge barriers ▪ You still need to do clear methodology,
to implementation the boost your financial
implementation knowledge, and get
started fast.

Approach Pros Cons Who is it for?

Index investing ▪ Small on-going
▪ Follow a simple Probably the fastest
with a robo- methodology fee, but often well way to get started
advisor worth it as you get
▪ Very quick and with minimal
automated access to an knowledge, if you
automated
implementation don’t mind the small
platform drag on returns.
▪ Over the long
term, the fees will We often
be a small drag on recommend you
your returns also pursue
approach 1 or 2 as
your financial
knowledge is your
best asset.
Index investing ▪ Provides a wide ▪ Higher fee, but You have a complex
often well worth it
with a fee-only range of financial situation
initially if you have
financial advisor professional and need full
services beyond just a complex professional support
index investing financial situation and advice.
▪ Especially suitable ▪ Not required for
the vast majority of
for investors with
large assets and index investors
complex situations
Table 7. Comparing the 4 investment approaches.

PART 7. ADDITIONAL RESOURCES

7.1. Blogs
Blogs are a great way to learn. Some provide great investing guidance, while others focus on
other FI-related topics.
The Happiest Teacher

This blog is run by Zach, who is also a Board Member of SimplyFI.
Zach is an expat teacher from the US who has taught all over the world and recently
discovered the joys of healthy living and financial frugality. He writes brilliantly about mindset
and lifestyle, often ignored aspects of FI.
Impactivated
This blog is run by Sébastien Aguilar, who is also a Board Member of SimplyFI.
Sébastien writes about how to reach financial independence and how you can use your FI
superpowers to make the world a better place. He believes that, just like money, FI is a tool to
help us do great things.
DeadSimpleSaving.com
This blog for expats is run by Steve Cronin, who is also a Board Member of SimplyFI.
It shows you how to take back control of your expat personal finances through planning,
saving, and investing, with an emphasis on Simple to cut through jargon and complexity. You
can do it!
Millennial-Revolution.com
A hilarious, quirky, and very informative site, ideal for those close to retirement (they retired at
31!) and those looking to combine Financial Independence with travel. Lots of details about
smart investing.
MrMoneyMoustache.com
The original early retirement dude, some of those classic early posts are still worth a read. He’s
fully into lifestyle design and chopping out non-essential living costs. Worth knowing it’s possible
even if you don’t go that far.
EarlyRetirementNow.com
If you want to geek out on the numbers around FI, passive investing, and safe withdrawal rates,
this website has plenty of data-driven insights and isn’t afraid to go against some mainstream
FI views.
FourPillarFreedom.com
Another Zach, with a real gift for using simple charts and thought experiments to give you a
different perspective on investing and working life.

OfDollarsAndData.com
Nick Maggiulli is a data scientist and crunches the numbers to show us how the best ways to
invest can be very different from the mental biases we usually cling on to.
JL Collins Stock Series

What initially started as simple letters from JL Collins to his daughter about investing became
one of the most famous blogs in the FI community and later on, the basis of JL Collins’ own
book: The Simple Path to wealth.
7.2. Podcasts
Podcasts are another great way to absorb information about Financial Independence, saving,
and investing, without it feeling like work. You could listen to podcasts at your convenience:
on your way to the office, in the gym, or under the shower…
Bogleheads on Investing
This is the official Bogleheads® podcast, hosted by Rick Ferri, a long-time Boglehead and
investment advisor. Rick releases an episode each month in which he interviews a guest to
discuss all matters related to investing using the Bogleheads® investment philosophy.
ChooseFI
Fantastic podcast by Jonathan Mendonsa and Brad Barrett, two Americans dedicated to the
pursuit of Financial Independence. Very informative but investing advice is focused on US
citizens, so it may not be appropriate for non-US citizens. Start with episode 100.
Afford Anything
Another impressive podcast on Financial Independence by Paula Pant. A former journalist,
Paula is an amazing host. She’s entertaining and insightful, covering topics from investing in
real estate to index funds. Again, some recommendations may not suit non-US citizens.
Canadian Couch Potato

Ground to a halt in August 2019 but has 26 very useful episodes covering a wide range of
sensible investing topics. Goes deeper into the details than most, while still being engaging.
Mad Fientist
The Mad Fientist was determined to reach FI and then when he got there, he wondered what
to do with himself. Honest and interesting, with good reflections on mindset and the reality of
life after FI.
Animal Spirits
Ben Carlson, of A Wealth of Common Sense blog, chats about his latest research on personal
finance, asset management, financial markets, and parenting. Ben does a good job to keep
his podcast accessible to all.

7.3. YouTube Channels

Andrew Hallam
Andrew has a wonderful video series aimed at the beginner investor:
https://www.youtube.com/channel/UCzB-HBzq-qexpAn1BuQEp3g
Common Sense Investing with Ben Felix:

Common Sense Investing is about sensible investing and financial decision making. The
channel is geared namely towards Canadians, but there are gems for investors from around
the world:
https://www.youtube.com/channel/UCDXTQ8nWmx_EhZ2v-kp7QxA
7.4. Books
Books are a great way to develop your financial knowledge. No matter what approach you
use for investing, you need to make sure you build your knowledge so that you can make
better-informed decisions. Don’t expect any boring finance textbooks here, all of these are
entertaining and easy to read for beginners.
Millionaire Expat – Andrew Hallam

We’ve mentioned this book earlier, but if there‘s one book on personal finance you need to
read, it’s this one. Engaging, practical, and filled with information about how to avoid terrible
advisors and build a simple investment portfolio from almost anywhere in the world.
The Little Book of Common Sense Investing – John Bogle

The founder of Vanguard and the father of the low-cost passive index investing movement
explains his theories on how to invest in the most simple way and at a low cost so you could
grow your wealth effectively.
The Bogleheads’ Guide to Investing 2 nd Edition – Taylor Larimore & Mel

Lindauer
Inspired by Jack Bogle, the founder of Vanguard and godfather of passive index investing, this
is an accessible guide to managing money by yourself, from the leaders of the highly
informative Bogleheads® movement.
A Random Walk Down Wall Street – Burton Malkiel

Initially published in 1973 and currently at its twelfth edition (in 2019), this is a timeless classic by
Burton Malkiel, a professor of economics at Princeton University. In this book, Malkiel examines
popular investing techniques including technical analysis and fundamental analysis and notes
significant flaws in these techniques based on academic research, concluding that investors
would be best served by investing passively in index funds.
The Simple Path to Wealth – JL Collins

The godfather of FI gives his no-nonsense advice on investing and financial independence,
drawn from many decades of hard-won experience. The fund recommendations are more
relevant for US citizens.

ChooseFI – Chris Mamula with Brad Barrett and Jonathan Mendonsa

A practical guide to reaching Financial Independence by boosting your passive income and
managing your expenses, then investing the difference – from the guys behind the amazing
ChooseFI podcast.
Unshakeable – Tony Robbins with Peter Mallouk

Tony Robbins is mostly known as one of the world's leading life and business strategist. In this
book, he teams up with Peter Mallouk, the president of Creative Planning, a fiduciary financial
planning firm in the US. Together, they reveal how to become unshakeable – maintaining
peace of mind in a world of financial and economic volatility. Tony really understands human
psychology and explains that while the stock market could be scary, putting in place a simple,
actionable plan of passive investing in index funds can lead you to true financial freedom.
The Coffeehouse Investor – Bill Schultheis

A quick and easy read that emphasizes the importance of putting a diversified portfolio in
place, then ignoring the markets and living your best life.
Investing Demystified – Lars Kroijer

A former hedge fund manager, Kroijer realized that the complete opposite – simplicity – is the
key to investing and wrote this excellent guide to building a simple portfolio tailored to your
needs.
Taming the Pound – Kim Stephenson

A guide to help you control your money rather than having your money controlling you, with
extra insight given the author is both a financial advisor and psychologist.
Authentic Happiness – Martin Seligman

The father of positive psychology demonstrates that happiness can be learned and cultivated.
Understand which types are longer-lasting and how to use your strengths to protect against
negativity.

FREQUENTLY ASKED QUESTIONS

Should I invest on my own or should I use an advisor?
If you learn a few basic concepts, understand the Bogleheads® philosophy, follow our
guidelines, have a sound investment plan in place, and are disciplined, doing it yourself or DIY
investing is cheaper and more efficient.
If, however, you lack discipline or you let your emotions get the best of you during times of
market turmoil, it might be better to work with a coach or fee-only financial advisor who can
help you to “stay the course”. The challenge though is to find a good ethical advisor that
would put you exclusively in index funds as opposed to actively managed funds that are
riddled with fees and are not necessarily suitable for you.
Refer to section “Part 6 Getting Some Guidance” for more info.
Should I open a cash or a margin brokerage account?

It is always recommended to go for a cash account. A margin account allows you to use some
leverage, which is quite risky and not something recommended or needed by long-term buy-
and-hold index investors.
Should I split my investments between two brokers?

We don’t believe this is really necessary: it will incur additional costs and would make
rebalancing more complicated than it needs to be. Brokers, especially the reputed ones, have
some protection (insurance) in place. Please check the applicable protection on the broker’s
website for more info.
If, however, distributing your investments across more than one broker enables you to sleep
better at night (despite the added complexity and associated costs), then feel free to do it.
What is Dollar Cost Averaging?

Dollar Cost Averaging is the act of investing a fixed amount regularly (such as monthly or
quarterly). The term is further described in the below article:
https://www.bogleheads.org/wiki/Dollar_cost_averaging
Should I invest monthly or quarterly?

In an ideal world, it is best to invest as soon as your paycheck lands in your account (typically
monthly for most people). However, if the total associated transaction cost (including
exchange rate, money transfer fees, intermediary bank fees and trading commission) is larger
than 0.5% of the amount to invest, it might be more cost-effective to invest quarterly (or at least
every other month) so that the total cost of you transaction is 0.5% or less of the invested
amount.
If I have a lump sum to invest, should I invest it all at once?

When you are about to invest a large sum of money, a common question is whether you should
invest it immediately as a lump sum or use Dollar Cost Averaging (DCA) by splitting your
investment across several payments over a certain period of time.

The answer depends on the degree to which you are willing to accept lower expected returns
in exchange for lower potential losses (aversion to possible loss).
Simply put, if you want to maximize your chance of returns, you would invest the money as a
lump sum as soon as possible. On the other hand, if you want to minimize regret in case the
market goes down, it might be better psychologically to split the investment into several
payments and drip the money in over a predefined period.
For more info, check out the following links:
▪ https://www.bogleheads.org/wiki/Dollar_cost_averaging#Dollar_cost_averaging_versus_l
ump_sum
▪ https://investor.vanguard.com/investing/online-trading/invest-lump-sum
▪ https://assetbuilder.com/knowledge-center/articles/andrew-
hallam/_invest_a_lump_sum_or_dollar_cost_average_just_ask_a_rat
▪ https://jlcollinsnh.com/2014/11/12/stocks-part-xxvii-why-i-dont-like-dollar-cost-averaging/
How to invest for my child’s education?

Investing for a child’s education is different than investing for your retirement. For instance,
money for children’s education would need to be withdrawn entirely over a relatively shorter
period time (typically 4~5 years) as opposed to 30 years (or more) for retirement money.
Therefore, money for children’s education needs to be managed in a different way (and
separately) from a retirement account.
Andrew Hallam explains this thoroughly in his excellent article: https://en.swissquote.lu/expat-

investing/wealth-building/how-expats-should-invest-their-childrens-education
My ETF is listed in multiple currencies, which one should I choose?

In short, the listed currency of the ETF has no bearing on its performance or value. For example,
the popular "Vanguard FTSE All-World UCITS ETF Accumulating", which is a global stocks ETF, is
listed on multiple stock exchanges and in multiple currencies. Moreover, its ticker symbol
changes depending on the combination of exchange and listed currency: VWRA for USD,
VWCE for EUR, and VWRP for GBP.
However, regardless of the ETF listed currency, the underlying assets of this fund remain the
same, and this is what really matters. For example, at the time of this writing, the Vanguard FTSE
All-World ETF stocks holdings are split as follows:
Country Currency Percentage

United States USD 58.8%
Japan JPY 4.6%
United Kingdom GBP 4.4%
Switzerland CHF 2.9%
France EUR 2.7%
Canada CAN 2.4%
Germany EUR 2.4%
(etc…)

As you could see from the table above, no matter which currency your ETF is listed in, your
actual currency exposure will be as per the ETF actual underlying assets.
Note that when you buy ETF shares, you will have to exchange your money from the currency
you’re earning in into the currency that the ETF is listed in. When, however, you sell some ETF
shares in retirement, you might have to exchange the money from the ETF sales proceeds into
your withdrawal currency (which is the currency you'll be spending in). With that said, to
minimize the exchange fees, you could either choose your ETF in the currency you're earning
in (or the one that your earning currency is pegged against) or alternatively, in the currency
you plan to spend in during retirement. Therefore, choosing your ETF currency is just a matter
of convenience and boils down to answering the question: do you want to exchange
currencies now while accumulating or at the time of withdrawal in retirement?
For more info, check out the below articles:
▪ https://andrewhallam.com/2016/05/expatriate-investors-does-it-matter-which-currency-
your-etf-is-listed-in/
▪ https://en.swissquote.lu/expat-investing/smart-investing/which-currency-should-you-pick-
your-diversified-portfolio-index-funds
Is it OK to add a special sector ETF to my portfolio?

Bogleheads® always favor a broad market index fund and are not proponents of sector funds.
Our rationale is that a broad market index ETF already includes the special sector you’re
interested in (be it technology, healthcare, energy, communication services, consumer
staples, etc…). Adding a sector ETF on top of the broad market ETF will tilt (i.e. overweight) your
portfolio to that particular sector and hence you’ll be making a biased bet that this particular
sector will perform better than the broad market.
If you really must take a such bet, it is recommended to keep this around 5% (and definitely
not more than 10%) of your portfolio.
Should I include a REIT 1 ETF in my portfolio?

Some people believe that adding a REIT ETF to a portfolio would reduce risk while improving
performance over the long term, but there isn’t really any conclusive study that confirms this.
Bogleheads®, on the other hand, usually prefer to keep things simple with a broad market
index ETF without any additional sector or REIT ETFs. If you really must, you could consider
adding a REIT ETF, but it is usually recommended to keep your REIT ETF to around 10% of the
stock allocation in your portfolio.
Andrew Hallam recommends portfolios with a home country ETF, so why

do most SimplyFI members prefer a global 2-fund portfolio?
A global stock ETF most probably includes stocks from your home country2. Adding a country
ETF will overweight your portfolio to your home country’s stocks, which means that you’re
taking a small bet on your own home country’s stock market which might or might not perform
better than the overall stock market.
1 Real Estate Investment Trust; refer to section 1.5.3 “Real Estate” for more info.
2 Unless your country’s economy is a really very small.

We don’t see anything wrong in having a small tilt to your home country, but as we are strong
proponents of simplicity, we prefer to keep things simple with a portfolio having a single global
stock ETF and a single global bond ETF. Neat, massively diversified, and easier to manage.
How should my asset allocation change with time?

There is a popular rule of thumb with regards to how your asset allocation should change with
your age or as you approach retirement. It suggests that you have “your age in bonds” (or a
slight variation of that, such as “your age – 10” in bonds).
While it is understandable that your asset allocation might need to become more conservative
with age or as you approach retirement, the issue with the above rule of thumb is that it is too
generic and takes a cookie-cutter approach to asset allocation.
We believe that your asset allocation is very personal and that it primarily depends on your
appetite for risk as well as your need to take risk. For instance, if you are younger, and your risk
tolerance is low, you could be better served with a more conservative asset allocation to
prevent you from panic-selling in a market downturn. On the other hand, if you started
investing late and you need to reach financial independence, you might have to take more
risk than the average person so you can hit your retirement goal. Moreover, if for instance, you
are ahead of the curve and are close to achieving financial independence, you might want
to dial down your stock allocation as you no longer need to take more risk to reach your goal.
Having said that, it is recommended that you review your asset allocation and current progress
towards your goals every year or when your personal situation changes (i.e. marriage, new
child, divorce, etc…) and reevaluate your asset allocation and risk tolerance.
Refer back to section 1.6.3 “Never Bear Too Much Or Too Little Risk” for more info about risk
tolerance and asset allocation.
How do I protect myself from the next market crash?

In short: learn to live with the idea that your portfolio will lose value every once in a while. This
is only a paper loss unless if you sell and make the loss permanent. Therefore, just stick to your
plan; i.e. “stay the course”.
Go back and read section 1.7 “Key Facts About Financial Markets”, namely the part about
the seasonality of market corrections and bear markets, which explains why it is best to always
stay the course, even during a market crash.
Copyright© 2020 SimplyFI.org. All rights reserved. All product, brand, or company names may be trademarks of their respective owners. Nothing
herein represents any binding commitment by SimplyFI.org or any or all parties associated or affiliated with SimplyFI.org. SimplyFI.org reserves the
right to change, modify, or otherwise revise this publication without notice, and the most current version of the publication shall be applicable.
The materials in this publication may be freely copied, printed, or distributed, partially or as a whole, as long as this copyright notice is included.

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A SIMPLE, PRACTICAL, AND EFFECTIVE INVESTMENT APPROACH FOR REGULAR PEOPLE

Index Investing &

Getting Started Guide

Version Change Description Date

Author: Elie Irani.

Contributing authors: Sébastien Aguilar and Steve Cronin.

Reviewers: Sébastien Aguilar, Steve Cronin and Demos Kyprianou.

Foreword by Andrew Hallam.

Cover design: Sébastien Aguilar.

Document layout: Elie Irani.

Special thanks to Dorota Aguilar, Heidi-Jane Hill, and Jen Lincoln.

The most recent version of this guide can be downloaded from

www.simplyfi.org Getting Started Guide | i

www.simplyfi.org Getting Started Guide | ii

www.simplyfi.org Getting Started Guide | iii

― Master Yoda, Star Wars: Episode III, Revenge of the Sith

www.simplyfi.org Getting Started Guide | iv

― SimplyFI board members.

“Pass on what you have learned.”

www.simplyfi.org Getting Started Guide | v

www.simplyfi.org Getting Started Guide | vi

2.1. Pay Off Your Credit Card Debt ........................................................................................... 17

www.simplyfi.org Getting Started Guide | vii

5.1.1. Term Life Insurance............................................................................................................ 29

www.simplyfi.org Getting Started Guide | viii

PART 1. CORE CONCEPTS

1.2. About The Bogleheads®

1.3. What is Financial Independence?

― Chris Mamula, Choose FI: Your Blueprint to Financial Independence

The 3 building blocks of Financial Independence are:

www.simplyfi.org Getting Started Guide | 1

1.4. How Much Money Do You Need To Become Financially

Your FI number = 25 x Your Total Yearly Expenses (adjusted for inflation).

1.5. Investment Choices

www.simplyfi.org Getting Started Guide | 2

1.5.3. Real Estate

1.5.4. Mutual Funds (Unit Trusts)

1.5.5. Exchange Traded Funds

▪ low-cost with management charges typically between 0.03% to 0.60%

maintained by the FTSE (Financial Times Stock Exchange) Russel company.

Morgan Stanley Capital International.

www.simplyfi.org Getting Started Guide | 3

1.5.6. Hedge Funds

www.simplyfi.org Getting Started Guide | 4

1.6. Bogleheads® Investment Philosophy

The Bogleheads® investment philosophy consists of the following core principles:

1. Develop a workable plan.

For more info, check out the following link:

1.6.1. Develop A Workable Plan

www.simplyfi.org Getting Started Guide | 5

Investment objectives ▪ Reach Financial Independence at age 55

To download a sample Investment Policy Statement, visit https://www.simplyfi.org/resources-

― Rick Ferri, Protecting Your Wealth

understanding your risk tolerance.

www.simplyfi.org Getting Started Guide | 6

1.6.2. Invest Early And Often

Savings Rate Time until FI

1Compounding is the process in which an asset's earnings are reinvested to generate

www.simplyfi.org Getting Started Guide | 7

1.6.3. Never Bear Too Much Or Too Little Risk

www.simplyfi.org Getting Started Guide | 8

1.6.4. Never Try To Time The Market

1.6.5. Use Index Funds