Financial Housekeeping for Moving Abroad

The last couple weeks have been a whirlwind of selling of stuff, packing what's left, moving the packed things, saying "goodbye" to our awesome friends in Edmonton, and traveling. All this to say things have been busy.

We took a 10 day trip to visit our friends in Toronto. I've never been there before and it has a lot to offer. If you haven't been, go visit Niagara Falls (the Canadian side)! We also took in a Blue Jays game (where they stomped all over the Orioles), visited Barrie and the Flying Monkeys Brewery, and enjoyed the South Asia Festival.

While I admit Toronto is a cool city to visit, the traffic and sprawl are quite insane. Our friends were sharing prices for houses, semis, and condos in different areas of the city. My god, I don't know why anyone would ever buy there. It's a ticket to financial destruction! Not to mention poking your eyeballs out driving in endless gridlock traffic day-in and day-out. If you want to buy a house and enjoy your life with much shorter commutes, move to Calgary or Edmonton folks!

Currently we are in B.C. visiting family and friends on the west coast (where house prices and financial madness are no better than GTA). We go to B.C. twice a year on average, so this will be the less touristy part of our trip. In about a week we will be flying out of YVR en-route to Hanoi.

Daily Banking

Some of the things I've been working on between the traveling and busyness is arranging our banking accounts for our move. A few months ago I opened up a Tangerine account and shifted most of our banking to the orange folks. (I was with an Alberta credit union before.) Since Tangerine is all online and fees are low, we will be keeping this account when we are overseas.

I must say I've been very impressed with Tangerine—especially considering they are owned by a big bank (Scotia) and I otherwise try stay away from the oligarchs. Customer service over the phone has been great, the app is clean and a pleasure to use, and the process of setting up our bill payments and deposits is easy. If you are banking with the big guys and are paying monthly fees, you should seriously consider switching. If you do, a free way to say thanks to me is by using my Orange Key: 55884598S1. We will both get around $50 from Tangerine as a thank you. (You have to use the Orange Key in the sign-up process.) As an aside, thanks to everyone who used my Questrade referral code! It has paid several hundred dollars so far, helping cover the costs of webhosting this blog.

I've also opened up a Borderless account with Transferwise. This is another awesome application that will allow me to move money across linked accounts (including Tangerine) and change currencies for extremely low fees. I was hoping to get a Mastercard debit card from Transferwise sometime this year, but it seems they have quietly put that program on hold in Canada.

I anticipate my wife will be opening a local account in Vietnam for local spending (a portion of her salary is paid in Vietnamese dong). Whether or not we can move Vietnamese dong out of the country (via Transferwise), or another compatible currency like Euros or British pounds remains to be seen. I know there are problems with U.S. dollar transfers.

Investment Accounts

As I've mentioned in prior posts, my wife and I will become tax residents in Vietnam effective on the date we land in Hanoi. This is based on the Vietnam tax code and their tax agreement with Canada.

Our RRSPs look like they won't be a problem. We can continue to invest within our RRSP accounts (including Locked-in RRSPs/LIRAs) as we always have without any additional tax repercussions. Questrade allows full access for expats and non-residents. We won't make any new contributions to our RRSPs though; there won't be any income earned in Canada which we can deduct the contributions against. With no new contributions for a while, I don't need to worry about currency changes; in the coming weeks I will switch these over to U.S. dollar accounts.

Our pensions will be partly moved into LIRAs and partly paid out (the excess portion). Neither my wife nor I have received our pension packages yet, so I don't know what their impact will be on our new worth. However, I anticipate it will be relatively substantial and I will not be leaving the money in the pension plans.

The payout will be made to us as foreign residents so it will be subject to a flat 25 percent tax. This might seem high, but it is important to remember that we contributed in the 30.5 and 36 percent tax brackets. Even if we remained residents in Canada, the excess portion would be taxed as regular income less any RRSP contributions we made. It is highly likely that the payout would be taxed at rates higher than 25 percent.

Unfortunately Vietnam doesn't recognize TFSAs as being tax free. I'm not sure if or when we would return to Canada as residents, so at the end of the month I will be moving money out of our TFSAs and into our regular investment account. This means we will be shifting more money from investing in Dual Momentum towards trend investing.

I'm looking forward to this move as it will play a key part in improving our overall capital efficiency. In our regular investment account I would love to get to 90 percent bonds (mostly short-term). I'm not precisely sure how this will look as I'm trying to find the best ways to allocate capital with tools like options and futures. But I do believe it will be doable while being tax efficient.

Taxes

In order to legally leave Canada, we will be paying a sizeable tax bill. All of our assets will be deemed disposed on the day we leave and taxed at their current fair value. This means some capital gains taxes will be owing. But I suppose that's the price to pay for moving to a much lower tax jurisdiction where our taxes should be much lower going forward. Pay now, save a lot more later.

As mentioned above, we'll also be paying taxes on pension payouts. This would happen inevitably with quitting our jobs, but the costs will add up nonetheless. With RRSPs, time will be on our side. We can keep them indefinitely and let them grow, or withdraw them at a 25 percent tax at any time once we are out of Canada. For now I'll keep them in place, mindful that any gains are effectively subject to a 25 percent tax while I make up my mind.

Taxes in Vietnam will be much lower than in Canada. Particularly on investment income and returns. Using UCITS funds (mainly listed in London), we can buy bond funds and have a low 15 percent withholding tax on interest income while also eliminating estate tax exposure. In Vietnam our tax rate on the interest income will be just 5 percent. The only other investment tax we need to worry about is effectively a sell-side transaction tax of 0.1 percent on equities and publicly traded instruments.

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Markets I Trade: July 16, 2019

In my non-registered account I am developing my trend following strategy continuously. I don’t pretend to have all the answers. I am sharing this ongoing learning journey with you in this series.

I am always exploring new methods of trading, new markets to access, and better control of risk and opportunities. My main goal is to avoid large losses while achieving reasonable returns over time. I try to focus on trades which I believe have good reward-to-risk ratios.

You will see me trade index products, currencies, and commodities primarily with leveraged ETFS, futures contracts, and LEAPS options for maximum capital efficiency. I try to risk small amounts of capital with each trade targeting high return multiples on that risk.

One thing that is easy to notice is most weeks have no action and trading is quite boring. The equity based positions move in relative tandem. Volatility positions are the only place where exciting things seem to happen more frequently.

I've added stop levels for the leveraged ETFs which are based on momentum signals. The stop levels are estimates since I am translating data from a signal ETF which is different from the traded ETF.

Currently my exposure to stocks in the trading account is around 38 percent. Most of my cash is in BSV, a short-term bond ETF.

*Information on this post is dated at market close, Monday, July 15, 2019.

VXX: Options

On May 7, I purchased a call ratio backspread for a small account credit when VXX was trading at approximately $29 per unit. This is a hedged position. VXX is now in a downtrend and my trade is showing a small profit. I closed this position for a $530 profit on July 9.

QQQ: LEAPS Options

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Momentum Factor: +10

I opened a position in QQQ on May 17 with a purchase of $160 call options when QQQ was at $184 per unit. My trade is showing a small profit right now (nearly equal to my risk).

Gold: UGLD ETF

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Momentum Factor: +10

I opened a half position in gold on May 29 with a purchase of the 3x leveraged ETF UGLD at a price of $91.15 per unit. With continued upside momentum I moved to a full position on June 3 when UGLD was at around $99.40 with an average position price of $93.20. My stop is up to $90 per unit. My entry was based off a signal in GLD.

Brazil: BRZU ETF

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Momentum Factor: +10

I opened a full position in Brazilian stocks on June 7 with a purchase of the 3x leveraged ETF BRZU at a price of $30.25 per unit. My stop is currently set at around $27 per unit. My entry was based off a signal in EWZ.

Europe: EURL ETF

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Momentum Factor: +8

I opened a nearly full position in European stocks on June 7 with a purchase of the 3x leveraged ETF EURL at price around $27.30 per unit. My stop is currently set at about $23 per unit. My entry was based off a signal in VGK.

India: INDL ETF

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Momentum Factor: +8

I opened a full position in Indian stocks on June 18 with a purchase of the 3x leveraged ETF INDL at price around $73.80 per unit. My stop price is up to approximately $63. My entry was based off a signal in INDA. I'm close to the point where I need to trim down my position a bit, we'll see where momentum goes from here.

Soybeans: YK Futures

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Momentum Factor: +5

I opened a full position in soybean futures on June 24 with a purchase of mini soybean futures contract at price around $9.30 per bushel. At that time the momentum was at +8. My initial stop price is $8.45 per bushel.

GLD: Options

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Momentum Factor: +10

On June 26 I opened a put ratio backspread trade for a small credit on GLD when it was trading at approximately $133. This is a hedged position that will only lose money (within my maximum limit) if the price of GLD is between $120 and $130 per unit.

FXI: Options

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Momentum Factor: +2

On June 27 I purchased in-the-money call options on FXI when it was trading at $42.60. FXI has been climbing in the momentum score in the past few weeks as it pulled out of the low in the beginning of June. A move towards $45 will give it full momentum, but so far momentum has been falling since my entry.

VXX: Options

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Momentum Factor: -10

On May 7, I purchased an out-of-the-money call spread when VXX was trading at approximately $22.75 per unit. This position is effectively a low cost hedge against market turmoil.

Comments & Questions

All comments are moderated before being posted for public viewing. Please don't send in multiple comments if yours doesn't appear right away. It can take up to 24 hours before comments are posted.

Comments containing links or "trolling" will not be posted. Comments with profane language or those which reveal personal information will be edited by moderator.