Belgium, 37, seeking advice asset allocation & portfolio

For investors outside the US. Personal investments, personal finance, investing news and theory.
Sister forums: Canada, Spain (en español)
---------------
Post Reply
Topic Author
Wim_vdb
Posts: 4
Joined: Wed Apr 14, 2021 7:17 am

Belgium, 37, seeking advice asset allocation & portfolio

Post by Wim_vdb »

Hi all,

Have been reading a lot on this forum, and I thought it’s time for my first post. Hope some of you could give some advice on my portfolio/asset allocation/investment ideas…

Country of Residence: Belgium
International Lifestyle: planning to stay in Belgium.
Currency: EUR
Emergency fund: yes, 30 months of expenses. (is this too much..?)
Age: 37

Current Investment portfolio
Equities (50%)
Vanguard FTSE All-World UCITS ETF IE00BK5BQT80 VWCE 20,0%
iShares Core MSCI World UCITS ETF IE00B4L5Y983 IWDA 15,0%
iShares MSCI EM UCITS ETF USD (Acc) IE00B4L5YC18 IEMA 3,6%
iShares Core MSCI Europe UCITS ETF EUR (Acc) IE00B4K48X80 IMAE 1,5%
2 Individual stocks (holdings) 10%

Fixed income (50%)
Savings account 45%
iShares Core Global Aggregate Bond UCITS ETF IE00BDBRDM35 5%

Also I’m investing yearly in a private pension plan with tax benefits. It’s a mutual fund with 70% equities. I don’t take this into account in my asset allocation.

Target asset allocation: I’m struggling a bit with finding the appropriate asset allocation. My investment objective is saving for retirement: maybe working part-time as I am older, or even retiring before retirement age if this would be financially possible. So I have a long investment horizon, and an aggressive asset allocation might be appropriate.
However I also fear losing too much of my investments (certainly now with booming equities..), so I believe ‘something in the middle’ is right for me. I was thinking about equities: 100-age (which would be 63%), or equities: 110-age (which would be 73%). I won’t be able to cope with a higher percentage of equities.
What do you think?

Let’s assume my new asset allocation would be 65/35: this means an increase in equities from 50% to 65%. How should I get my investments in line with my new asset allocation? Should I invest this additional 15% at once? Or spread it for example over a year..? (I am a bit afraid of investing this additiona 15% at once)
Any thoughts or advice about this?

New monthly contributions: will be invested in ETF’s (with low cost broker DeGiro) according to my asset allocation.

For equities I’m planning to invest in iShares Core MSCI World (75% of total investment in equities), iShares MSCI EM (emerging markets 15% of total investment in equities), and iShares Core MSCI Europe (10% of total investment in equities).

Bonds: investing in either a savings account or in iShares Core Global Aggregate Bond.

Questions:

1. Any thoughts/advice about my asset allocation?
2. If I would change my asset allocation from 50% to 65% equities. How should I invest this addtional 15%: at once or spreading over a certain period?
3. Is my emergency fund too high?
4. Thoughts on my portfolio, and my plan for future investments?
5. Any general advice?

Thanks a lot in advance for your time!
Last edited by Wim_vdb on Thu Apr 22, 2021 4:10 am, edited 1 time in total.
User avatar
BeBH65
Posts: 1763
Joined: Sat Jul 04, 2015 7:28 am

Re: Belgium, 37, seeking advice asset allocation & portfolio

Post by BeBH65 »

Welcome to the forum

Your portfolio seems generally OK.

It is good to look at all your investment together (excluding your emergency fund) --> so best to include your pension savings fund.
Pension savings fund: You are getting some tax advantages for that, however since it invest in active funds the consensus seems that you can do better yourself.
Your bond fund is hedged to Euro right?
Your 2 individual stocks make up 5% of your total portfolio. Bogleheads normally do not invest in individual stock. An allocation of max 5% of play money is "tolerated".

An Asset Allocation is something really personal. You need to determine it yourself based om you need, ability and willingness to take risk.
How will you react if you lose 50% of your stock portion, and if that, even after a number of years, your portfolio wild still be at a loss?
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence). | Have a look at https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles
Topic Author
Wim_vdb
Posts: 4
Joined: Wed Apr 14, 2021 7:17 am

Re: Belgium, 37, seeking advice asset allocation & portfolio

Post by Wim_vdb »

For now I’ll include my pension saving fund in the asset allocation, and I’ll consider your feedback about not investing in this active fund anymore (despite the tax advantage).
Yes, the bond fund is hedged to EUR.
I realize that the weight of these individual stocks is too high in my total portfolio, though I already had these stocks before I started investing in ETF. Nevertheless, it seems a good idea to lower the weight of them.

Thanks for your feedback.
User avatar
zarci
Posts: 197
Joined: Sat Jun 10, 2017 11:02 am

Re: Belgium, 37, seeking advice asset allocation & portfolio

Post by zarci »

you sound a bit skittish so I’d recommend taking it easy.

- if you move from 50 to 65 equities you could do so by purchasing more stock with new savings rather than by selling and buying immediately. this avoids transaction cost and tax.

- you mentioned you invest in a global bond fund. since you spend in euros and plan on retiring here a diversified euro government bond fund could achieve the same goal at a lower cost. a global bond fund hedges return of foreign bonds back to euros, which results in similar performance as euro bonds at a higher cost. the additional diversification you get from a global bond fund is questionable.

- you’re in doubt between 50% and 65% stock. you also seem a bit hesitant about large market drops. there’s nothing wrong with playing it safe. Many beginning investors got burnt by an agressive asset alloction in 2007 and swore to never touch equities again. if they had been a little more conservative they’d have experienced way better returns overall compared to fleeing equities.


All in all i’d say the right asset allocation for you is the one that let’s you sleep soundly, without worry.

oh one more thing; tou seem to be mixing FTSE and MSCI index funds. mixing indices is generally not recommended. but i’m unsure if that’s intentional since the VWCE hasn’t been around that long
international001
Posts: 2746
Joined: Thu Feb 15, 2018 6:31 pm

Re: Belgium, 37, seeking advice asset allocation & portfolio

Post by international001 »

Why so much 45% in savings accounts? I would use most of fixed income in bonds

Many don't consider having an emergency fund is really needed (except a bit for enough liquidity).
Topic Author
Wim_vdb
Posts: 4
Joined: Wed Apr 14, 2021 7:17 am

Re: Belgium, 37, seeking advice asset allocation & portfolio

Post by Wim_vdb »

Stock asset allocation
I have simplified my stock portfolio in the last 2 weeks
Have sold individual stocks & iShares Core MSCI Europe & iShares MSCI EM
& have reinvested in iShares Core MSCI World IWDA & iShares Core MSCI EM IMI.

So future stock allocations will go:
1. either to Vanguard FTSE All-World UCITS ETF IE00BK5BQT80 VWCE
2. or to IWDA (88%)+ EMIM (12%)
I started investing in VWCE. After a while I also opened an account at a second broker (DeGiro) because they’re offering some ETFs free of transaction costs and started buying IWDA+IEMA. Since last week DeGiro also included VWCE & EMIM. Imo both options (VWCE and IWDA+EMIM) are good, so will just keep these 3 ETFs in my portfolio.


In regard to bonds:
@ international001: Yes at the moment most of my fixed assets are on a savings account with a fixed interest rate of 0,60%. The reason of the high stake in savings at the moment is that I only just recently started thinking about how to invest in bonds, and I’m not sure yet about the way forward. (eg what’s the expected return of a bond fund, and is it worth it compared to a certain return of 0,6%? – also dividend/capital gain taxes should be taken into account on a bond fund…)

@ Zarci: any suggestions for a Eur government bond? I did not find one that is accumulating (taxation advantage compared to a distributing ETF if you’d have lost capital when you’re selling) + not registered in Belgium (transaction tax advantage).

- What’s your view on using a government bond vs aggregate bond ETF as fixed assets?
Last edited by Wim_vdb on Sat Apr 24, 2021 2:17 pm, edited 1 time in total.
Henri111
Posts: 20
Joined: Thu Apr 22, 2021 6:45 am

Re: Belgium, 37, seeking advice asset allocation & portfolio

Post by Henri111 »

Your bond fund is hedged to Euro right?
Why is it SO important to pay extra for a euro hedged fund? Currencies in general will go up and down within a certain range. Certainly on a longer plan I feel these level themselves out. While paying for a euro hedged fund can have a significantly higher TER.

I appologise if this is too offtopic.

In general about your portfolio presented, I follow the general consensus. You have to look at a solution that makes you sleep well at night. Emotions are the biggest profit killer.

In regard to investing the extra 15%. It's your choice. Whatever makes you sleep well. But also read the following:
https://static.twentyoverten.com/5980d1 ... nguard.pdf

PS Can I send you a DM in regard to Belgian taxes?
Topic Author
Wim_vdb
Posts: 4
Joined: Wed Apr 14, 2021 7:17 am

Re: Belgium, 37, seeking advice asset allocation & portfolio

Post by Wim_vdb »

Henri111 wrote: Sat Apr 24, 2021 2:03 pm
Your bond fund is hedged to Euro right?
Why is it SO important to pay extra for a euro hedged fund? Currencies in general will go up and down within a certain range. Certainly on a longer plan I feel these level themselves out. While paying for a euro hedged fund can have a significantly higher TER.

I appologise if this is too offtopic.

In general about your portfolio presented, I follow the general consensus. You have to look at a solution that makes you sleep well at night. Emotions are the biggest profit killer.

In regard to investing the extra 15%. It's your choice. Whatever makes you sleep well. But also read the following:
https://static.twentyoverten.com/5980d1 ... nguard.pdf

PS Can I send you a DM in regard to Belgian taxes?
Thanks for sending the link!
Yes of course, pls feel free to send me a DM
international001
Posts: 2746
Joined: Thu Feb 15, 2018 6:31 pm

Re: Belgium, 37, seeking advice asset allocation & portfolio

Post by international001 »

Wim_vdb wrote: Sat Apr 24, 2021 11:25 am
In regard to bonds:
@ international001: Yes at the moment most of my fixed assets are on a savings account with a fixed interest rate of 0,60%. The reason of the high stake in savings at the moment is that I only just recently started thinking about how to invest in bonds, and I’m not sure yet about the way forward. (eg what’s the expected return of a bond fund, and is it worth it compared to a certain return of 0,6%? – also dividend/capital gain taxes should be taken into account on a bond fund…)
Savings are like a Euro bond of 0 duration. Higher duration bonds will give better return (over long term) and better diversification with stocks.
That's why it's part of the Bogleheads portfolio
international001
Posts: 2746
Joined: Thu Feb 15, 2018 6:31 pm

Re: Belgium, 37, seeking advice asset allocation & portfolio

Post by international001 »

Henri111 wrote: Sat Apr 24, 2021 2:03 pm
Why is it SO important to pay extra for a euro hedged fund? Currencies in general will go up and down within a certain range. Certainly on a longer plan I feel these level themselves out. While paying for a euro hedged fund can have a significantly higher TER.
Because usually currencies have a greater volatility than bonds. So it doesn't make sense to get the lower return of bonds without the benefits of lower volatility.

If your percentage of bonds is low, then it probably doesn't matter much, because the volatility of your portfolio is dominated by the stock portion. But at 50/50 is probably better to maintain the volatility of the bond portion also low. TERs don't make a huge difference today. Look at AGGH or VAGF. It may actually be difficult to get an unhedged bond fond, since they are usually considered bad investments.
Henri111
Posts: 20
Joined: Thu Apr 22, 2021 6:45 am

Re: Belgium, 37, seeking advice asset allocation & portfolio

Post by Henri111 »

Yes of course, pls feel free to send me a DM
Hi Wim, thanks for the note! I'll do now.

Hi international001, I get your point. If the idea is to create safety, you don't want to be dependent on the currency fluctuations.
Thank you for the input.
Post Reply