I'm 80% stocks, 20% bonds, late 30s, live in EU. For the bond part, I have a mix of AGGH and CD, as a nice little boglehead who has read the wiki. Now the thing is, I don't see how my AGGH could ever have positive returns over a significant portion of my investing life. So the natural choice, as often suggested, may be to move 100% to CDs. However, I see two issues with that:
1) CDs now have a very low yield anyway in my country (<1%)
2) CDs don't compound! I don't like to pay capital gain taxes every 1-2-3 years, decreasing my principal.
So I'm thinking to increase a bit the risk and variance on my bond part, in order to get positive returns. I wouldn't drop the CDs completely, but I'm considering replacing AGGH and some of the CDs with something else. I'd be satisfied with an expected return of around 1-2% or so.
Does it make sense?
If yes, under this assumption, which (mixture of) bond(s) would you recommend? These are the minimum requirements I'm considering:
- EUR hedged
- At least Investment grade
- Govt and/or corporate
- No inflation-linked, as I'm already heavy in stocks, that should be enough hedge
[BANKS] LU1852211991 UBS ETF (LU) Sustainable Development Bank Bonds UCITS ETF (hedged to EUR) A-acc
[EMERGING] LU1974696418 UBS ETF (LU) J.P. Morgan USD EM IG ESG Diversified Bond UCITS ETF (hedged to EUR) A-acc
[EMERGING] IE00BK8JH525 SPDR Bloomberg Barclays Emerging Markets Local Bond UCITS ETF EUR Hedged Acc
[TIPS] IE00BDZVH966 iShares USD TIPS UCITS ETF EUR Hedged (Acc)
[US CORP] LU1048315243 UBS ETF (LU) Bloomberg Barclays US Liquid Corporates 1-5 UCITS ETF (hedged to EUR) A-acc
Do you see any merit in the mix and matching of some of these to replace my current allocation? Or any other suggestion? Thank you!!