[Europe] Creating 1st portofolio

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chookity
Posts: 19
Joined: Sun Jun 06, 2021 10:23 am

[Europe] Creating 1st portofolio

Post by chookity »

Hello,

I am 31 yo from Romania and I want to invest aprox 1500$ using the dollar cost averaging method as a start - and after I've finished investing the first batch of 1500$, to continue investing every other 2 or 3 months 150 - 300$.
After much needed reading and studying about investments, I finally decided on how and what I have to do. Mostly.

I finally found that XTB would be the closest broker to what I need, considering I want to invest in ETFs domiciled in Irleand and I barely narrowed it down to this:

1. 30% - AGGU.UK - ISHARES CORE GLOBAL AGGREGATE BOND UCITS (accumulating)
2. 50% - IWDA.UK - ISHARES CORE MSCI WORLD UCITS (accumulating)
3. 20% - EIMI.UK - ISHARES CORE MSCI EM IMI UCITS (accumulating)

I have also seen and considered other ETFs (like VUTA instead of IWDA and EIMI, for example), but haven't found them on XTB. The upper should be my consideration of what should be the best out of what is available, for me.

Any thoughts about this are greatly apreciated.

Thank you!
DJN
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Re: [Europe] Creating 1st portofolio

Post by DJN »

Hi,
looks like a good overall plan to me. Looks like you want to overweight emerging markets.
I would check the exchange that you buy through, you are showing AGGU.UK etc with UK in the title looks like you might be thinking of getting your funds through LSE, you probably don't want that. Also AGGU is hedged back to the dollar, is that what you want? I cannot find any AGGU.UK just AGGU LN which is bought through LSE.
Its accumulating also, does that suit your tax situation?
Why not just use AGGH/EUNA which is hedged back to the euro and is available through european exchanges.
DJN
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.
jg12345
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Re: [Europe] Creating 1st portofolio

Post by jg12345 »

Very good points from DJN!

Additional notes:
1 unless you are investing commission free, you may want to lump your monthly payments into 3-6 months periods. if you put 150US$ per month, and pay 4US$ per operation... you lose too much in commission fees.

2 do you plan to retire in a country with EUR or USD as currency? if it's EUR, then your base currency is EUR, and so I'd suggest investing in EUR.

Best
DJN
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Re: [Europe] Creating 1st portofolio

Post by DJN »

Hi,
one other point for consideration. My favourite hobby horse of the moment is the new life strategy fund from Vanguard, if you can access VNGA (accumulating) or VNGD (distributing) then why not buy just one fund and solve all problems and Vanguard will look after the rebalancing.
Happy days!
DJN
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.
Topic Author
chookity
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Joined: Sun Jun 06, 2021 10:23 am

Re: [Europe] Creating 1st portofolio

Post by chookity »

DJN wrote: Wed Jun 16, 2021 9:44 am Hi,
looks like a good overall plan to me. Looks like you want to overweight emerging markets.
I would check the exchange that you buy through, you are showing AGGU.UK etc with UK in the title looks like you might be thinking of getting your funds through LSE, you probably don't want that. Also AGGU is hedged back to the dollar, is that what you want? I cannot find any AGGU.UK just AGGU LN which is bought through LSE.
Its accumulating also, does that suit your tax situation?
Why not just use AGGH/EUNA which is hedged back to the euro and is available through european exchanges.
DJN
hello and thank you all for the kidn replies.

I am still trying to make perfect sense out of everything that I read and it's a lot of info that I have covered in a short time.

I'm not 100% sure I understand what hedging is and what happens if i'm getting my funds through LSE, but I can tell you my reasons for my choices and you can correct me where I am wrong:

* I chose AGGU (through LSE, with USD, yes) because I've seen that it represents a good ETF in general and I want that 30% to be risk-free, as much as it can be.
* my bank lets me have 1 foreign currency debit card account, with free montly maintainance. And since most of the ETFs that caught my eye as being good are in USD, I thought I'll get an USD account. It seems that my broker XTB doesnt have all the equivalents. I found EUNA tho.
* I also seem to preffer the USD more, I feel it has a bit more stability than the Eur - might be wrong on this as well. What does hedged back to dolar/euro mean, though?

Why don't I want getting my funds through LSE? I checked the 3 etfs, they are all through LSE. London stock exchange, right?
Regarding the exchange, I have a foreign exchange house here in my city where I can get good deals, so I am planning to buy USD and putting them into my USD account so I can use them for investing. And everything I do here is comission-free, tax-free. Even the buying and selling of ETFs, is comission free. I think XTB (broker) gets it's share out of the spread.

All of what I said is under the posibility of change :P since i'm talking with you, I'll surely get other new and better ideas.

Thanks!
Topic Author
chookity
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Re: [Europe] Creating 1st portofolio

Post by chookity »

jg12345 wrote: Wed Jun 16, 2021 12:12 pm Very good points from DJN!

Additional notes:
1 unless you are investing commission free, you may want to lump your monthly payments into 3-6 months periods. if you put 150US$ per month, and pay 4US$ per operation... you lose too much in commission fees.

2 do you plan to retire in a country with EUR or USD as currency? if it's EUR, then your base currency is EUR, and so I'd suggest investing in EUR.

Best
1. i am investing comission free, but thanks for the headsup, this will surely help me in the future.
2. i plan to retire in my country... in romania, where EUR is indeed used more than USD (but mostly as in price displays, or blackmarket/avoiding tax between private individuals etc). You say this in the event that I might want to get some money out from my gains, in the future? And them being USD, I might lose some value to the exchange again.

The thing is that, for anything that I buy in Romania, I need to pay with my local currency so if I ever pull out some money from my account, I'll have to partly exchange it anyways. Maybe I'll get a good deal to exchange from USD to EUR? :D
Topic Author
chookity
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Re: [Europe] Creating 1st portofolio

Post by chookity »

DJN wrote: Wed Jun 16, 2021 9:44 am
Looks like you want to overweight emerging markets.
does 20% mean really overweight? is that bad? should I go maybe 10% with EIMI and 60% with IDWA?

sorry for so many questions.
jg12345
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Re: [Europe] Creating 1st portofolio

Post by jg12345 »

chookity wrote: Wed Jun 16, 2021 3:48 pm
jg12345 wrote: Wed Jun 16, 2021 12:12 pm Very good points from DJN!

Additional notes:
1 unless you are investing commission free, you may want to lump your monthly payments into 3-6 months periods. if you put 150US$ per month, and pay 4US$ per operation... you lose too much in commission fees.

2 do you plan to retire in a country with EUR or USD as currency? if it's EUR, then your base currency is EUR, and so I'd suggest investing in EUR.

Best
1. i am investing comission free, but thanks for the headsup, this will surely help me in the future.
2. i plan to retire in my country... in romania, where EUR is indeed used more than USD (but mostly as in price displays, or blackmarket/avoiding tax between private individuals etc). You say this in the event that I might want to get some money out from my gains, in the future? And them being USD, I might lose some value to the exchange again.

The thing is that, for anything that I buy in Romania, I need to pay with my local currency so if I ever pull out some money from my account, I'll have to partly exchange it anyways. Maybe I'll get a good deal to exchange from USD to EUR? :D
Given that your base currency is EUR, I would suggest you hold all your funds in EUR and not USD.

Regarding your overweight of EM: not a good nor bad, if you are chasing better return/volatility you are assuming you know better than the market the price of EM or alternatively that you are happy with higher returns/higher volatility of EM (and in that case, you could also increase the stock portion of your allocation).

Generally here we suggest to stay close to market weights (EM: 11% of equity). in your case you are at 3 times that. Maybe doing a smaller tilt would help (10-15% EM, 30% AGGH, 60-55% IWDA)
XtremePWN
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Re: [Europe] Creating 1st portofolio

Post by XtremePWN »

chookity wrote: Wed Jun 16, 2021 8:18 am Hello,

I am 31 yo from Romania and I want to invest aprox 1500$ using the dollar cost averaging method as a start - and after I've finished investing the first batch of 1500$, to continue investing every other 2 or 3 months 150 - 300$.
After much needed reading and studying about investments, I finally decided on how and what I have to do. Mostly.

I finally found that XTB would be the closest broker to what I need, considering I want to invest in ETFs domiciled in Irleand and I barely narrowed it down to this:

1. 30% - AGGU.UK - ISHARES CORE GLOBAL AGGREGATE BOND UCITS (accumulating)
2. 50% - IWDA.UK - ISHARES CORE MSCI WORLD UCITS (accumulating)
3. 20% - EIMI.UK - ISHARES CORE MSCI EM IMI UCITS (accumulating)

I have also seen and considered other ETFs (like VUTA instead of IWDA and EIMI, for example), but haven't found them on XTB. The upper should be my consideration of what should be the best out of what is available, for me.

Any thoughts about this are greatly apreciated.

Thank you!
I assume your salary is in RON so why not invest in EURO? Go for the stocks part with VWCE - Vanguard FTSE All-World UCITS ETF that contains Developed markets + Emerging markets, and for the bonds part AGGH
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tre3sori
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Re: [Europe] Creating 1st portofolio

Post by tre3sori »

For creating 1st portfolio, look at this https://www.bogleheads.org/wiki/EU_inve ... portfolios and

use one of these
Vanguard LifeStrategy® 60% Equity UCITS ETF (EUR) ACCUMULATING
Vanguard LifeStrategy® 80% Equity UCITS ETF (EUR) ACCUMULATING

or this
70% iShares MSCI ACWI UCITS ETF USD Acc
30% iShares Global Aggregate Bd ETF EUR Hedged Acc

or this
70% Vanguard FTSE All-World UCITS ETF USD Acc
30% Vanguard Global Aggregate Bd ETF EUR Hedged Acc

For ISINs/tickers take a look at the wiki.
Let every man divide his money into three parts, and invest a third in land, a third in business, a third let him keep by him in reserve. Talmud | 35% Real Estate, 45% Stocks, 15% Bonds, 4% Gold, 1% Cash
DJN
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Re: [Europe] Creating 1st portofolio

Post by DJN »

chookity wrote: Wed Jun 16, 2021 3:53 pm
DJN wrote: Wed Jun 16, 2021 9:44 am Looks like you want to overweight emerging markets.
does 20% mean really overweight? is that bad? should I go maybe 10% with EIMI and 60% with IDWA?
sorry for so many questions.
Hi,
as usual it depends.
Checking the MSCI indices the share of Emerging Markets in the ACWI is only around 13%, although these countries account for around 40% of the world's gross domestic product (GDP). So the MSCI analysts say 13%.
Two other points regarding emerging markets:
1. They are heavily weighted to tech stocks.
2. China and Taiwan account for 50% of the index.
DJN
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.
Topic Author
chookity
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Re: [Europe] Creating 1st portofolio

Post by chookity »

DJN wrote: Thu Jun 17, 2021 6:09 am 1. They are heavily weighted to tech stocks.
2. China and Taiwan account for 50% of the index.
DJN
what does this mean to me?
Topic Author
chookity
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Re: [Europe] Creating 1st portofolio

Post by chookity »

Ok, so after reading and thinking for a bit, I have revised my plan:

1. 15% IS3N.DE - IE00BKM4GZ66 - iShares Core MSCI EM IMI UCITS ETF USD (Acc) (EUR) - i like the volatility here, just 15% going up and down doesn't make me get hurt too much. it's a bit exciting
2. 30% EUNA.DE - IE00BDBRDM35 - iShares Core Global Aggregate Bond UCITS ETF EUR Hedged (Acc) (EUR)
3. 65% EUNL.DE - IE00B4L5Y983 - iShares Core MSCI World UCITS ETF (Acc) (EUR)

What do you think?

I don't like having developed and emerging in the same place so that's why I opted for two different etfs.

Thanks
DJN
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Re: [Europe] Creating 1st portofolio

Post by DJN »

That's super.
Why not just buy VNGA80 if you can get it?
DJN
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.
helloyou
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Re: [Europe] Creating 1st portofolio

Post by helloyou »

DJN wrote: Thu Jun 17, 2021 7:31 am That's super.
Why not just buy VNGA80 if you can get it?
DJN
Shouldn't we be worried about the AUM?

Also bonds might not be the best solution for most Europeans since the wide availability of saving accounts with decent interest rates (0.5-1%)?
DJN
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Re: [Europe] Creating 1st portofolio

Post by DJN »

helloyou wrote: Thu Jun 17, 2021 10:15 am
DJN wrote: Thu Jun 17, 2021 7:31 am That's super.
Why not just buy VNGA80 if you can get it?
DJN
Shouldn't we be worried about the AUM?
Also bonds might not be the best solution for most Europeans since the wide availability of saving accounts with decent interest rates (0.5-1%)?
I am not worried about AUM for Vanguard, especially if enough people find out about it and invest!
Bonds for me act as ballast to risk taking and form a source for re-balancing. Europe is not a country and it depends upon which jurisdiction in regards to savings accounts, 1% is a pretty juicy return, where in "Europe" do you get that on deposit? Deposit guarantees are another problem to watch on cash in "Europe" .
DJN
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.
jg12345
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Re: [Europe] Creating 1st portofolio

Post by jg12345 »

DJN wrote: Thu Jun 17, 2021 12:10 pm
helloyou wrote: Thu Jun 17, 2021 10:15 am
DJN wrote: Thu Jun 17, 2021 7:31 am That's super.
Why not just buy VNGA80 if you can get it?
DJN
Shouldn't we be worried about the AUM?
Also bonds might not be the best solution for most Europeans since the wide availability of saving accounts with decent interest rates (0.5-1%)?
I am not worried about AUM for Vanguard, especially if enough people find out about it and invest!
Bonds for me act as ballast to risk taking and form a source for re-balancing. Europe is not a country and it depends upon which jurisdiction in regards to savings accounts, 1% is a pretty juicy return, where in "Europe" do you get that on deposit? Deposit guarantees are another problem to watch on cash in "Europe" .
DJN
Helloyou has a point. Via raisin.com (maybe there are other fintechs doing that) any EU resident can get CDs from a few banks based in EU. It is true EU is not a country, but it is also true the EU mandates that savings accounts from EU bank should be available to all EU citizens (whether that really happens is another question). That's the legislation that raisin.com is exploiting to make a business.

0.5-1% (gross) probably in Italy or Eastern European countries. I guess 0-0.5% in other countries.

That said, I am also not worried about AUM very much
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chookity
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Re: [Europe] Creating 1st portofolio

Post by chookity »

jg12345 wrote: Thu Jun 17, 2021 7:44 pm
DJN wrote: Thu Jun 17, 2021 12:10 pm
helloyou wrote: Thu Jun 17, 2021 10:15 am
DJN wrote: Thu Jun 17, 2021 7:31 am That's super.
Why not just buy VNGA80 if you can get it?
DJN
Shouldn't we be worried about the AUM?
Also bonds might not be the best solution for most Europeans since the wide availability of saving accounts with decent interest rates (0.5-1%)?
I am not worried about AUM for Vanguard, especially if enough people find out about it and invest!
Bonds for me act as ballast to risk taking and form a source for re-balancing. Europe is not a country and it depends upon which jurisdiction in regards to savings accounts, 1% is a pretty juicy return, where in "Europe" do you get that on deposit? Deposit guarantees are another problem to watch on cash in "Europe" .
DJN
Helloyou has a point. Via raisin.com (maybe there are other fintechs doing that) any EU resident can get CDs from a few banks based in EU. It is true EU is not a country, but it is also true the EU mandates that savings accounts from EU bank should be available to all EU citizens (whether that really happens is another question). That's the legislation that raisin.com is exploiting to make a business.

0.5-1% (gross) probably in Italy or Eastern European countries. I guess 0-0.5% in other countries.

That said, I am also not worried about AUM very much
hello!

are you saying that instead of bonds its better to make a deposit through raisin?

ty

postedit: one drawback i already discovered is that minimal deposit is 5000 E, money that i do not have for a first deposit. bond etfs let me invest much lower.
jg12345
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Re: [Europe] Creating 1st portofolio

Post by jg12345 »

No, we are not.

We are saying CDs are a possible option for your bonds allocation. Bonds ETF are also an excellent choice. Since you have no access to decent CDs in euro, the bonds etf remain an excellent choice.

hope this is clear!
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chookity
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Re: [Europe] Creating 1st portofolio

Post by chookity »

yes it is. thank you!

i have some further concerns.

After a few considerations about the allocations, I have a reluctance to say that it would not be diverse enough.

By the way, I did a backtest on https://backtest.curvo.eu/ and I noticed that it has a Sharpe Ratio below 1%, which would be theoretically suboptimal.

Am I worrying too much or should I rethink the allocation a bit?

The variants with Sharpe Ratio over 1% offered by the backtest are with much higher allocation in bonds, up to ~ 80%, very small in emerging markets ~ 2% and the rest ~ 15-20% in developed countries MSCI WORLD. Which seems a bit strange to me, I didn't expect such a big investment in bonds.
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tre3sori
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Re: [Europe] Creating 1st portofolio

Post by tre3sori »

chookity wrote: Fri Jun 18, 2021 4:57 am The variants with Sharpe Ratio over 1% offered by the backtest are with much higher allocation in bonds, up to ~ 80%, very small in emerging markets ~ 2% and the rest ~ 15-20% in developed countries MSCI WORLD. Which seems a bit strange to me, I didn't expect such a big investment in bonds.
Sharpe ratio is define by (expected rate of return of portfolio - rate of return of riskfree asset)/(standard deviation of portfolio returns). You can see by this formula that as standard deviation of portfolio returns goes down relative to expected rate of return, Sharpe ratio goes up.
Therefore allocations that maximize sharpe ratio/have high sharpe ratios are heavy in bonds and other asset classes (real estate) that have very little volatility relative to their return.

That does not mean that these allocations with Sharpe ratios > 1 have sufficient total return for you. From memory I recall that a classic 60/40 stock/bond allocation has a long term Sharpe ratio of about 0.5. My portfolio happens to have a Sharpe ratio of 1.06 as of now. See my signature. Compared to a classic 60/40 stock/bond portfolio it is heavy in real estate and light in stocks.
Let every man divide his money into three parts, and invest a third in land, a third in business, a third let him keep by him in reserve. Talmud | 35% Real Estate, 45% Stocks, 15% Bonds, 4% Gold, 1% Cash
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chookity
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Re: [Europe] Creating 1st portofolio

Post by chookity »

tre3sori wrote: Fri Jun 18, 2021 5:39 am See my signature. Compared to a classic 60/40 stock/bond portfolio it is heavy in real estate and light in stocks.
i understand.

what does it mean when you have investment in cash?
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tre3sori
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Re: [Europe] Creating 1st portofolio

Post by tre3sori »

chookity wrote: Fri Jun 18, 2021 5:57 am what does it mean when you have investment in cash?
If cash gives you the risk free rate of return or if you can borrow cash at the risk free rate, it means this:
You can cut the investment portfolio by any fraction, or multiply it by any number, investing the extra cash or borrowing the necessary extra cash at the risk-free rate. When you plug into the Sharpe ratio formula, the ratio will not change.

Source: https://www.quora.com/Why-does-cash-inv ... arpe-ratio

The greater a portfolio's Sharpe ratio, the better its risk-adjusted-performance. If the analysis results in a negative Sharpe ratio, it either means the risk-free rate is greater than the portfolio’s return, or the portfolio's return is expected to be negative. In either case, a negative Sharpe ratio does not convey any useful meaning.

Source: https://www.investopedia.com/terms/s/sharperatio.asp

In this respect investing right now in Europe/the Eurozone is special because many models in finance do not provide for negative return of the risk free rate.
Let every man divide his money into three parts, and invest a third in land, a third in business, a third let him keep by him in reserve. Talmud | 35% Real Estate, 45% Stocks, 15% Bonds, 4% Gold, 1% Cash
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chookity
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Re: [Europe] Creating 1st portofolio

Post by chookity »

tre3sori wrote: Fri Jun 18, 2021 6:50 am
chookity wrote: Fri Jun 18, 2021 5:57 am what does it mean when you have investment in cash?
If cash gives you the risk free rate of return or if you can borrow cash at the risk free rate, it means this:
You can cut the investment portfolio by any fraction, or multiply it by any number, investing the extra cash or borrowing the necessary extra cash at the risk-free rate. When you plug into the Sharpe ratio formula, the ratio will not change.

Source: https://www.quora.com/Why-does-cash-inv ... arpe-ratio

The greater a portfolio's Sharpe ratio, the better its risk-adjusted-performance. If the analysis results in a negative Sharpe ratio, it either means the risk-free rate is greater than the portfolio’s return, or the portfolio's return is expected to be negative. In either case, a negative Sharpe ratio does not convey any useful meaning.

Source: https://www.investopedia.com/terms/s/sharperatio.asp

In this respect investing right now in Europe/the Eurozone is special because many models in finance do not provide for negative return of the risk free rate.
sorry if i didnt understand this correclty, and please correct me if i am wrong - i am also trying to make correct translations to my language.

is "cash" to be asociated as well with things like bonds, cds etc? i mean - if i invest 10% in bonds, for example, does it mean that i have a 10% investment in cash?
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tre3sori
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Re: [Europe] Creating 1st portofolio

Post by tre3sori »

chookity wrote: Fri Jun 18, 2021 8:32 am is "cash" to be asociated as well with things like bonds, cds etc? i mean - if i invest 10% in bonds, for example, does it mean that i have a 10% investment in cash?
Please correct me if I am wrong:
If you look at Sharpe ratio, there is no distinction between investment vehicles like bonds, cash, cds...you have a risky portfolio and its expected return and you have a riskless investment vehicle and its return (In Eurozone this is usually short-term German Bunds, US Treasuries Bills in the United States). There is some disagreement as to whether the rate of return on the shortest maturity treasury bill should be used in the calculation or whether the risk-free instrument chosen should more closely match the length of time that an investor expects to hold the equity investments. So these 10% bonds are viewed as risky, if they are not short-term German Bunds, US Treasury Bills... or if they have a duration longer than your investment horizon.
Let every man divide his money into three parts, and invest a third in land, a third in business, a third let him keep by him in reserve. Talmud | 35% Real Estate, 45% Stocks, 15% Bonds, 4% Gold, 1% Cash
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chookity
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Re: [Europe] Creating 1st portofolio

Post by chookity »

tre3sori wrote: Fri Jun 18, 2021 9:16 am
chookity wrote: Fri Jun 18, 2021 8:32 am is "cash" to be asociated as well with things like bonds, cds etc? i mean - if i invest 10% in bonds, for example, does it mean that i have a 10% investment in cash?
Please correct me if I am wrong:
If you look at Sharpe ratio, there is no distinction between investment vehicles like bonds, cash, cds...you have a risky portfolio and its expected return and you have a riskless investment vehicle and its return (In Eurozone this is usually short-term German Bunds, US Treasuries Bills in the United States). There is some disagreement as to whether the rate of return on the shortest maturity treasury bill should be used in the calculation or whether the risk-free instrument chosen should more closely match the length of time that an investor expects to hold the equity investments. So these 10% bonds are viewed as risky, if they are not short-term German Bunds, US Treasury Bills... or if they have a duration longer than your investment horizon.
i think i understand what you are saying. i hope i am not tiresome, but i was curious also about the terminology of "cash". in your signature is written you have 1% invested in cash. what does this mean? is "cash" viewed as an investment into any type of risk-free choice with a maturity limit?
helloyou
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Re: [Europe] Creating 1st portofolio

Post by helloyou »

France for example offered 1% on some saving accounts up to February 2021. It’s 0.5% now. There is a cap at around 22k EUR so can be great for a EF.
DJN
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Re: [Europe] Creating 1st portofolio

Post by DJN »

chookity wrote: Fri Jun 18, 2021 4:31 pm i think i understand what you are saying. i hope i am not tiresome, but i was curious also about the terminology of "cash". in your signature is written you have 1% invested in cash. what does this mean? is "cash" viewed as an investment into any type of risk-free choice with a maturity limit?
See Bogleheads Wiki here on cash equivalents including cash:
https://www.bogleheads.org/wiki/Cash_eq ... _investors

Extract:
"In the investment world, 'cash' is the term used for a collection of short-term investment instruments that are highly liquid and easily converted into ready cash. Collectively, these investments make up the money markets. The short-term nature of all money market instruments means that they rapidly adjust to changes in short term interest rates".
DJN
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.
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tre3sori
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Re: [Europe] Creating 1st portofolio

Post by tre3sori »

chookity wrote: Fri Jun 18, 2021 4:31 pm i hope i am not tiresome, but i was curious also about the terminology of "cash". in your signature is written you have 1% invested in cash. what does this mean? is "cash" viewed as an investment into any type of risk-free choice with a maturity limit?
I live off my portfolio. So I have about 1 year of expenses in my checking account on average. The checking account gets replenished by distributions and by selling shares of the asset that is highest above target allocation once a year. Usually shares of some old equity ETF with relatively high TER that I have not sold yet because of capital gains. My withdrawal rate is about 1.5% of total assets. So at the beginning of the year I start with about 1.5% - 2% in cash and i draw this down to about 0 - 0.5% at the end of the year. Cash is closest to spending, followed by bonds, gold, stocks and real estate, which are the most illiquid assets in my portfolio. So in my case, cash is not "invested", it is waiting to be spend within a year or so. I still view it as part of my assets.
Let every man divide his money into three parts, and invest a third in land, a third in business, a third let him keep by him in reserve. Talmud | 35% Real Estate, 45% Stocks, 15% Bonds, 4% Gold, 1% Cash
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