Austrian resident - seeking feedback on first Boglehead-portfolio plans

[CE_BogleNovice]

Dear Bogleheads,

I am so happy to have found this community. The amount and quality of information is impressive, as well as how generously people are sharing their knowledge and experience. Thank you for that.
I have been researching on the site for a while now, and now its time for my first post seeking your feedback on my investment plans.

Basic information
- Country of residence: Austria (Hungarian citizen)
- International lifestyle: I moved to Austria 2 years ago and plan to stay on the long run.
- Age: 41
- Desired asset allocation: as I am a new investor, with mid five-figures to invest, I was thinking of a 70% equity 30% bond asset allocation for the next 7-10 years or so, to accelerate a bit my wealth accumulation. Then do 60% stock/40% bond allocation till age 60, where I might switch to 50/50.
- I have no home bias.

Additional information
- Currency: EUR
- annual gross income: low 6 figures (incl 13+14 months + 15% bonus per annum)
- Emergency fund: currently 10k and building
- Debt: none
- Fixed costs: 60% of monthly income
- State pension: I will be eligible for state pension from Hungary and Austria (if I stay here for 15 years) as I understand

Current investments (in HUF)
This "portfolio" was not put together very consciously when I started to save money systematically, 11 years ago, definitely not according to the Boglehead principles. However I now plan to transform this into a proper low-cost and simple portfolio. Percentages show the percentage of all my savings together.

Retirement savings accounts :
1. 41% - "Private" retirement savings account (OTP Hungary) - growth portfolio (TER: 1.28%) - tax free if kept until age of pension (65).
- I plan to keep this account as the government makes it so complicated to close it (multiple years procedure and taxes), that its not worth the effort. With minimal contribution but with growth portfolio, it will hopefully grow over the years.
2. 24% - Metlife Private pension plans (Hungary, TER: 2.5%-5.5% depending on contract length)

Insurance investment accounts:
3. 25% - Metlife Life insurances (Hungary, TER: 2.5-9.5% depending on contract length)
4. 10% - Union Life insurance (Hungary, TER: 3.5%-6.5% depending on contract length)

Future investments
Now that I understand better the importance of having a low cost, simple portfolio, Im planning to close my Metlife and Union contracts, and transfer the money to low cost equity and bond funds.
I decided to use Flatex platform.
I plan to invest:
- 24% from my monthly income, plus yearly 50% (minimum) from my annual bonus.

Equity:
70% - SPDR MSCI ACWI IMI UCITs ETF USD unhedged Acc.
OR - iShares Core MSCI World UCITs ETF USD Acc.
These seem to offer the lowest cost available in Austria covering the entire market more or less.

Bond:
30% - Trackers Global Government Bond UCITS ETF 50C
OR - iShares Core Global Aggregate Bond ETF

Questions:
1. What is the best place to keep an emergency fund in Austria?
1. I was looking for some HYSA, however it is hard to find a good one. The banks offer really low interest rates. The best option I fund was Trade Republic with 3.75%, still insured to 100k, I guess the downside is that I have to take care of taxes for this. I want to keep it easy to access, still a bit separate from the rest of my savings. I would appreciate tips on this.
2. Does the 70/30 asset allocation sound like a good idea at my age, given that I still need to accumulate wealth for a solid foundation?
3. Do these funds sound good to start with, or would you recommend making it more diversified within each asset class?
1. Im thinking of dividing the the Equity investments into
- 50% SPDR MSCI ACWI IMI UCITs ETF USD unhedged Acc. OR iShares Core MSCI World UCITs ETF USD Acc.
- 50% iShares Core S&P 500 UCITS ETF (Acc) OR Vanguard S&P 500 UCITS ETF
4. For bonds the list of available low cost funds seem to be a bit limited in Austria. Would you recommend any other funds?
5. Not sure if its the right forum to ask, but can anyone recommend a Steuerberater in Austria?

Thank you in advance for any feedback, observations, advice.

[jg12345]

the numbering of the Questions is a bit messy, I'll try

1. I would suggest a HYSA
1. Can''t help. the trade republic you mention seems good (too good?). One note: in theory EU residents should have access to CDs from EU banks. in practice... it's hard. you can check raisin.com though, and might put your money into a HYSA from another country (and yes, you'll have to deal with taxes)
2. sounds ok. will you be able to stay the course? don't think only of what you need the portfolio to return. think fo your tolerance to a recession and a -30% for stocks
3. ETFs mentioned sound good. I would suggest:
- the ACWI IMI ETF
- the Global core aggregate bond EUR hedged
Nothing else, no SP500, whatever.
4. don't have experience with Austrian ETF. you can certainly use Interactive broker though, and I suppose degiro. others can comment better on platform in Austria and EU
5. no idea what that is

[Siaigi]

Insurance investment accounts:
3. 25% - Metlife Life insurances (Hungary, TER: 2.5-9.5% depending on contract length)
4. 10% - Union Life insurance (Hungary, TER: 3.5%-6.5% depending on contract length)

Future investments
Now that I understand better the importance of having a low cost, simple portfolio, Im planning to close my Metlife and Union contracts, and transfer the money to low cost equity and bond funds.

I don’t know if it is your situation but when you close your life insurance before the expiration date they generally give you less money you paid. So pay attention. Eventually t should be also an alternative

[CE_BogleNovice]

Thank you so much for your feedback and input.

@Siaigi, thanks for your remark here.

I don’t know if it is your situation but when you close your life insurance before the expiration date they generally give you less money you paid. So pay attention. Eventually t should be also an alternative

Yes Im aware of this downside unfortunately. And I realize there will be some losses on these contract closures. However looking at the big picture and the potential long term gains by transferring those over to a low cost alternatives from these contracts with TER 3-6%, I trust it will pay off.

@jg12345, thank you for your detailed feedback.

Can''t help. the trade republic you mention seems good (too good?). One note: in theory EU residents should have access to CDs from EU banks. in practice... it's hard. you can check raisin.com though, and might put your money into a HYSA from another country (and yes, you'll have to deal with taxes)

I will look into the CDs, Im not yet familiar with the concept, but I will definitely research it. If I understand correctly, the main difference compared to a HYSA is that here your money is locked in for a fixed amount of time for fixed interest rate. You can not take it out (only with penalties), but you can also not add to it. Right now Im looking for a solution where I can still add to it on a regular basis, but once I reached my saving goal, maybe a CD is a great option.
I will definitely check Raisin.com and compare with TradeRepublic. Thanks for the tip.

2. sounds ok. will you be able to stay the course? don't think only of what you need the portfolio to return. think fo your tolerance to a recession and a -30% for stocks

Im quite determined and I think I will be able to stay the course. I understand the principle and the risks, so hopefully it will work out just well, I trust the process in the long run:) I plan to set up regular, automatic contributions, so that I can also "forget about it" a bit, and not check the markets every other day. The goal is that these investments are not additional stress factors in my life but part of a longer term, concious financial self-care strategy.

Nothing else, no SP500, whatever.

This is super useful advice, thanks for confirming my thoughts.

My last question was if someone can suggest a good tax advisor, Im having a hard time finding one in Austria. Hopefully someone will have a good tip locally.

Thank you again for your valuable insights!

[jg12345]

Hi

CDs exist in fixed term form, or flexible form. usually the flexible one have lower rates, and different terms to take out the money. Some allow you to take money in 2 days, some in 30.

If you buy a CD today with a term to one yar (14 Aug 2025), then afterwards, say in a month, on 14 Sep 2024, if you want to add money you just put money into the same provider again for 1 year (term to 14 Sep 2025)

No idea about tax advisors in Austria, sorry

[Siaigi]

Yes Im aware of this downside unfortunately. And I realize there will be some losses on these contract closures. However looking at the big picture and the potential long term gains by transferring those over to a low cost alternatives from these contracts with TER 3-6%, I trust it will pay off.

There is one more option. I think it is an international possibility. Try. You can suspend payments. The insured value is reduced according to actuarial calculations. You remain insured for less but still benefit your loved ones, and you can invest your savings as you wish.

Then I found an easy and interesting quiz to understand better the risk propensity:

https://investor.vanguard.com/tools-cal ... start-quiz

[xkcd4711]

In German, CD's are called "Festgeld." Google will guide you to options in Österreich.

[CE_BogleNovice]

CDs exist in fixed term form, or flexible form. usually the flexible one have lower rates, and different terms to take out the money. Some allow you to take money in 2 days, some in 30.

If you buy a CD today with a term to one yar (14 Aug 2025), then afterwards, say in a month, on 14 Sep 2024, if you want to add money you just put money into the same provider again for 1 year (term to 14 Sep 2025)

Thank you @jg12345 for the explanation. Sounds like an interesting alternative. So basically its a great way to "hide" money away from myself and grow the saving, I just have to count with it not being available until the end of the term, if I want higher return. Im researching this option this weekend, what returns are available in Austria with CDs. Thank you for the tip!:-)

[CE_BogleNovice]

Yes Im aware of this downside unfortunately. And I realize there will be some losses on these contract closures. However looking at the big picture and the potential long term gains by transferring those over to a low cost alternatives from these contracts with TER 3-6%, I trust it will pay off.

There is one more option. I think it is an international possibility. Try. You can suspend payments. The insured value is reduced according to actuarial calculations. You remain insured for less but still benefit your loved ones, and you can invest your savings as you wish.

Then I found an easy and interesting quiz to understand better the risk propensity:

https://investor.vanguard.com/tools-cal ... start-quiz

Thank you for this information Siaigi. I asked my financial advisor in Hungary if this is an option and she said unfortunately not. So I will have to buy back these contracts now. But as Im paying these for a while now, the buyback value is just slightly lower then the value of the contract, so I guess I will have to accept that cost of switching to a low cost investing option.

This calculator is quite interesting! Knowing what I know today thanks to the Bogleheads and their investment philosophy, funnily enough the quiz returned that Im a high risk taker. Which I would have never considered myself to be. Probably knowing more about the world of investing is giving me some confidence in responding to these question lol. But lets see how I stay the course when the road gets bumpy!:-)

Thank you for recommending it though, I saved the link!

[CE_BogleNovice]

In German, CD's are called "Festgeld." Google will guide you to options in Österreich.

Much appreciated @xkcd4711! Im googling it this weekend to learn more about how it works in Austria.

[erma]

I am assembling my very first portfolio as well and, like you, I ended up looking at the Xtrackers Global Government Bond UCITS ETF 5C (ticker XG7S). Did you notice it is domiciled in Luxemburg?

[CE_BogleNovice]

I am assembling my very first portfolio as well and, like you, I ended up looking at the Xtrackers Global Government Bond UCITS ETF 5C (ticker XG7S). Did you notice it is domiciled in Luxemburg?

Hi @erma, sorry for the late response. So I ended up choosing the iShares Global Aggregate Bond ETF, which is domiciled in Ireland. But I originally did not notice that the Xtrackers one is in Luxembourg. As I read, Luxembourg provides an excellent domicile, legal environment for the fund. I read about Ireland a lot, that many investors suggest that too. I dont have a detailed understanding for the pros and cons for each, but as I understand it its both ideal for investors like us.

Did it play a factor in your bond fund choice?

[dratkinson]

Late to the party.

Recall BH wiki contains topics for/by non-US investors. Searched your prior posts and notice it has not been mentioned nor linked to. Maybe you will find something helpful there.
See: https://www.bogleheads.org/wiki/Getting ... _investors


Welcome.

[erma]

Did it play a factor in your bond fund choice?

I suggest you the Bogleheads wiki page https://www.bogleheads.org/wiki/Nonresi ... cite_note-
from which I quote

ETFs domiciled in Ireland can take advantage of the US/Ireland treaty rate of 15%, but because of a less favourable US treaty ETFs domiciled in Luxembourg suffer 30% tax withholding on dividends from US stocks