Hi everyone. Recently I decided that it’s time to think about saving money for kids’ education and about own pension. I’m a new investor, so far finishing the planning part. Below is my background, the planned investment portfolio/strategy and a few questions I could not find a good answer to.
I would appreciate any kind of feedback!
Background and goals
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If to follow the tickers listed in https://www.bogleheads.org/wiki/EU_investing, my fund could be translated into [SPDR-EIMI]-IGLA-IGLN [48-7]-38-7, but it has worse results (Sharpe ratio 0.71 vs 0.79, CAGR 6.54% vs 8.33%, though somewhat less risk [8.05% vs 9.48%] and some of the funds have higher commissions.
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Funds base currency: I’m not 100% sure what will be the main currency of expenses. More probably the Education fund money will be spent in Europe (in EUR), while the retirement fund - in Ukraine (where USD or EUR seems to be better than UAH). This means that I should chose funds with EUR as base currency, right? But ETFs in EUR as base currency are harder to find (e.g. in https://www.bogleheads.org/wiki/EU_investing there are no EUR-based stock ETFs) and they tend to have worse commissions and results in my modelling. So my chosen funds are USD-based.
You may ask “Where’s the Education portfolio?” Well, I started my planning from 2 separate portfolios, one for education, another for retirement. However given the timelines, available money and the needed sums, it would be something like “create Education portfolio -> spend the Education portfolio, in parallel start contributing to the retirement portfolio -> continue adding to the retirement portfolio -> spend the retirement portfolio”. As during the period of kids’ education I would be both contributing and withdrawing money, it seems reasonable to avoid extra transactions and leave only the net-balance operation (that is just to withdraw some, smaller sum). Given these and some other factors, I ended up with the idea that
My main question at the moment probably is how valid would be the following approach to contributions/withdrawals (please also see the screenshot):![Image]()
![Image]()
You can find the “Financial Goals” page with my configs saved from portfoliovizualizer in the file Kids+Pension-v2.zip
This modelling doesn’t take into account taxes and the loss caused by our national currency (Ukrainian hryvna) devaluation relative to USD (expected >=10%/y). Roughly, the tax should be ~40% of the profit (out of which 19.5% is the tax itself, and the rest is caused by the relative UAH/USD devaluation), but this part needs further modelling and probably might change the results notably.
My questions are:
I would appreciate any kind of feedback!
Background and goals
- I’m 40, Ukrainian tax resident. If Ukraine exists, don’t plan to emigrate, otherwise move to Europe or Canada.
- Goal 1 - Pension: I plan to work and invest during the next 20y (till at least 60), then to live with my wife on that pension for another 15y (till 75). Minimum desirable monthly expenses - $1k (with state pension that could be ~$1.5k/month for 2).
- Goal 2 - Kids’ Maturity Fund: I’m married, we have 3 kids (10-11y.o.). In 7-8 years they should graduate from school and start getting higher education. What kind of higher education, is not clear at the moment. Most probably some “classical” university in Ukraine or in Europe, but who knows, in 7-8y it may be also some online degree, or maybe they’ll want to start some business, or travel, or just get married well. The plan is to be able to provide them with $50k each ($150k in total) during the period from 2031 till 2036.
- Risk profile: moderate
- Money available for investing: $30k initial amount, $1k/month (as of 2024).
- I have a reserve fund (6 months of our current expenses)
- 38% bonds - DTLA - iShares USD Treasury Bond 20+yr UCITS ETF USD (Acc) - 0.07%
- 55% stocks: 48% (87% from stocks share) VHVE - Vanguard FTSE Developed World UCITS ETF Acc - 0.12%; 7% (13% of stocks share) EMIM - iShares Core MSCI Emerging Markets IMI UCITS ETF (Acc) - 0.18%
- 7% - IGLN - iShares Physical Gold ETC - 0.12%
If to follow the tickers listed in https://www.bogleheads.org/wiki/EU_investing, my fund could be translated into [SPDR-EIMI]-IGLA-IGLN [48-7]-38-7, but it has worse results (Sharpe ratio 0.71 vs 0.79, CAGR 6.54% vs 8.33%, though somewhat less risk [8.05% vs 9.48%] and some of the funds have higher commissions.
Funds base currency: I’m not 100% sure what will be the main currency of expenses. More probably the Education fund money will be spent in Europe (in EUR), while the retirement fund - in Ukraine (where USD or EUR seems to be better than UAH). This means that I should chose funds with EUR as base currency, right? But ETFs in EUR as base currency are harder to find (e.g. in https://www.bogleheads.org/wiki/EU_investing there are no EUR-based stock ETFs) and they tend to have worse commissions and results in my modelling. So my chosen funds are USD-based.
You may ask “Where’s the Education portfolio?” Well, I started my planning from 2 separate portfolios, one for education, another for retirement. However given the timelines, available money and the needed sums, it would be something like “create Education portfolio -> spend the Education portfolio, in parallel start contributing to the retirement portfolio -> continue adding to the retirement portfolio -> spend the retirement portfolio”. As during the period of kids’ education I would be both contributing and withdrawing money, it seems reasonable to avoid extra transactions and leave only the net-balance operation (that is just to withdraw some, smaller sum). Given these and some other factors, I ended up with the idea that
- I will have one portfolio, which is mainly related to retirement and is more long-term (20y),
- education will be covered by 2/3 from the expected salary, plus 1/3 of the expected sum during several years will be withdrawn from the Retirement fund (for more details - please see below).
My main question at the moment probably is how valid would be the following approach to contributions/withdrawals (please also see the screenshot):
- Invest $12k/y for the next 7 years, till kids start their higher education
- During the higher education (years 8-13 from now) - no contributions. Cover ~2/3 of the expenses (~$2k/m) from the salary + withdraw ~$8k/y from the fund during the years 9-12.
- After kids finish their higher education and till pension - invest ~$15.6k/y for another 7 years
- Retirement: withdraw $12k/y (in today’s dollars) for 15y. During the 1st year of pension - spend the reserve fund, withdraw ~$4.4k (in today’s dollars)
You can find the “Financial Goals” page with my configs saved from portfoliovizualizer in the file Kids+Pension-v2.zip
This modelling doesn’t take into account taxes and the loss caused by our national currency (Ukrainian hryvna) devaluation relative to USD (expected >=10%/y). Roughly, the tax should be ~40% of the profit (out of which 19.5% is the tax itself, and the rest is caused by the relative UAH/USD devaluation), but this part needs further modelling and probably might change the results notably.
My questions are:
- How would you approach such a task, with 2 goals (kids’ higher education and retirement) and given the available money and time? Does the described contribution/withdrawals idea sound valid?
- Any comments about the portfolio itself? Would you do something differently?
Did I miss any major points/factors?
Statistics: Posted by iurii — Tue Mar 19, 2024 3:25 am — Replies 0 — Views 41