[Germany]Portfolio management (Need Help with 7 figures)

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erYof531
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Joined: Mon Oct 03, 2022 1:10 am

[Germany]Portfolio management (Need Help with 7 figures)

Post by erYof531 »

Country of Residence: Germany(I am not American. I am German and an EU citizen.)

Currency: EUR

Age: 27

Hello Bogleheads forum,

After some extensive research, my journey led me to this community, and I believe here is where I can find the answers to my problems. Half a decade ago, my father abruptly passed away, leaving behind a sizeable amount of wealth(in the 7 figure realm). My mother has been in charge mostly of managing it with the help of a bank consultant, who provides her with investment plans as to how to allocate the money. Last update was done around March-April of this year, and since the market has been very weak, she turned to me for help as to what to do, because she is panicking and fears we might see severe losses to our capital. By no means am I an expert in finances, but I was determined to be responsible here, since I hadn't been when it would have been most important. After reading through threads on the internet, which eventually lead me here and then through the notes provided on this website and forum, I noticed first and foremost that all of the money we have, has been either put in multi-assets or equities, which means none of it is in bonds. I understand the importance of bonds now, especially during this time we are experiencing. Having some money in bonds and not seeing it plummet like everything else, would have come in handy, especially for the mental well being of my mother who is very worried about our future.

With this capital, I want to ensure the prosperity of my family. I believe, from what I have read, that with an amount like this, a 5 figure return on our investment each year, is more than just plausible. I will include the current allocation of the portfolio(which accounts for 99.7% of the total, the rest 0.3% is in smaller insignificant equities):

BGF-ESG MULTI-ASSET A4EOD FUNDS 19.5%
DB PBC-DB BEST ALLOC.-BAL.ESG.NAM.ANT.R O.N 26.2%
DWS ESG AKKUMULA INHABER-ANTEILE LC 4.3%
DWS TOP DIVIDENDE LD 9.8%
DWS AKTIEN STRATEGIE DEUTSCHLAND LC FONDS 11.5%
AGIF-EUR.EQU.GRTH A EO FUNDS 12.2%
Franklin U.S. Opportunities Fund A(acc)EUR-H1 1%
Fr.Temp.Inv.Fds-F.U.S.Oppor.Fd Namens-Anteile A Fond 7.2%
ALLIANZ GLOB.WAT.A FONDS A.A.PO.A EURDIS ON 0.8%
CSIF2-CS(L)ROBO.EQ.AEODIS FUNDS 2.3%
DWS INV.-GLOBAL INFRASTRUCTU.INH.ANT.LD O.N. 4.9%

This portfolio has had a 15% loss since its establishment.

Please, give me any kind of helpful feedback. What would your mindset be? What would you change? How would you change it and when? What kind of questions would you be asking?

Goals: Preserving a strong portfolio and have an annual return of 4-5%

Thank you for the opportunity to be on this forum and ask likeminded people, who strive for the best! Any kind of feedback and help is very much appreciated. Thank you so much in advance.
Last edited by erYof531 on Wed Oct 12, 2022 3:33 am, edited 1 time in total.
Topic Author
erYof531
Posts: 4
Joined: Mon Oct 03, 2022 1:10 am

Re: Portfolio management (Need Help with 7 figures)

Post by erYof531 »

If there's any kind of bibliography you guys can point me towards to find answers, I'd be much obliged! I just want to find the best possible solution. The way the portfolio is structured now is bleeding money, and I know that the people on this forum will have the best possible solutions for what I'm looking for. Thank you again for giving me your time.
pennywiser
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Re: Portfolio management (Need Help with 7 figures)

Post by pennywiser »

There is quite a lot to get into here and I can't possible address all of it but these are my thoughts:
erYof531 wrote: Mon Oct 03, 2022 2:02 am she is panicking and fears we might see severe losses to our capital
Please watch this video, it gives the message along the lines thinking of this forum https://www.youtube.com/watch?v=ymUAqaJn9ec
erYof531 wrote: Mon Oct 03, 2022 2:02 am I noticed first and foremost that all of the money we have, has been either put in multi-assets or equities, which means none of it is in bonds.
Multi-asset fund is very likely to contain bonds, hence multi-asset.
"BGF-ESG MULTI-ASSET A4EOD FUNDS" seems to hold 25.80% of the fund in bonds according to this Blackrock
Best way to find out is to log into your account on wealth manager's website and find the breakdown of the entire portfolio to see what it holds. Your annual statement might also show portfolio allocation. You might find out that you alread own bonds and you portfolio is down because not only equity is down this year, pretty much everything is down, including bonds.
erYof531 wrote: Mon Oct 03, 2022 2:02 am What would you change?
It is hard to clearly see what you porftolio breakdown is but from what I see it might be overweight towards german securities Your financial advisor will be the best person to explain why the overweight. The current attrocious state of european economy demonstrates pretty well why diversified portfolio is a good idea.
Selection of funds is very well explained in this video:
https://www.youtube.com/watch?v=16bauiT1F20

For somebody like your mother I would recommend something like a Vanguard Lifestrategy fund. This video explains why funds like this can be a good one-stop solution and what kind of investors they are for:
https://www.youtube.com/watch?v=lGQ9KyQq8Jw
Jack FFR1846
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Re: Portfolio management (Need Help with 7 figures)

Post by Jack FFR1846 »

First, relax. And tell your mom to relax. There is no emergency where you need to do something RIGHT NOW.

What I would do first is to work with your mom to figure out how much equity she wants and how much bonds. There are numerous online "calculators" where you answer questions to determine risk. This is actually a good time to take these tests as during market booms, people think that it could never drop and want to get 100% stock and even have more risk than that. Look at the Bogleheads wiki topics to help determine what she'd want. Does she want to include international? She could, but certainly doesn't have to. She could have literally 2 funds and be in fantastic shape. I have to think from your age that she's near my age (65), so I'll tell you that with my 7 figure portfolio, I am at 50% stock and 50% bond. While the market has dropped this year, mine hasn't dropped so much. I also have a very large US Savings Bond stash, so like in 2008, I can see gains regardless of what the market does.

Next, look up the expense ratio for each investment you listed. This is key because whether the market is going up or going down, the expenses can take away her money day in and day out. Here at Bogleheads, a key is to have LOW COST investments. Your list doesn't seem to have any traditional low cost investments. Being guided by a bank, I am not surprised. Bank "advisors" are pretty well known to push investments that kick back money to them. And that costs your mom money.

Eventually, moving to a low cost house such as Vanguard, Fidelity or Schwab will give her the ability to get rid of her high cost investments and invest in low cost mutual funds or ETFs. Don't be afraid of ETFs. They are easily moved.

Also, what kind of accounts is your mom in? "Tax advantaged" includes 401k, IRA, TSA and the like. "Taxable" are regular broker accounts where sales and dividends generate income tax every year. If currently, she has taxable accounts, she could sell investments that have lost money and take up to $3000 in loss off her income tax or sell both losses and gains to offset each other and sell of the garbage. This is called tax loss harvesting. This could be done after moving if she's allowed to move "in kind" where nothing is sold or bought....it just moves funds as is. Then they can be sold at the new, good broker, likely with no charge.

An example portfolio with 2 funds and 50/50 is wicked simple. It could be 50% VTI and 50% BND. Of course the type of account matters. She'd want to have bonds in tax advantaged accounts, not in taxable.

This might sound complicated, but it's not. Just do one step at a time, step back, take a breath and plan the next step.
Bogle: Smart Beta is stupid
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Hyperborea
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Re: Portfolio management (Need Help with 7 figures)

Post by Hyperborea »

First, the post above has a lot of good general advice but the specifics on companies, types of retirement accounts, funds, etc. are all very US-centric and won't apply to the OP. Perhaps if you change the topic title to include your country of residence (Germany) then you will get some country specific advice.

Second, the market will go up and will go down and when and how much is really unknown no matter how much some people will tell you otherwise. If you are invested in stock or bonds they will from time to time experience loss. Often short term but occasionally long term - many years. Even cash can experience loss during inflationary times. You need to accept that fact.

Third, it seems that your adviser has set you up with a real hodge podge of funds. There's a lot of stuff in there at sub-10% and even sub-5% of your portfolio. At those levels it really doesn't make that much of a difference. You need to simplify. But first, leave it alone and do some research on how and what you want to invest in. You could do it with as few as 2 or 3 funds if you want.
It’s not just that facts don’t seem to matter anymore. It’s that it doesn’t seem to matter that facts don’t matter.
Laurizas
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Re: Portfolio management (Need Help with 7 figures)

Post by Laurizas »

erYof531 wrote: Mon Oct 03, 2022 2:49 pm If there's any kind of bibliography you guys can point me towards to find answers,
https://www.bogleheads.org/wiki/Boglehe ... philosophy
TedSwippet
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Re: Portfolio management (Need Help with 7 figures)

Post by TedSwippet »

Laurizas wrote: Tue Oct 04, 2022 12:52 pm
erYof531 wrote: Mon Oct 03, 2022 2:49 pm If there's any kind of bibliography you guys can point me towards to find answers,
https://www.bogleheads.org/wiki/Boglehe ... philosophy
There is a version of this article that is specific to non-US investors (or more accurately, that is not specific to US investors):

Bogleheads® investment philosophy for non-US investors - Bogleheads
Laurizas
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Re: Portfolio management (Need Help with 7 figures)

Post by Laurizas »

erYof531 wrote: Mon Oct 03, 2022 2:02 am I understand the importance of bonds now, especially during this time we are experiencing. Having some money in bonds and not seeing it plummet like everything else, would have come in handy, especially for the mental well being of my mother who is very worried about our future.
The irony of 2022 bear market from EU investor's perspective is that 100 % world stock portfolio (VWCE) lost only 12.48 %, while 20/80 portfolio lost 14.67, 40/60 - 13.86, in other world, bonds have not helped so far.
erYof531 wrote: Mon Oct 03, 2022 2:02 am I will include the current allocation of the portfolio
Active fund with find fees, it is better to avoid these.
erYof531 wrote: Mon Oct 03, 2022 2:02 am This portfolio has had a 15% loss since its establishment.
When was it established?
erYof531 wrote: Mon Oct 03, 2022 2:02 am What would you change? How would you change it and when?
I would determine you mom's asset allocation (stocks and bonds/CDs) in regard of her need, ability and willingness to take risk
https://www.bogleheads.org/wiki/Asset_allocation
erYof531 wrote: Mon Oct 03, 2022 2:02 am What kind of questions would you be asking?
Whom would you question?
1squirrel
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Re: Portfolio management (Need Help with 7 figures)

Post by 1squirrel »

erYof531 wrote: ↑Mon Oct 03, 2022 9:02 am
I will include the current allocation of the portfolio
All these funds have high fees.
Looking at the portfolio I suspect Deutsche Bank to be on the 'advising' side which is expensive too.
I fear that your total cost, including bank fees, is somewhere around 1,8% of portfolio value yearly.

Since there are some old funds included you should check if something was bought before Jan.1.2009
since that would be grandfathered with a EUR 100000,- tax exemption on capital gains in German tax law.
If you are coming close to that threshold it can be multiplied with transfer in the family:
https://www.juhn.com/fachwissen/erbscha ... verkaufen/

Therefore such funds should be kept isolated from the rest.
erYof531 wrote: ↑Mon Oct 03, 2022 9:02 am
This portfolio has had a 15% loss since its establishment.
Since the portfolio is underwater it would be a good time to simplify, streamline and cut costs,
the same portfolio can be established with a fraction of the fees.
The losses will be carried forward in German taxation.

About the importance of fees:
https://itsyourmoneyandestate.org/wp-co ... tfolio.pdf
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erYof531
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Re: Portfolio management (Need Help with 7 figures)

Post by erYof531 »

I wanted to thank everyone who contributed to this thread!

Everyone here helped me pinpoint mistakes and understand concepts! I gathered all the knowledge and made a presentation(unironically in powerpoint) to explain to my mom how we should move forward from here on out! The current funds are an absolute disaster!!

I wanted to ask two followup questions, if anyone could perhaps help:

1)The portfolio as it is right now, is draining money. Considering how high fees are on each of these funds individual, we are seeing a huge loss just from those.
First question:
Is it wise to completely dismantle this portfolio and suffer the losses, how many they may be, but reinvest the money more wisely, in an efficient low cost fund? My mom and I are considering the LifeStrategy 60/40, which leads me to my second question.

2)Vanguard's LifeStrategy!
Second question:
What does this board think about this particular fund? From all I can see it's perfect for us, especially considering it's a one decision fund, and we basically won't have to deal with tinkering around with it, which takes away a huge portion of the stress.

Thank you once again so much for giving me the opportunity to mingle with like-minded individuals, who have their wealth's and family's best interest at heart and who share knowledge in order for success to be part of our livelihood.
Valuethinker
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Re: Portfolio management (Need Help with 7 figures)

Post by Valuethinker »

erYof531 wrote: Mon Oct 10, 2022 10:57 am I wanted to thank everyone who contributed to this thread!

Everyone here helped me pinpoint mistakes and understand concepts! I gathered all the knowledge and made a presentation(unironically in powerpoint) to explain to my mom how we should move forward from here on out! The current funds are an absolute disaster!!

I wanted to ask two followup questions, if anyone could perhaps help:

1)The portfolio as it is right now, is draining money. Considering how high fees are on each of these funds individual, we are seeing a huge loss just from those.
First question:
Is it wise to completely dismantle this portfolio and suffer the losses, how many they may be, but reinvest the money more wisely, in an efficient low cost fund? My mom and I are considering the LifeStrategy 60/40, which leads me to my second question.

2)Vanguard's LifeStrategy!
Second question:
What does this board think about this particular fund? From all I can see it's perfect for us, especially considering it's a one decision fund, and we basically won't have to deal with tinkering around with it, which takes away a huge portion of the stress.

Thank you once again so much for giving me the opportunity to mingle with like-minded individuals, who have their wealth's and family's best interest at heart and who share knowledge in order for success to be part of our livelihood.
60 40 may be OK. Note that it hasn't done well the last 12 months?

Can you post a link? I suspect the UK version is somewhat different (being in pounds, with a marked slant towards UK shares & bonds).

You have to consider your national taxation (Germany?).
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erYof531
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Re: Portfolio management (Need Help with 7 figures)

Post by erYof531 »

Valuethinker wrote: Tue Oct 11, 2022 12:24 pm
60 40 may be OK. Note that it hasn't done well the last 12 months?

Can you post a link? I suspect the UK version is somewhat different (being in pounds, with a marked slant towards UK shares & bonds).

You have to consider your national taxation (Germany?).
https://www.de.vanguard/professionell/a ... stributing

This is the link for the German one. Could you propose a viable alternative? Should I be looking at Schwag and Fidelity? I really enjoy the fact of automation this fund offers. Are there German specific ones?
WienerG
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Re: [Germany]Portfolio management (Need Help with 7 figures)

Post by WienerG »

OP,

Servus aus Wien.

First of all, sorry for your loss. These things take a long time to process and accept.

There is a lot of good advice above from our fellow Bogleheads. Simplification and lower management costs are definitely something to aspire to.
One thing that I have not yet seen mentioned here and which I believe is worth a mention is Capital Gains Tax (Kapital-Etrag Steuer). If memory serves correctly this is 25% on any gain in Germany. You therefore may want to discuss any sales you are planning with an accountant to ensure that you understand what the sale may cost in terms of taxation. Now may be a good time to sell as the markets are lower than a year ago, (which will potentially lower KESt), however one should be aware of all angles prior to making any moves. Just re-read your post and if the aggregated portfolio really is -15% since its inception, then you may have no KESt liability, however, please do check this per fund to be sure.

Personally I would move to a lifefund or a 2 fund portfolio (1 stock and 1 bond), with global exposure rather than a domestic German or even European tilt.

WienerG
pennywiser
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Re: Portfolio management (Need Help with 7 figures)

Post by pennywiser »

erYof531 wrote: Wed Oct 12, 2022 3:33 am https://www.de.vanguard/professionell/a ... stributing
This is the link for the German one. Could you propose a viable alternative?
Very good alternative would be Blackrock's MyMap:
https://www.blackrock.com/uk/solutions/ ... and-return
Ongoing charge is even lower than Lifestrategy although they don't have 60/40 fund.
1squirrel
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Re: Portfolio management (Need Help with 7 figures)

Post by 1squirrel »

pennywiser wrote: Wed Oct 12, 2022 1:47 pm
erYof531 wrote: Wed Oct 12, 2022 3:33 am https://www.de.vanguard/professionell/a ... stributing
This is the link for the German one. Could you propose a viable alternative?
Very good alternative would be Blackrock's MyMap:
https://www.blackrock.com/uk/solutions/ ... and-return
Ongoing charge is even lower than Lifestrategy although they don't have 60/40 fund.
I don't think this would be an appropriate fund. In German Taxation funds which always hold a minimum of 51% equity get a
partial tax discount (Teilfreistellung). The Lifestrategy 60/40 is a good fit for that.
With Blackrock you would have to opt for 70/30 and therefore higher equity risk.
Apart from that I don't know if those funds have a EUR version because if not you would have conversion fees to GBP.
1squirrel
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Re: Portfolio management (Need Help with 7 figures)

Post by 1squirrel »

erYof531 wrote: Wed Oct 12, 2022 3:33 am
Could you propose a viable alternative? I really enjoy the fact of automation this fund offers. Are there German specific ones?
You also might want to look at :
Lyxor Portfolio Strategy (ISIN DE000ETF7011) = 60% equity/30% bonds/10% commodities, overweight Germany/Europe - distributing
ARERO (ISIN LU0360863863) = 60% equity/25% bonds/ 15% commodities, overweight Emerging Markets - accumulating

These can be mixed with the Vanguard 60/40 if you want to come to a certain geographical allocation and/or diversify management/fund companies.
TheoLeo
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Re: [Germany]Portfolio management (Need Help with 7 figures)

Post by TheoLeo »

Vanguard lifestrategy 60/40 is good choice in my opinion. Even though I always feel a bit uncomfortable with fixed income investments.

I think the biggest risk to your wealth is you. Instead of focusing on optimizing the portfolio allocation and costs, I would put the biggest focus on establishing mechanisms that prevent you from trading in and out of the market, betting on stocks and industries etc. As soon as you take on the responsibility of investing this money, you are at a very high risk of investing based on your feelings and "insights". You shouldn't assume that you are immune to ruining your investment returns. There is a reason most people underperform the passive benchmarks. Why would you be different fron these people?

I don't have a good solution for that. But maybe someone else has. I know Vanguard started an investment service in Germany. It is basically a robo advisor that charges a fee of, I think, 0.65 %. I don't care about the robo advisor. But it is a platform where you can't even make the really stupid investment decisions. They only offer portfolio solutions with broad index funds. That means you can't just sell hundreds of thousands of euro worth of stock on your app while sitting on the toilet and putting it all in BASF because "wow its so cheap now".
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