Check my portfolio/strategy (First time ever entering the market)

For residents of Spain.
Post Reply
Topic Author
0AdamReith0
Posts: 12
Joined: Tue Jul 14, 2020 5:12 am

Check my portfolio/strategy (First time ever entering the market)

Post by 0AdamReith0 »

Hi everyone,

I'm a 39 years old business owner that has decided to put some of his capital to work. I have never done this before, but I have a quite large sum (At least for my standards, over 500K). I'm from Spain (so taxes work a little different, keep that in mind) but I have no problem investing in american stock through IBKR and a holding company.

After reading a lot in the past year, I guess I have become a boglehead and I play to follow the buy&hold, rebalance, stay the course approach.

My final asset allocation should look something like this:

VTI VANGUARD IX FUN/VANGUARD TOTAL STK --- 25.0%
VXUS VANGUARD STAR F/VANGUARD TOTAL INTL STOCK ETF --- 15.0%
ACWV ISHARES INC/EDGE MSCI MIN VOLAT STOCK ETF --- 25.0%
VNQ VANGUARD IX FUN/RL EST IX FD ETF REIT -- 5.0%
VNQI VANGUARD INTL E/GLB EX-US RL EST IX REIT --- 5.0%
BND Vanguard Total Bond Market ETF BOND --- 10.0%
BNDX VANGUARD CHARLO/TOTAL INTL BD ETF BOND --- 5.0%
VTIP VANGUARD MALVER/SHORT-TERM INFLATIO BOND --- 5.0%
Plus I plan on having some 'fun money' to pick stocks --- 5.0%

So 70% stock ETF, 10% REIT and 20% bonds. I would like to be covered for different scenarios (potential inflation, US not performing as good as in the past, bonds not performing good at all, etc..) but at the same time capture as much return as possible. So, basically I'm trying to have good risk adjusted long term results. I plan on holding this 20 or 30 years, adding more funds over time. The "fun money" is basically to keep me entertained and make sure I don't mess with the core positions (I tend to stay busy and have quite a lot of energy...).

That would be my final allocation to hold 'forever'. I think I'll be able to handle the emotions on a market crash and simply rebalance (based on 25% bands), I'm not a particularly risk adverse person.

The thing is that since I'm quite afraid (this being my first time, investing most of my wealth) and feel that there is a lot of volatility and potential downside to the current market (Long bull market, Covid, American Elections). I would like to reduce the risk of timing the market poorly by investing in phases.

First I would buy ACWV + REITs + BND/BNDX + VTIP (45% on VTIP, basically improved cash as far as I understand it). Then, slowly (every quarter for the next 6 quarters) move money from VTIP to VXUS (first since it has better CAPE valuations) and VTI (later since I consider the CAPE valuation is just too high...). I might even wait a little more to enter VTI if the valuations don't change since... I just don't get how can it be interesting to enter a market with a CAPE close to 30.

I would love some constructive criticism and advise, this is my first post here (although I have been lurking in the dark for quite a while and I love this place) and I hope someone else's insight can help me avoid critical mistakes. I don't know anybody who can give me proper advise.

Thanks in advance to anyone kind enough to share some wisdom to this newcomer! :sharebeer
medic
Posts: 186
Joined: Thu Jul 18, 2019 11:30 am

Re: Check my portfolio/strategy (First time ever entering the market)

Post by medic »

Your 5% allocations are just noise in your portfolio; they won't materially impact your returns/volatility and with just starting out the movements there are likely going to get you jittery. If you're thinking buy/hold, look at the 3-fund portfolios and set your allocation there. Alternatively, you could just buy a target date fund which well setup and maintain a balanced portfolio and adjust the allocations as you get closer to retirement.

Given it's your first time entering the market and you're apprehensive, going in slowly makes sense. I'd probably just invest proportionally to your allocation vs trying to do all of investment A over investment B, but in the long run it probably doesn't matter much.
Personally, I don't do any international, but others here will disagree.
Also, your bond allocation feels high for your age, but not knowing the rest of your financials it's hard to really judge.
Topic Author
0AdamReith0
Posts: 12
Joined: Tue Jul 14, 2020 5:12 am

Re: Check my portfolio/strategy (First time ever entering the market)

Post by 0AdamReith0 »

medic wrote: Tue Jul 14, 2020 6:13 am Your 5% allocations are just noise in your portfolio; they won't materially impact your returns/volatility and with just starting out the movements there are likely going to get you jittery. If you're thinking buy/hold, look at the 3-fund portfolios and set your allocation there. Alternatively, you could just buy a target date fund which well setup and maintain a balanced portfolio and adjust the allocations as you get closer to retirement.

Given it's your first time entering the market and you're apprehensive, going in slowly makes sense. I'd probably just invest proportionally to your allocation vs trying to do all of investment A over investment B, but in the long run it probably doesn't matter much.
Personally, I don't do any international, but others here will disagree.
Also, your bond allocation feels high for your age, but not knowing the rest of your financials it's hard to really judge.
Thanks Medic! I could probably simplify my bond exposure, maybe even just get US bonds at BND and remove VTIP and BNDX. I would still like to keep the ACWV for the min volatility and global exposure, and REITs since the behave a little different and tend to have almost stock level returns in the long-term, it's all about diversifying.

I like having quite international exposure even if the US is still most of the portfolio. I'm from outside the US and even if I appreciate the fact the US markets have traditionally outperformed the rest of the world, that doesn't mean it needs to continue to be like that. I can accept the "whole humanity" returns while having an even more distributed risk. Having too much in the US, from my view, feels a little too risky since, in the end, you are concentrating in one country (the best, true, but one country and things might happen in the following 20-30 years).

I'll take another look at the way I enter the market and also consider reducing even further my bond allocations (I don't love bonds after listening to Warren Buffett, although I get their role in the portfolio). Maybe 15% BND will be enough for all my needs.

Thank you for your advice!
snailderby
Posts: 1421
Joined: Thu Jul 26, 2018 11:30 am

Re: Check my portfolio/strategy (First time ever entering the market)

Post by snailderby »

Welcome to the forum! :happy

A. There is nothing wrong with any of the ETFs you have chosen. You seem to have put a lot of thought into this. And there are certainly reasonable arguments for holding REITs, minimum volatility funds, etc. But I wonder whether 8 ETFs is really necessary. Here are a couple ways to think about this:

1. A 5% allocation to one ETF is unlikely to make a huge difference, one way or another.

2. Compare your portfolio (the 5% of play money excluded) with a simpler portfolio consisting of VT, ACWV, and BND: https://www.portfoliovisualizer.com/bac ... tion9_2=40. How much of a difference do you see between the blue line (your portfolio) and the red line (the simplified VT/ACWV/BND portfolio)?

3. In the long run, other factors such as your savings rate, stock/bond allocation, and U.S./ex-U.S. allocation will likely make a much bigger difference on your portfolio performance than minor differences in your portfolio construction.

4. Holding 8 separate ETFs creates many opportunities for you to second guess yourself and keep tinkering with your portfolio in search of the "perfect" portfolio. (Hint: There is no such thing, unless you can predict the future.)

5. Have you read Taylor Larimore's collected quotes on simplicity? See viewtopic.php?f=10&t=156505.

B. If you are "quite afraid (this being my first time, investing most of my wealth) and feel that there is a lot of volatility and potential downside to the current market (Long bull market, Covid, American Elections)," take a hard look at your stock/bond ratio. Your unease with investing everything you have right now (other than an emergency fund) might be an indication that an 80/20 stock/bond ratio is too risky for you.

C. Your plan to move into VTIP first, then VXUS, then VTI sounds like (a mild form of) market timing. It may work out for you. Or it may not. I honestly have no idea. But if you haven't read what experts say about market timing, Taylor Larimore has collected many of those quotes here: https://www.bogleheads.org/wiki/Taylor_ ... ing_quotes.
vsquid
Posts: 132
Joined: Sat May 18, 2019 2:24 pm

Re: Check my portfolio/strategy (First time ever entering the market)

Post by vsquid »

You should check if holding Irish accumulating ETFs instead of American dividend paying ETFs would be beneficial from a tax point of view.
Topic Author
0AdamReith0
Posts: 12
Joined: Tue Jul 14, 2020 5:12 am

Re: Check my portfolio/strategy (First time ever entering the market)

Post by 0AdamReith0 »

vsquid wrote: Tue Jul 14, 2020 8:09 am You should check if holding Irish accumulating ETFs instead of American dividend paying ETFs would be beneficial from a tax point of view.
That sounds like a good idea yes. The thing is that my tax advisor told me that if the dividends are automatically reinvested in the broker (I use Interactive Brokers) the whole portfolio can still be taxes as a "long term investment" under the spanish law, so I will get taxed only when position are sold. That's pretty much the same as having an accumulating ETF but with lower costs (VTI, VXUS, etc.. all have lower ER than european irish based Vanguard funds).

My advisor might be wrong so I'll double check with him and keep this in mind as an alternative.

Thank you for suggesting this.
Topic Author
0AdamReith0
Posts: 12
Joined: Tue Jul 14, 2020 5:12 am

Re: Check my portfolio/strategy (First time ever entering the market)

Post by 0AdamReith0 »

snailderby wrote: Tue Jul 14, 2020 7:36 am Welcome to the forum! :happy

A. There is nothing wrong with any of the ETFs you have chosen. You seem to have put a lot of thought into this. And there are certainly reasonable arguments for holding REITs, minimum volatility funds, etc. But I wonder whether 8 ETFs is really necessary. Here are a couple ways to think about this:

1. A 5% allocation to one ETF is unlikely to make a huge difference, one way or another.

2. Compare your portfolio (the 5% of play money excluded) with a simpler portfolio consisting of VT, ACWV, and BND: https://www.portfoliovisualizer.com/bac ... tion9_2=40. How much of a difference do you see between the blue line (your portfolio) and the red line (the simplified VT/ACWV/BND portfolio)?

3. In the long run, other factors such as your savings rate, stock/bond allocation, and U.S./ex-U.S. allocation will likely make a much bigger difference on your portfolio performance than minor differences in your portfolio construction.

4. Holding 8 separate ETFs creates many opportunities for you to second guess yourself and keep tinkering with your portfolio in search of the "perfect" portfolio. (Hint: There is no such thing, unless you can predict the future.)

5. Have you read Taylor Larimore's collected quotes on simplicity? See viewtopic.php?f=10&t=156505.

B. If you are "quite afraid (this being my first time, investing most of my wealth) and feel that there is a lot of volatility and potential downside to the current market (Long bull market, Covid, American Elections)," take a hard look at your stock/bond ratio. Your unease with investing everything you have right now (other than an emergency fund) might be an indication that an 80/20 stock/bond ratio is too risky for you.

C. Your plan to move into VTIP first, then VXUS, then VTI sounds like (a mild form of) market timing. It may work out for you. Or it may not. I honestly have no idea. But if you haven't read what experts say about market timing, Taylor Larimore has collected many of those quotes here: https://www.bogleheads.org/wiki/Taylor_ ... ing_quotes.
Thank you so much for your detailed response!

1,3,4,5 - Yes, I'll simplify. I'm already convinced of the necessity of removing the 5% of bond ETF and put it all in BND. I don't really mind if bonds are american or foreign to be honest I see them as "better than money part of your portfolio that I'll use to rebalance and give some stability". I'm having second thoughts about REITs, might dump them. ACWV, VTI and VXUS already have a lot REIT inside them. I might leave the portfolio as: VTI, VXUS, ACWV, BND. 4 fund portfolio. Just one above canon I guess :P
2 - I have considered using VT, but the ER on VTI and VXUS is smaller and it doesn't give me a big headache to balance those two. Besides, it allows me to enter the market in phases (first international, then US, given my views on the current US market valuation)
B,C - Regarding the 80/20. I'm ok taking risks, this is all the money I have available to invest, but not all my wealth. I believe I won't get nervous if the portfolio goes down 50%, I'll just feel regret because I could have paid a smaller price for that stock, which is why I'd rather do some mild market timing when entering the market, to avoid regret. I would still buy&hold and stay the course. To me it's not about market timing (who knows what and when the market will do funny stuff... certainly not me) but about not overpaying for the stocks inside an ETF. A Forward PE Ratio > 20 just feels too high for me, and VTI is the only one that is that expensive, so I'd rather delay a little entering that market (even if it's the best) I'll be already owning US stocks through ACWV.

Again, thank you for taking the time. This is an incredible forum. I hope I can be useful to other people someday, I plan on being here a couple of decades, so I might also get wise eventually...
snailderby
Posts: 1421
Joined: Thu Jul 26, 2018 11:30 am

Re: Check my portfolio/strategy (First time ever entering the market)

Post by snailderby »

0AdamReith0 wrote: Tue Jul 14, 2020 10:52 am 1,3,4,5 - Yes, I'll simplify. I'm already convinced of the necessity of removing the 5% of bond ETF and put it all in BND. I don't really mind if bonds are american or foreign to be honest I see them as "better than money part of your portfolio that I'll use to rebalance and give some stability". I'm having second thoughts about REITs, might dump them. ACWV, VTI and VXUS already have a lot REIT inside them. I might leave the portfolio as: VTI, VXUS, ACWV, BND. 4 fund portfolio. Just one above canon I guess :P 2 - I have considered using VT, but the ER on VTI and VXUS is smaller and it doesn't give me a big headache to balance those two. Besides, it allows me to enter the market in phases (first international, then US, given my views on the current US market valuation
Sounds good. BNDW is another alternative for bond exposure if you want U.S. and ex-U.S. bonds in one ETF.
B,C - Regarding the 80/20. I'm ok taking risks, this is all the money I have available to invest, but not all my wealth. I believe I won't get nervous if the portfolio goes down 50%...
Thanks for the clarification! Chalk that up to my misunderstanding. If you're sure you can stay the course, 80/20 is perfectly reasonable for your age.
I'll just feel regret because I could have paid a smaller price for that stock, which is why I'd rather do some mild market timing when entering the market, to avoid regret. I would still buy&hold and stay the course. To me it's not about market timing (who knows what and when the market will do funny stuff... certainly not me) but about not overpaying for the stocks inside an ETF. A Forward PE Ratio > 20 just feels too high for me, and VTI is the only one that is that expensive, so I'd rather delay a little entering that market (even if it's the best) I'll be already owning US stocks through ACWV.
Fair enough. We can debate all day whether dollar cost averaging into certain asset classes based on their PE ratios is market timing. But at the end of the day, if it makes you feel more comfortable doing it that way, and you have a plan that you can stick to for putting this money into the market, that's great.
TedSwippet
Posts: 5181
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Check my portfolio/strategy (First time ever entering the market)

Post by TedSwippet »

0AdamReith0 wrote: Tue Jul 14, 2020 5:30 am I'm from Spain (so taxes work a little different, keep that in mind) but I have no problem investing in american stock through IBKR and a holding company.
Do double-check with your tax advisor that your holding company will protect you fully from rapacious US estate taxes. Spain has no estate tax treaty with the US, and without insulation from it of some type, on your death your US assets would be subject to 26%-40% of everything above a miserly $60k exemption.

You also want to be sure that you have the right type of non-US holding company, to keep the US estate tax fully at bay but still allow you to use the US/Spain income tax treaty for a 15% rate on dividends from the ETFs you hold in it, rather than the US's standard 30% dividend or branch profits tax rate.
Topic Author
0AdamReith0
Posts: 12
Joined: Tue Jul 14, 2020 5:12 am

Re: Check my portfolio/strategy (First time ever entering the market)

Post by 0AdamReith0 »

TedSwippet wrote: Tue Jul 14, 2020 3:32 pm
0AdamReith0 wrote: Tue Jul 14, 2020 5:30 am I'm from Spain (so taxes work a little different, keep that in mind) but I have no problem investing in american stock through IBKR and a holding company.
Do double-check with your tax advisor that your holding company will protect you fully from rapacious US estate taxes. Spain has no estate tax treaty with the US, and without insulation from it of some type, on your death your US assets would be subject to 26%-40% of everything above a miserly $60k exemption.

You also want to be sure that you have the right type of non-US holding company, to keep the US estate tax fully at bay but still allow you to use the US/Spain income tax treaty for a 15% rate on dividends from the ETFs you hold in it, rather than the US's standard 30% dividend or branch profits tax rate.
mmm you are right, I don't know much about this (I read something in the past, but since I don't have plans to die anytime soon, I kinda ignored it). I'll doublecheck and seriously consider the (more expensive and with way less volume :( ) European alternatives.
Topic Author
0AdamReith0
Posts: 12
Joined: Tue Jul 14, 2020 5:12 am

Re: Check my portfolio/strategy (First time ever entering the market)

Post by 0AdamReith0 »

I just wanted to updated on this that, after rechecking my tax status (and how complex it us for a European to actually buy american ETFs, it's doable but only through selling puts and that kind of stuff...) I have decided to both:

- Buy only EU registered ETFs
- Simplify the portfolio extremely.

As a result my current plan is this:

VWRA - Vanguard FTSE All-World - 80%. (ER 0,22%, Similar to VT, includes Emerging but not small caps, registered in Ireland, accumulating)
VAGU - Global Aggregate Bond UCITS ETF USD Hedged Accumulating - 20%. (ER 0,10%, seems to be like BND + BNDX combined at a higher cost)

Super simple and with wide coverage, I will rebalance adding new funds (better for taxes). The problem is the base ER costs that will be around 0,18% + Div Taxes (2% * 15% = 0,3%) -> around 0,4-0,5% of anual return being eaten by costs. I dislike that a lot.

But, the ways I have seen to reduce this (Synthetic ETFs, using american ones in a convoluted way, or increasing the complexity and need for rebalance of with funds like SWRD or EIMI) seem to add some risk or some complexity and I have decided to keep things simple.

I'm a little unsure about this, maybe I should make things more complex to reduce expense ratio and even taxes (Synthetic ETFs seem to avoid dividend taxes totally).

Anyway, taxes and death is the english saying I believe...

Special thanks to @vsquid for pointing me in the right direction.
Rosales
Posts: 116
Joined: Thu Apr 30, 2020 8:43 pm

Re: Check my portfolio/strategy (First time ever entering the market)

Post by Rosales »

This is a great plan! I'm following the same as a non-US investor.
0AdamReith0 wrote: Fri Jul 17, 2020 4:56 am
VWRA - Vanguard FTSE All-World - 80%. (ER 0,22%, Similar to VT, includes Emerging but not small caps, registered in Ireland, accumulating)
VAGU - Global Aggregate Bond UCITS ETF USD Hedged Accumulating - 20%. (ER 0,10%, seems to be like BND + BNDX combined at a higher cost)
VWRA & chill
TedSwippet
Posts: 5181
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Check my portfolio/strategy (First time ever entering the market)

Post by TedSwippet »

0AdamReith0 wrote: Fri Jul 17, 2020 4:56 am As a result my current plan is this:

VWRA - Vanguard FTSE All-World - 80%. (ER 0,22%, Similar to VT, includes Emerging but not small caps, registered in Ireland, accumulating)
VAGU - Global Aggregate Bond UCITS ETF USD Hedged Accumulating - 20%. (ER 0,10%, seems to be like BND + BNDX combined at a higher cost)
Assuming you plan to spend your investment proceeds in EUR, hedging your holdings to the USD is probably unwise. Rather than VAGU, consider iShares AGGH (Global Aggregate Bd ETF EUR Hedged). More here:

Simple non-US portfolios - Bogleheads
iShares Core Global Aggregate Bond UCITS ETF | AGGH | Hedged
0AdamReith0 wrote: Fri Jul 17, 2020 4:56 am Super simple and with wide coverage, I will rebalance adding new funds (better for taxes). The problem is the base ER costs that will be around 0,18% + Div Taxes (2% * 15% = 0,3%) -> around 0,4-0,5% of anual return being eaten by costs. I dislike that a lot.
These numbers look off to me. It's true that on stock dividends you will lose 15% to US tax internally to the ETF on the US stock element of your holdings, and around 8-10% or so to other countries for the non-US stock element. However, this is better than the 15% broker withholding you would pay on your entire stock holding if you were to use US domiciled. In practice, this works out to about 5% of 2% saved for you, so around 0.1%-0.15%/year.

So you only lose if the blended ER of the ETFs you plan to use is 0.1% above the blended ER of your planned US domiciled ETFs. It may be, but if so, only slightly. And almost always worth paying to avoid any and all interactions with the IRS and the US's estate tax.
Topic Author
0AdamReith0
Posts: 12
Joined: Tue Jul 14, 2020 5:12 am

Re: Check my portfolio/strategy (First time ever entering the market)

Post by 0AdamReith0 »

TedSwippet wrote: Fri Jul 17, 2020 6:13 am
0AdamReith0 wrote: Fri Jul 17, 2020 4:56 am As a result my current plan is this:

VWRA - Vanguard FTSE All-World - 80%. (ER 0,22%, Similar to VT, includes Emerging but not small caps, registered in Ireland, accumulating)
VAGU - Global Aggregate Bond UCITS ETF USD Hedged Accumulating - 20%. (ER 0,10%, seems to be like BND + BNDX combined at a higher cost)
Assuming you plan to spend your investment proceeds in EUR, hedging your holdings to the USD is probably unwise. Rather than VAGU, consider iShares AGGH (Global Aggregate Bd ETF EUR Hedged). More here:

Simple non-US portfolios - Bogleheads
iShares Core Global Aggregate Bond UCITS ETF | AGGH | Hedged
0AdamReith0 wrote: Fri Jul 17, 2020 4:56 am Super simple and with wide coverage, I will rebalance adding new funds (better for taxes). The problem is the base ER costs that will be around 0,18% + Div Taxes (2% * 15% = 0,3%) -> around 0,4-0,5% of anual return being eaten by costs. I dislike that a lot.
These numbers look off to me. It's true that on stock dividends you will lose 15% to US tax internally to the ETF on the US stock element of your holdings, and around 8-10% or so to other countries for the non-US stock element. However, this is better than the 15% broker withholding you would pay on your entire stock holding if you were to use US domiciled. In practice, this works out to about 5% of 2% saved for you, so around 0.1%-0.15%/year.

So you only lose if the blended ER of the ETFs you plan to use is 0.1% above the blended ER of your planned US domiciled ETFs. It may be, but if so, only slightly. And almost always worth paying to avoid any and all interactions with the IRS and the US's estate tax.
Regarding hedging the BONDS in EUR, I mostly have USD to invest (because of my work) so I wanted to keep my portfolio is USD. The rest of my wealth is already in EUR and very exposed, so it sounds reasonable to do so. But I'll do more research since I don't really understand the reason for hedging the bonds, I just did it because people recommend to do so.

And regarding the costs. Now that I think about it, I believe you are right. That really eases my mind. Thanks!! Still thinking about adding more complexity or synthetic to reduce both ER and Taxes... It's a thing of cost vs simplicty, both boglehead values. Hard to make a decision.

Thank you for your wisdom :beer
Rosales
Posts: 116
Joined: Thu Apr 30, 2020 8:43 pm

Re: Check my portfolio/strategy (First time ever entering the market)

Post by Rosales »

You could also go for unhedged global bond fund like AGGG.
VWRA & chill
Topic Author
0AdamReith0
Posts: 12
Joined: Tue Jul 14, 2020 5:12 am

Re: Check my portfolio/strategy (First time ever entering the market)

Post by 0AdamReith0 »

Rosales wrote: Fri Jul 17, 2020 9:58 am You could also go for unhedged global bond fund like AGGG.
That one is just american bonds, right? I'd rather have global bonds.

Regarding hedged, not hedged, on USD or on EUR. I don't think it's that critical to be honest but, since I want stability from the bond side on the portfolio, hedge should be more stable, right?

I don't know much about bonds (or investing in general :? )

I think I'm going to go for a full USD portfolio with bond hedged and stocks unhedged.
TedSwippet
Posts: 5181
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Check my portfolio/strategy (First time ever entering the market)

Post by TedSwippet »

0AdamReith0 wrote: Fri Jul 17, 2020 11:12 am
Rosales wrote: Fri Jul 17, 2020 9:58 am You could also go for unhedged global bond fund like AGGG.
That one is just american bonds, right?
Wrong. Global bonds: iShares Core Global Aggregate Bond UCITS ETF | AGGG
0AdamReith0 wrote: Fri Jul 17, 2020 11:12 am Regarding hedged, not hedged, on USD or on EUR. I don't think it's that critical to be honest but, since I want stability from the bond side on the portfolio, hedge should be more stable, right?
Hedging to your home currency improves stability, since it removes the forex element from the results of investing. Hedging to a currency other than your own will decrease stability.
Topic Author
0AdamReith0
Posts: 12
Joined: Tue Jul 14, 2020 5:12 am

Re: Check my portfolio/strategy (First time ever entering the market)

Post by 0AdamReith0 »

TedSwippet wrote: Fri Jul 17, 2020 12:23 pm
0AdamReith0 wrote: Fri Jul 17, 2020 11:12 am
Rosales wrote: Fri Jul 17, 2020 9:58 am You could also go for unhedged global bond fund like AGGG.
That one is just american bonds, right?
Wrong. Global bonds: iShares Core Global Aggregate Bond UCITS ETF | AGGG
0AdamReith0 wrote: Fri Jul 17, 2020 11:12 am Regarding hedged, not hedged, on USD or on EUR. I don't think it's that critical to be honest but, since I want stability from the bond side on the portfolio, hedge should be more stable, right?
Hedging to your home currency improves stability, since it removes the forex element from the results of investing. Hedging to a currency other than your own will decrease stability.
Thanks, I forgot one 'G' on my previous search :D

I think I understand the role of hedging on stability I just don't see that it's going to affect my whole strategy that much. Variance is not the same as risk and I see bond as playing the part of "not invested" in my portfolio, specially after the arrived to an all-time low interest rates. I'll just stick to the USD hedged vanguard fund just to keep the whole portfolio on dollars. I'm in it for the very long-term so I don't think it's going to make a big difference either way.
Topic Author
0AdamReith0
Posts: 12
Joined: Tue Jul 14, 2020 5:12 am

Re: Check my portfolio/strategy (First time ever entering the market)

Post by 0AdamReith0 »

I just wanted to update with what I'm looking at right now as the "final" version of the portfolio.

VWRA - FTSE All-World UCITS ETF - (USD) Accumulating 60%
VDMV - Global Minimum Volatility UCITS ETF Shares USD Acc - 25%
VAGU - Global Aggregate Bond UCITS ETF - USD Hedged Accumulating 15%.

- All Ireland based accumulating ETFs.
- All Vanguard.
- 85% stock / 15% bonds.
- Global exposure with some minimum volatility (to compensate the quite small bond allocation).
- Full USD portfolio (even if I live in Europe I get paid in dollars and this is very long term, so I feel fine) with bond hedged to USD.
- I also have some real state (direct) properties and a quite large emergency cash (2-3 years of expenses) amount in EUR, plus a stable job and own a healthy company.

I keep the plan of entering the market with VDMV + VAGU as a lump sum and then slowly, over a year, add the 60% of VWRA (I'm a newcomer so I'm worried about the current volatility).

Being 39 I feel good about the level of risk I'm taking. So, after a lot of thought (maybe too much!) I believe I'm entering the market this week!

Special thanks to everyone that took the time to answer and give advice, if was truly useful.
reln
Posts: 718
Joined: Fri Apr 19, 2019 4:01 pm

Re: Check my portfolio/strategy (First time ever entering the market)

Post by reln »

0AdamReith0 wrote: Tue Jul 14, 2020 5:30 am Hi everyone,

I'm a 39 years old business owner that has decided to put some of his capital to work. I have never done this before, but I have a quite large sum (At least for my standards, over 500K). I'm from Spain (so taxes work a little different, keep that in mind) but I have no problem investing in american stock through IBKR and a holding company.

After reading a lot in the past year, I guess I have become a boglehead and I play to follow the buy&hold, rebalance, stay the course approach.

My final asset allocation should look something like this:

VTI VANGUARD IX FUN/VANGUARD TOTAL STK --- 25.0%
VXUS VANGUARD STAR F/VANGUARD TOTAL INTL STOCK ETF --- 15.0%
ACWV ISHARES INC/EDGE MSCI MIN VOLAT STOCK ETF --- 25.0%
VNQ VANGUARD IX FUN/RL EST IX FD ETF REIT -- 5.0%
VNQI VANGUARD INTL E/GLB EX-US RL EST IX REIT --- 5.0%
BND Vanguard Total Bond Market ETF BOND --- 10.0%
BNDX VANGUARD CHARLO/TOTAL INTL BD ETF BOND --- 5.0%
VTIP VANGUARD MALVER/SHORT-TERM INFLATIO BOND --- 5.0%
Plus I plan on having some 'fun money' to pick stocks --- 5.0%

So 70% stock ETF, 10% REIT and 20% bonds. I would like to be covered for different scenarios (potential inflation, US not performing as good as in the past, bonds not performing good at all, etc..) but at the same time capture as much return as possible. So, basically I'm trying to have good risk adjusted long term results. I plan on holding this 20 or 30 years, adding more funds over time. The "fun money" is basically to keep me entertained and make sure I don't mess with the core positions (I tend to stay busy and have quite a lot of energy...).

That would be my final allocation to hold 'forever'. I think I'll be able to handle the emotions on a market crash and simply rebalance (based on 25% bands), I'm not a particularly risk adverse person.

The thing is that since I'm quite afraid (this being my first time, investing most of my wealth) and feel that there is a lot of volatility and potential downside to the current market (Long bull market, Covid, American Elections). I would like to reduce the risk of timing the market poorly by investing in phases.

First I would buy ACWV + REITs + BND/BNDX + VTIP (45% on VTIP, basically improved cash as far as I understand it). Then, slowly (every quarter for the next 6 quarters) move money from VTIP to VXUS (first since it has better CAPE valuations) and VTI (later since I consider the CAPE valuation is just too high...). I might even wait a little more to enter VTI if the valuations don't change since... I just don't get how can it be interesting to enter a market with a CAPE close to 30.

I would love some constructive criticism and advise, this is my first post here (although I have been lurking in the dark for quite a while and I love this place) and I hope someone else's insight can help me avoid critical mistakes. I don't know anybody who can give me proper advise.

Thanks in advance to anyone kind enough to share some wisdom to this newcomer! :sharebeer
I would stick with just market weight stock and bond index funds.

No overweight to REITs.

No overweight to minimum volatility stock strategies.

Since you live in Spain, I would have less US (currency risk). At most I would hold global weight in US stock (see VT).

I wouldn't have any fun money allocation at all. Pick another hobby, like writing your thoughts on BHs.
Topic Author
0AdamReith0
Posts: 12
Joined: Tue Jul 14, 2020 5:12 am

Re: Check my portfolio/strategy (First time ever entering the market)

Post by 0AdamReith0 »

Hi! My last post is the updated version of the portfolio.

I simplified a lot (removed REITs), moved to EU ETFs and got only three of them: Global stock + Min volatility + Global Hedged funds.

I'll keep the portfolio in USD I receive most of my income in USD due to my work, I understand and accept the currency risk.
TedSwippet
Posts: 5181
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Check my portfolio/strategy (First time ever entering the market)

Post by TedSwippet »

0AdamReith0 wrote: Wed Jul 22, 2020 8:05 am I'll keep the portfolio in USD I receive most of my income in USD due to my work, I understand and accept the currency risk.
Perhaps I'm missing something, or being naive, but ... overall I would have thought that having your salary closely coupled to the USD/EUR exchange rate but your spending in EUR would argue for, rather than against, decoupling this exchange rate as far as possible from your investment returns. So EUR hedged global bonds rather than USD hedged ones.

Of course, it's your decision, anyway. Just so long as you fully understand what you're getting into.
Topic Author
0AdamReith0
Posts: 12
Joined: Tue Jul 14, 2020 5:12 am

Re: Check my portfolio/strategy (First time ever entering the market)

Post by 0AdamReith0 »

TedSwippet wrote: Fri Jul 24, 2020 7:22 am
0AdamReith0 wrote: Wed Jul 22, 2020 8:05 am I'll keep the portfolio in USD I receive most of my income in USD due to my work, I understand and accept the currency risk.
Perhaps I'm missing something, or being naive, but ... overall I would have thought that having your salary closely coupled to the USD/EUR exchange rate but your spending in EUR would argue for, rather than against, decoupling this exchange rate as far as possible from your investment returns. So EUR hedged global bonds rather than USD hedged ones.

Of course, it's your decision, anyway. Just so long as you fully understand what you're getting into.
There were some reasons for keeping the portfolio in USD, but finally I decided to move everything to EUR.

I ended having a very standard thing. FTSE All World, Global bonds hedged to EUR and the only oddity is the min volatility fund (I'll get rid of it once the market becomes a little more predictable and go full 80-20%). I already invested about 40% of the capital and I'll deploy the rest during the following 12 months. I'm of the opinion that funny stuff (funnier than usual) could happen in the next 12 months (Covid + American Elections). I won't time the market after that but I consider 2020 and my first time into the market (bigger amount deployed) to be special.

Thank you so much for your help.
Franco123
Posts: 1
Joined: Wed May 24, 2023 9:35 am

Re: Check my portfolio/strategy (First time ever entering the market)

Post by Franco123 »

Hi, which broker in the US are you using to buy UCITS from Europe?
Post Reply