Italy - help with ETF selection based on different commissions

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dendke
Posts: 2
Joined: Fri Jun 09, 2023 6:36 am

Italy - help with ETF selection based on different commissions

Post by dendke »

Hello everyone!

I have recently started investing and would like some help in deciding the ETFs to buy since my broker offers no commissions for some ETFs when buying. Here is the template for basic information, more info on my situation is below.

Country of Residence: Italy

International Lifestyle: I expect to remain in Italy

Currency: EUR

Emergency funds: Already taken care of

Debt: No debt

Age: 27

Desired Asset allocation: 80% stocks / 20% bonds (I already have a decent amount of bonds so I will only be investing in stocks for at least 1/2 years)

Current size of the total portfolio: mid five-figures

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I am currently investing around 300€/month in VWCE, with a long-term objective (at least 10 years, probably more). The broker I use is non-negotiable: it automatically does my taxes and pays them so I don't have to manually fill tax documents every year, and does this with the lowest fees in Italy (that I know of, at least).

The commissions are 0.19% for each buy/sell, with a minimum of 1.5€ (there's an option for a flat 5€ fee if you move much more than I do for a single movement, but it's not important).

However, this broker also provides the option of automatically setting a monthly (or bi-weekly) buy order for ETFs with zero buy commission (I think the selling commission will be applied), on a restricted amount of ETFs (this is the list). This is convenient as it's an automatic "set it and forget it" operation. It also provides some commission advantage, which is certainly small, but why waste money when I can avoid it?

My question is whether the ETFs they propose are worth the savings (since they are not commonly recommended in the wiki/Reddit/etc) or if the savings are so small that I may as well stick with VWCE. I am ok with around 90% developed markets and around 10% emerging markets, which is roughly what VWCE has. Maybe I will add a small percentage of European small caps in the future.

Here are some practical options that I have:
  1. Invest 300€/month in VWCE (0.22% ter). What I am currently doing, paying 0.5% commission on each buy order.
  2. Stick with VWCE but invest every 2 or 3 months instead of monthly. This will reduce commissions to 0.25% or 0.19% when I buy.
  3. Buy a MSCI world ETF and a MSCI emerging market ETF between the ones with no buy commission. Since the orders are automatic, I will probably need to do some rebalancing once in a while. Some examples of the available ETFs are:
    • MSCI World:
      • MWRD (0.18% ter, Physical replication, 897 M€ size)
      • CW8 (0.38% ter, unfunded swap replication, 2485 M€ size)
      • WLDC (0.3% ter, unfunded swap, 31 M€ size)
    • MSCI Emerging markets:
      • AEEM (0.2% ter, unfunded swap, 2310 M€ size)
      • EMKT (0.55% ter, unfunded swap, 842 M€ size)
    Unfortunately, there is no MSCI EM ETF with physical replication.
  4. Instead of VWCE I can also do manual investments in VHVE+VFEA (or SWRD+EIMI) (investing once in VFEA/EIMI every 8 or 9 investments in VHVE/SWRD) to have a lower ter. The investments in emerging markets would be less periodic and more subject to fluctuations but I will pay less annual expenses.
Regarding small caps, I will probably buy them manually (if I do it at all) when I have some leftover money, so I would not include them in an automatic investment plan for now.

According to this, what would be a suitable strategy? For now, I am thinking of buying VWCE every 2/3 months, but I am a newb in investments and just read something off the Bogleheads wiki before starting, so I'd like to ask someone with more experience. If the answer is "the difference is so small it does not matter between any one of those strategies", good to know, but I'm asking since I wouldn't be able to determine that myself.

Thanks, everyone!
Mors
Posts: 277
Joined: Wed Aug 16, 2017 10:06 am

Re: Italy - help with ETF selection based on different commissions

Post by Mors »

ACWI is available, it is a great choice, almost, or even better, essentially as good as VWCE, it is worth preferring it to avoid commissions.
GAGH seems also as a solid bond etf, just keep in mind the low volume.
Vogatrice
Posts: 174
Joined: Mon Mar 25, 2019 4:56 pm

Re: Italy - help with ETF selection based on different commissions

Post by Vogatrice »

You say you are a newbie, but you are asking solid, sophisticated questions and making good choices for diversified ETFs and paying attention to expense ratios and trading costs. You already have great discipline with regular investing. I think you are off to a great start with a good understanding of what you're doing.

I had a look at the ETF list and it's very long, so I'm not sure I can be specific about recommendations. But I love the idea of regular, automatic, low-cost investing, so I would look hard at the list and choose that path if possible. Are you familiar with the justETF site? It's a good place to do comparative research on ETFs as you can filter the options, compare side by side, do mock portfolios to compare results over time. And you can't invest there, so no conflict of interest, just good information. I've benefited from set-and-forget investing so I like that route. In fact, I have Vanguard all-in-one self-balancing 60/40 portfolios in 3 separate countries, so I've taken it to the farthest reaches of set-and-forget investing :D . (V60A in Europe - not the cheapest TER but easy.)

As an aside, could you share the name of your broker? I'm also in Italy and could do with some simple tax filing. Is it Fineco?
Topic Author
dendke
Posts: 2
Joined: Fri Jun 09, 2023 6:36 am

Re: Italy - help with ETF selection based on different commissions

Post by dendke »

Mors wrote: Fri Jun 09, 2023 7:02 pm ACWI is available, it is a great choice, almost, or even better, essentially as good as VWCE, it is worth preferring it to avoid commissions.
GAGH seems also as a solid bond etf, just keep in mind the low volume.
Thanks a lot, I will take a look at it! For the bonds ETF, I will not be investing in bonds for now, but I will keep it in mind for the future.
Vogatrice wrote: Sat Jun 10, 2023 2:13 am You say you are a newbie, but you are asking solid, sophisticated questions and making good choices for diversified ETFs and paying attention to expense ratios and trading costs. You already have great discipline with regular investing. I think you are off to a great start with a good understanding of what you're doing.

I had a look at the ETF list and it's very long, so I'm not sure I can be specific about recommendations. But I love the idea of regular, automatic, low-cost investing, so I would look hard at the list and choose that path if possible. Are you familiar with the justETF site? It's a good place to do comparative research on ETFs as you can filter the options, compare side by side, do mock portfolios to compare results over time. And you can't invest there, so no conflict of interest, just good information. I've benefited from set-and-forget investing so I like that route. In fact, I have Vanguard all-in-one self-balancing 60/40 portfolios in 3 separate countries, so I've taken it to the farthest reaches of set-and-forget investing :D . (V60A in Europe - not the cheapest TER but easy.)

As an aside, could you share the name of your broker? I'm also in Italy and could do with some simple tax filing. Is it Fineco?
Thank you! I still feel like I don't know much, but I have invested some time in trying to learn the basics and I'm glad you think I'm heading in the right direction.

Yes, I also would like to find something that allows me to do everything in a totally automatic way. I will do some more research on various ETFs to see what I prefer as a strategy. Thanks for the suggestion.

The broker is Directa. I discovered it in the ItaliaPersonalFinance subreddit because I wanted a broker with the Regime Amministrato and relatively low fees. There's also a user that wrote a guide (in Italian, in case you're in Italy but coming from abroad and don't speak the language, you can try translating with DeepL) to using Directa (the guide is also available on this user's site, along with other guides he wrote for using Directa platforms); of course there is more information in the Directa website. The UI is not the best for the dLite platform, while the newest Libera platform is a bit more intuitive; unfortunately, on mobile only the dLite interface is available. I don't have experience with other brokers so I can't really give strong opinions; for me, the Regime Amministrato (not needing to think about taxes) and low fees are the primary factors, so I picked Directa regardless of other factors.

One last thing about Directa, if you decide to use it, there is currently a promotion: if a user invites you to open an account and you do one operation within June 11th, both people receive 50 euros of free commissions for orders before the end of July (not a lot if you do one operation/month, but it's there). We're right at the end of the promotion, so I don't think it's relevant for you, but maybe in the future they will do other similar offers. To do this, you have to put the "Codice Amico" of the person inviting you while registering. If you're interested (for potential future promos maybe), the reddit user who wrote the guide provided his Codice Amico at the end of the guide, or if you want my code feel free to drop a DM :)
Of course, no point in opening an account/timing the opening based on promotions, but if you are already opening it and there is an active promotion at the time, take advantage of it (I unfortunately missed it and only discovered this after opening the account)
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