[Greece] Combine FTSE All-World (VWCE) with S&P 500(VUSA)?

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Topic Author
alepou
Posts: 2
Joined: Wed Jun 02, 2021 5:34 am

[Greece] Combine FTSE All-World (VWCE) with S&P 500(VUSA)?

Post by alepou »

Hi.

My name is Dimi , i am 37 years old currently living in Greece (Greek nationality) and i just started getting into ETFs investments. I am very new to this and still educating myself even for the basic terminologies.

I would like to make a long-term low risk investment. That been said, with what i read so far best "bet" are ETFs so what i have in mind is to reserve a portion of my salary to buy every moth a pice of the following ETFs:

Vanguard FTSE All-World UCITS ETF USD Acc
Vanguard S&P 500 UCITS ETF USD

Is there any "issue" (for instance overlap) that a rookie like me cannot foresee with the above ETF combination?

Thanks
D.
Valuethinker
Posts: 49027
Joined: Fri May 11, 2007 11:07 am

Re: [Greece] Combine FTSE All-World (VWCE) with S&P 500(VUSA)?

Post by Valuethinker »

alepou wrote: Wed Jun 02, 2021 5:50 am Hi.

My name is Dimi , i am 37 years old currently living in Greece (Greek nationality) and i just started getting into ETFs investments. I am very new to this and still educating myself even for the basic terminologies.

I would like to make a long-term low risk investment. That been said, with what i read so far best "bet" are ETFs so what i have in mind is to reserve a portion of my salary to buy every moth a pice of the following ETFs:

Vanguard FTSE All-World UCITS ETF USD Acc
Vanguard S&P 500 UCITS ETF USD

Is there any "issue" (for instance overlap) that a rookie like me cannot foresee with the above ETF combination?

Thanks
D.
Yes.

About 55%, by value, of the FTSE All-World index is accounted for by US stocks - basically by the members of the S&P 500.

Thus you are doubling up on the USA.

There's no reason to do so given you do not live in the USA and have no long term ties there.

You could (and this is what I do) put 100% of your funds into the VG FTSE All-World ETF.** This gives you enough exposure to US markets for an international citizen and resident.

Main issues to consider:

- minimizing transaction fees. Are your broker's charges significant (anything more than 0.1-0.2% of the value of the money you are putting in at that transaction is "significant")?

You may find it more economical to buy say every 3 or even 6 months, thus having a larger deal size and saving on those fees in percentage terms.

- accumulating funds and your taxes. In the UK, one only uses Accumulation funds in tax-protected accounts (Pensions & ISAs). Otherwise you owe tax on dividends made and capital gains realised & distributed by the Fund or ETF, and you would have to sell units to raise the cash to pay the taxes.

** I would suggest to any investor that they have at least 20% in fixed income - bank accounts, bank term deposits or CDs, high quality government bond funds or ETFs (low risk countries like Germnany) etc. In the Eurozone right now, bank deposits (within the EUR 100k deposit insurance per investor per institution) have a higher expected return than German government bonds (yields are negative). So if you trust your banks, and the government behind the deposit insurance, then that's a better place to hold your money.

20% because when a bear market (falling) hits, you want to be able to rebalance into equities as they fall. That strategy, of maintaining constant percentages, is one of precommitment - it forces you to buy stocks when they are falling and sell them when they are rising -- the opposite of what humans tend to do.
Siaigi
Posts: 130
Joined: Sun May 17, 2020 4:24 am
Location: Italy

Re: [Greece] Combine FTSE All-World (VWCE) with S&P 500(VUSA)?

Post by Siaigi »

alepou wrote: Wed Jun 02, 2021 5:50 am
I would like to make a long-term low risk investment. That been said, with what i read so far best "bet" are ETFs so what i have in mind is to reserve a portion of my salary to buy every moth a pice of the following ETFs:

Vanguard FTSE All-World UCITS ETF USD Acc
Vanguard S&P 500 UCITS ETF USD

Is there any "issue" (for instance overlap) that a rookie like me cannot foresee with the above ETF combination?
Welcome Dimi,

Your investment is not precisely a low risk one. Hopefully in the long term. Therefore are you familiar about an Emergency and are you also aware that the value of your investment could drop by more than 50% for several years. Why aren't you thinking about investing in bonds too?
Topic Author
alepou
Posts: 2
Joined: Wed Jun 02, 2021 5:34 am

Re: [Greece] Combine FTSE All-World (VWCE) with S&P 500(VUSA)?

Post by alepou »

Valuethinker wrote: Wed Jun 02, 2021 7:14 am
Yes.

About 55%, by value, of the FTSE All-World index is accounted for by US stocks - basically by the members of the S&P 500.

Thus you are doubling up on the USA.

There's no reason to do so given you do not live in the USA and have no long term ties there.

You could (and this is what I do) put 100% of your funds into the VG FTSE All-World ETF.** This gives you enough exposure to US markets for an international citizen and resident.

Main issues to consider:

- minimizing transaction fees. Are your broker's charges significant (anything more than 0.1-0.2% of the value of the money you are putting in at that transaction is "significant")?

You may find it more economical to buy say every 3 or even 6 months, thus having a larger deal size and saving on those fees in percentage terms.

- accumulating funds and your taxes. In the UK, one only uses Accumulation funds in tax-protected accounts (Pensions & ISAs). Otherwise you owe tax on dividends made and capital gains realised & distributed by the Fund or ETF, and you would have to sell units to raise the cash to pay the taxes.

** I would suggest to any investor that they have at least 20% in fixed income - bank accounts, bank term deposits or CDs, high quality government bond funds or ETFs (low risk countries like Germnany) etc. In the Eurozone right now, bank deposits (within the EUR 100k deposit insurance per investor per institution) have a higher expected return than German government bonds (yields are negative). So if you trust your banks, and the government behind the deposit insurance, then that's a better place to hold your money.

20% because when a bear market (falling) hits, you want to be able to rebalance into equities as they fall. That strategy, of maintaining constant percentages, is one of precommitment - it forces you to buy stocks when they are falling and sell them when they are rising -- the opposite of what humans tend to do.
It seems posting here was a good idea. With two replies i learned some concepts that didnt know about and started thinking again about my investment plan. Looks like i have a lot to learn.

Standalone VG FTSE All-World ETF.** it is then. I did try to figure out myself if those two ETFs overlap by using online tools but any ETF ticker i tried i wasnt getting any results.

Regarding the fees of the broker, I am using Degiro which has a list of FREE transaction fee ETFs. FSTE All-World ETF is one of them however only the first transaction of the month. In my case where i am planning to buy only VG FTSE All-World ETF (after your suggestion) once per month i guess i am fine (fees-wise). Any other transaction within the month is charged with 2.50 euros.

Thanks for the tip regarding buying every 3-6 months so you can bring down fees. I never though about it because i wasnt aware of the "no more than 0.1% - 0.2% fees" rule-of-thumb. Makes sense that the larger the amount you invest the lower percentage the fee "translates" to. Assuming there was no free transaction fee charge from Degiro, and was planing to invest 150euros per month then the charge of 2.50 euros is like 1.7% ..which is way off according to your suggestion

I havent studied yet for Bonds but i will start doing so since i have also seen elsewhere that its the safest long term investment.

Siaigi wrote: Wed Jun 02, 2021 11:33 am
Welcome Dimi,

Your investment is not precisely a low risk one. Hopefully in the long term. Therefore are you familiar about an Emergency and are you also aware that the value of your investment could drop by more than 50% for several years. Why aren't you thinking about investing in bonds too?
Yes , after reading the basics i learned that its important to have Emergency fund. I have one which is not complete yet. Its about 70% of what i need to spend 3 months without salary but i am palling to get it to 100% within the next few months.

I did noticed that there is a chance for ETFs to drop 50% or even more but from what iv seen they always recover. Please correct me if i am wrong, your comments are very educative.

I havent went through bonds investing yet but you are the second person who mentions this. I am completely clueless regarding bonds so i guess ill start some reading.
XtremePWN
Posts: 43
Joined: Fri Aug 23, 2019 3:01 am

Re: [Greece] Combine FTSE All-World (VWCE) with S&P 500(VUSA)?

Post by XtremePWN »

You can think of it like this: FTSE All-World (VWCE) basically already contains the S&P 500(VUSA)!

If you don't have to believe me, just check the holdings of Vanguard's VWCE here https://api.vanguard.com/rs/gre/gls/1.3 ... nts/959/dk


And with this Image you can compare FTSE All-World (VWCE) to S&P 500 (In USD. Source https://www.reddit.com/r/eupersonalfina ... exes_ftse/)
Valuethinker
Posts: 49027
Joined: Fri May 11, 2007 11:07 am

Re: [Greece] Combine FTSE All-World (VWCE) with S&P 500(VUSA)?

Post by Valuethinker »

alepou wrote: Thu Jun 03, 2021 5:56 pm

Welcome Dimi,

Your investment is not precisely a low risk one. Hopefully in the long term. Therefore are you familiar about an Emergency and are you also aware that the value of your investment could drop by more than 50% for several years. Why aren't you thinking about investing in bonds too?
Yes , after reading the basics i learned that its important to have Emergency fund. I have one which is not complete yet. Its about 70% of what i need to spend 3 months without salary but i am palling to get it to 100% within the next few months.

I did noticed that there is a chance for ETFs to drop 50% or even more but from what iv seen they always recover. Please correct me if i am wrong, your comments are very educative.

I havent went through bonds investing yet but you are the second person who mentions this. I am completely clueless regarding bonds so i guess ill start some reading.
[/quote]

Emergency Fund is dependent on your career & risk of losing your job/ illness & the nature of your country's unemployment insurance system.

Americans have very limited social cover for unemployment or illness. Thus Americans often need to have a year's emergency money at hand (or more). Both after 2008/9 and now, job searches can take a very long time.

Re ETFs:

- *equity*/ stock market ETFs can drop 50% or more. It depends what the underlying asset is. It is a good rule of thumb that your global equity fund can drop 50% in a bad crash. Like 2008/9 or the Covid epidemic. Note though that in both cases recovery was relatively quick. Another example in recent history, the "dot com" crash of 2000-03 (roughly 33 months) the Bear (ie going down market) reached its bottom about -35% in March 2003.

Equities/shares/stocks are just risky. You only really find out how you will deal with that riskiness when it happens. Some people sell out into cash, then can only reinvest when the market is much higher in a recovery. Others are happy to keep investing. I just froze like a rabbit in the headlights and basically did nothing - stopped looking at my portfolios.

What rebalancing does is give you an external, precommitted, discipline. If stock markets are falling, you know you will be buying equities, conversely if they are rising, you will be selling equities. It's like not having any tasty sweet desserts in the house - you can't then snack on them.

20% bonds, and in the case of a Eurozone resident I think the best bond fund is a global bond fund, hedged into Euros. This gives the maximum diversification from a Credit Risk point of view (if Italy gets into trouble, say, it's bad for Eurozone govt bonds, but less so for global govt bonds) but the fact that it is Euro hedged will mean your returns will be quite stable (and very low, right now).

As you get closer to retirement you will want to increase your bond investments. Rules such as "Age minus 10% in bonds" are often suggested here ie at age 45, 35% in bonds.
Last edited by Valuethinker on Fri Jun 04, 2021 7:51 am, edited 1 time in total.
Valuethinker
Posts: 49027
Joined: Fri May 11, 2007 11:07 am

Re: [Greece] Combine FTSE All-World (VWCE) with S&P 500(VUSA)?

Post by Valuethinker »

https://www.morningstar.co.uk/uk/funds/ ... F00000T1HT

Vanguard Global Bond Fund Euro hedged

https://www.vanguard.co.uk/professional ... stributing

ETF version of same thing, I think. Average duration is about 7.5 years. So, if interest rates rise by 1% in the Eurozone, the price of units in this fund will drop by about 7.5%, all other things being equal (and they never are).

Note you have to understand the tax implications of Distributing v Accumulating funds.

In the more likely scenario, in my view, of continued low interest rates in the Eurozone as the economies struggle to get out of the Covid recession, then the fund will return about 1.0% p.a. That's not great but *shrug* that's true of bond investing.

It's quite easy to find years in the past where bonds have gone down -10%. It's rare, but it does happen. But in financial crises, for example, government bonds tend to go *up* -- flight to safety.

Bonds are for safety - relatively low volatility. Bank term deposits (Certificates of Deposit) will also work well, if:

1. You keep within the 100k EUR deposit insurance limit for each investor with each single financial institution (check quite carefully that the account or product you invest in is indeed covered by that deposit insurance)

2. You trust your government to be able to bail out a major bank failure. That's a hard call if you are Greek, and if I was Greek I would keep half my fixed interest/ fixed income investment in global bonds for that reason. Probably only keep my emergency money in a Greek financial institution.
fandridis
Posts: 11
Joined: Fri Nov 15, 2013 2:12 am

Re: [Greece] Combine FTSE All-World (VWCE) with S&P 500(VUSA)?

Post by fandridis »

Hi Dimi,

Nice to see a fellow Greek joining the forum. Welcome!

The guys before me explained things great, so the only thing I would like to say that VWCE is a great choice. Accumulating works well for us as we don't have any capital gain tax at the moment in Greece. I am also using Degiro and having it free to invest helps a lot.

About Bonds, I would say that you shouldn't hurry into them. Especially in Europe, they aren't much of a help and you can achieve a similar outcome with bank CDs.

Have a great day.

Regards,
George
jg12345
Posts: 427
Joined: Fri Dec 11, 2020 12:03 pm

Re: [Greece] Combine FTSE All-World (VWCE) with S&P 500(VUSA)?

Post by jg12345 »

alepou wrote: Thu Jun 03, 2021 5:56 pm
Valuethinker wrote: Wed Jun 02, 2021 7:14 am
Yes.

About 55%, by value, of the FTSE All-World index is accounted for by US stocks - basically by the members of the S&P 500.

Thus you are doubling up on the USA.

There's no reason to do so given you do not live in the USA and have no long term ties there.

You could (and this is what I do) put 100% of your funds into the VG FTSE All-World ETF.** This gives you enough exposure to US markets for an international citizen and resident.

Main issues to consider:

- minimizing transaction fees. Are your broker's charges significant (anything more than 0.1-0.2% of the value of the money you are putting in at that transaction is "significant")?

You may find it more economical to buy say every 3 or even 6 months, thus having a larger deal size and saving on those fees in percentage terms.

- accumulating funds and your taxes. In the UK, one only uses Accumulation funds in tax-protected accounts (Pensions & ISAs). Otherwise you owe tax on dividends made and capital gains realised & distributed by the Fund or ETF, and you would have to sell units to raise the cash to pay the taxes.

** I would suggest to any investor that they have at least 20% in fixed income - bank accounts, bank term deposits or CDs, high quality government bond funds or ETFs (low risk countries like Germnany) etc. In the Eurozone right now, bank deposits (within the EUR 100k deposit insurance per investor per institution) have a higher expected return than German government bonds (yields are negative). So if you trust your banks, and the government behind the deposit insurance, then that's a better place to hold your money.

20% because when a bear market (falling) hits, you want to be able to rebalance into equities as they fall. That strategy, of maintaining constant percentages, is one of precommitment - it forces you to buy stocks when they are falling and sell them when they are rising -- the opposite of what humans tend to do.
It seems posting here was a good idea. With two replies i learned some concepts that didnt know about and started thinking again about my investment plan. Looks like i have a lot to learn.

Standalone VG FTSE All-World ETF.** it is then. I did try to figure out myself if those two ETFs overlap by using online tools but any ETF ticker i tried i wasnt getting any results.

Regarding the fees of the broker, I am using Degiro which has a list of FREE transaction fee ETFs. FSTE All-World ETF is one of them however only the first transaction of the month. In my case where i am planning to buy only VG FTSE All-World ETF (after your suggestion) once per month i guess i am fine (fees-wise). Any other transaction within the month is charged with 2.50 euros.

Thanks for the tip regarding buying every 3-6 months so you can bring down fees. I never though about it because i wasnt aware of the "no more than 0.1% - 0.2% fees" rule-of-thumb. Makes sense that the larger the amount you invest the lower percentage the fee "translates" to. Assuming there was no free transaction fee charge from Degiro, and was planing to invest 150euros per month then the charge of 2.50 euros is like 1.7% ..which is way off according to your suggestion

I havent studied yet for Bonds but i will start doing so since i have also seen elsewhere that its the safest long term investment.

Siaigi wrote: Wed Jun 02, 2021 11:33 am
Welcome Dimi,

Your investment is not precisely a low risk one. Hopefully in the long term. Therefore are you familiar about an Emergency and are you also aware that the value of your investment could drop by more than 50% for several years. Why aren't you thinking about investing in bonds too?
Yes , after reading the basics i learned that its important to have Emergency fund. I have one which is not complete yet. Its about 70% of what i need to spend 3 months without salary but i am palling to get it to 100% within the next few months.

I did noticed that there is a chance for ETFs to drop 50% or even more but from what iv seen they always recover. Please correct me if i am wrong, your comments are very educative.

I havent went through bonds investing yet but you are the second person who mentions this. I am completely clueless regarding bonds so i guess ill start some reading.
It may be redundant given the excellent advice you received, but FYI there's a lot to learn in the boglewiki.
homebuyer6426
Posts: 1830
Joined: Tue Feb 07, 2017 8:08 am

Re: [Greece] Combine FTSE All-World (VWCE) with S&P 500(VUSA)?

Post by homebuyer6426 »

As an American who is marrying a Greek, welcome.

My fiance tells me there are not many Greeks who invest, so I am glad you are finding a way to do that.

I'm 35 and I hold about 88% stocks, 5% bonds, 5% bitcoin, 2% gold/silver, but I have a high risk tolerance. Most of my stock is U.S., which did very well in the last decade, but has no guarantee of doing as well in the future. International stock did not have amazing growth in that time period, but there are many here who think it's about to over perform. No one can predict the future though.

My personal feeling is that there is going to be a consequence for the U.S. printing so many dollars soon. I am considering paying off my house over the next couple years rather than investing any more into stocks at this time.

All the best.
Spgold
Posts: 85
Joined: Fri May 10, 2019 4:52 am

Re: [Greece] Combine FTSE All-World (VWCE) with S&P 500(VUSA)?

Post by Spgold »

Hi Dimi, welcome.

By searching this forum using the word “Greece” there are a couple of threads that you might find useful.

I think there is Greek site mentioned in 1 of them that also discusses actual tax situation in Greece as well as brokers, strategies etc.

Cheers.
makaros
Posts: 19
Joined: Fri Apr 16, 2021 3:47 pm

Re: [Greece] Combine FTSE All-World (VWCE) with S&P 500(VUSA)?

Post by makaros »

Καλησπέρα

There is big overlap between VWCE and VUAA.

I would just go with VWCE and invest every month.
Siaigi
Posts: 130
Joined: Sun May 17, 2020 4:24 am
Location: Italy

Re: [Greece] Combine FTSE All-World (VWCE) with S&P 500(VUSA)?

Post by Siaigi »

alepou wrote: Thu Jun 03, 2021 5:56 pm ill start some reading.
Here you can find the wiki with a lot of basic informations https://www.bogleheads.org/wiki/Getting ... _investors
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