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Index Investing & Financial Independence For Expats: Getting Started Guide
Index Investing & Financial Independence For Expats: Getting Started Guide
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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).
Introduction
“In a dark place we find ourselves… and a little more knowledge might light
our way.”
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.
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.
― Master Yoda
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
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.
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.”
▪ Spend less
▪ Earn more
▪ Invest the difference
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:
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
1.5.1. 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.
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
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.
Index tracking ETFs are undoubtedly the best and preferred investment vehicle for expats as
they offer multiple advantages. ETFs are:
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,
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
― 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:
"Write down your strategy (investment plan) ― and stay the course."
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
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.
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/
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
― 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!
― 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:
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.
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.
▪ 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…
▪ 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.
― 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 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.
― 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”.
― 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…
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/
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.
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.
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”.
Set Up an
Pay Off Credit
Emergency
Card Debt
Fund
Open a Develop an
Brokerage Investment
Account Plan
Transfer
Money
▪ 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.
▪ 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").
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:
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.
Here are the steps for purchasing your ETF (the exact steps could be slightly different for each
broker):
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.
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…
▪ 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.
▪ 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
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!
― 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”.
"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:
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”.
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.”
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.
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.
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.
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
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
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”.
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.
― 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.
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.
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.
The solution to this bias is to simply stick to the plan and “stay the course”.
― 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.
▪ 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).
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.
Vanguard Total World Bond ETF Bonds 0.06% 60% 40% 20%
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:
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.
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.
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.
▪ Aetna
▪ Allianz
▪ BUPA
▪ Cigna
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…
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:
▪ 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.
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.
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!
§ 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
community available to advisor § Small ongoing fee (<1%) § More suitable if you have a
help you can be a drag on long- large portfolio and
term returns complex situation
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:
6.1.1. 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.
▪ 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.
Steve Cronin teaches expats how to plan, save, and invest by themselves towards financial
independence, overcoming their fears and specific challenges. Friendly and effective.
▪ 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.
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.
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.
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.
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.
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.
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.
https://www.youtube.com/channel/UCzB-HBzq-qexpAn1BuQEp3g
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.
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.
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.
https://www.bogleheads.org/wiki/Dollar_cost_averaging
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.
▪ 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/
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:
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?
▪ 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
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.
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.
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.
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.
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