Bogleheads.org

bubbasour wrote: ↑Sun Jan 22, 2023 7:50 am Yes, SC is ok. I don't like the UI but it's OK for backup broker or spreading the risk. I've successfully transferred LSE positions both ways between SC and IB.

Thanks for your confirmation!

I submitted my request to both IB and SC to move a position across and it eventually went through just fine. I feel better having several months of expenses worth of bonds sitting in SC as my backup broker

tradez wrote: ↑Sun Jan 29, 2023 10:49 pm is there more of a reason to not just write it off?

Not saying this is happening here but if you want to check for a reason to write it off...

Fund providers often launch or a show a huge variety of funds. As some underperformed, they get closed down and no longer show. Only the over performers are kept on the list.

Survivorship bias

Worth referencing you are the author of this thread https://www.bogleheads.org/forum/viewtopic.php?t=395381 comparing private funds with Bogleheads. So I guess we are now comparing what Bogleheads thinks of funds vs Morningstar ratings What is a Morningstar rating? From: https://awgmain.morningstar.com/webhelp/glossary_definitions/mutual_fund/mfglossary_MorningstarRating.html The Morningstar Rating for funds, commonly called the star rating, is a measure of a fund's risk-adjusted return, relative to similar funds. Funds are rated from one to five stars, with the best performers receiving five stars and the worst performers receiving as single star. The star rating is best used as an initial screen to identify funds worthy of further researc...

I can't comment on continuous futures but regular futures prices include the effects of dividends as if it were an "accumulating ETF"

AVDV is a bad idea because it is US domiciled and subjective to high dividend withholding (and potentially other) taxes. WSML is Ireland domiciled which is likely preferred.

Your original idea of IWDA + EIMI + WSML seems perfectly sensible and reasonably simple (albeit could be even simpler with the likes of VWRA/SSAC). The extra cost of attempting to diversify beyond the world equity index is questionable.

TedSwippet wrote: ↑Wed Jan 11, 2023 2:40 am Fully worked example here: Defusing capital gains: a worked example - Monevator

The allowance is scheduled to reduce drastically over the next two years.

Thanks - that entire article is a great read. I has made me rethink one or two things regarding taxes if I ever move back to the UK.

will try to weigh up just how much less risky it is vs VEMT combined with how much less profitable it is expected to be on average. Not even sure if that's something people are able to model/quantify easily though. It's very readily quantifiable by the fixed income gurus. It's based on determining the risk free rate of interest (based off US treasuries) and then taking a mapping between the market's expectation of probability of default to the credit spread premium you get due to that possibility of default. That maths doesn't help the average punter though. The default advice around here is based on this question: why are you holding bonds in your portfolio? The standard Boglehead answer is to provide de-correlation against your equity po...

I'm curious, does that mean for a UK tax resident, the best tax optimisation strategy in this area would be to sell/buy annually whenever your gains hit the CGT tax-free limit?

The goal should be to minimize the spread costs of 1) Any FX transfers 2) Any spreads due to liquidity differences on different brokers. 1) is likely the biggest factor but is very dependent on your personal situation as to where your currency is now vs where it will be. You seem smart enough to figure this out on your own but do post details for help if you need. 2) is lesser but still counts. Again your post suggests you know how to do the math so I'll just point you in the right direction. You're looking at variants of VWRD. The USD flavour (VWRD/VWRL) are the most liquid and therefore have the smallest threads of all variants. USD/GBP variants are most liquid traded on the LSE. The EUR flavour, IIRC, is most liquid on the Amsterdam exch...

After all things considered I am still leaning towards 2 ETFs and will probably go with VWRL, and then for bonds probably go with AGBP (reflects bloomberg barclays global aggregate bond index) or VEMT (emerging markets government bonds). VEMT has higher yields but I guess that's because of greater risk. All those ETFs are listed in GBP which is good so no FX vig from ii there, but they all pay distributions so I guess the distributions will all be vigged for 1.5% by ii in my ISA? Also are all ETFs exempt from stamp duty or only those not based in UK? I seem to be reading conflicting information on that, and am wondering if VWRL, AGBP and VEMT are exempt from stamp duty Just to answer your situation specific questions - VWRL is good but VWR...

Bumping this thread again... I want to try to attempt this shortly so any tips are welcome.

For my personal context, I believe in holding assets in a second broker to mitigate the risk that one of the brokers freezes up for whatever reason and I need funds. I had so close my backup broker recently (during which time my assets were defacto frozen for a while due to administrative reasons, which reinforces my belief). SCB seems and excellent backup broker since there are no custody fees so just need to get some assets there cheaply

What is 1/CAPE? Its the inverse of CAPE which means its 10 Year Earnings Yield. Using this as long term expected return of stocks is probably not bad idea due to this. Well FWIW, I think this is a bad idea. Whether you are randomizing historical returns for MCS or assuming a particular returns distribution like normal/log-normal and randomly picking returns from that dostributiom you still have to make assumption about expected return of assets you are comparing . Correct You cant avoid making this assumption so the question then becomes are there other methods better 1/CAPE which can be used to get future expected return of stocks? I dont think so. I would rather assume all assets have the same future expected return. How you pick that on...

I may have originally misunderstood your purpose but you lost me in the subsequent explanation when you suggest your MCS will have "Returns ... adjusted to reflect current valuations of these assets". I don't think I've misunderstood you the second time. "Valuation Adjusted Monthly Real Returns to create monthly returns". You're using valuations to project returns. I don't think I need to repeat the dangers in doing that.

What Sean said. The only thing you can "exploit" is deciding the whether to be paid in USD or EUR for that month, based on which gives more.

There is no further opportunity. Your further attempts are just speculation

If you are just inputting your own expectations, you will just get your own expectations as output. Either you use historical data or you don't. What's the probability of another Great Depression or Great Recession or Covid pandemic or world war? You either compute those probabilities or you just sample the historical record as it is. The thing is I am using historical monthly real returns of these assets. I am just reducing them to match current valuations of these assets. I believe this approach is much better than other MCS methods which are assuming a distribution like Normal/Log-Normal distribution and randomly picking returns from that distribution which would be invalid if the assets returns dont follow normal/log-normal distributio...

You guys are both sort of right. 1) Individual bonds still have interest rate risk in that their present value (PV) at any point in its lifetime fluctuates with interest 2) Individual bonds have a fixed income outcome irrespective of interest rates - you know what you'll get on maturity. Those don't conflict. "That's why I said it's irrelevant when you hold an individual Treasury to maturity. You know exactly what you'll get." If you buy VDTY and hold it for the duration period you ALSO know exactly what you get. A bag of 272 bonds with a certain YTM over a certain duration period. But here, for an individual bond, I know exactly what I'll get in cash terms. For VDTY, after duration, you cannot predict what cash value you have due...

So I got my trading permissions at bought a healthy trial amount of a Treasury Note, maturing on 2024-02-15. Why that one? That's the peak of the currently weirdly shaped yield curve... it is yielding a risk free yield to maturity of 4.61%. http://bondfacts.finra.org/912828B66

Commission was 5 USD and the trading spreads are no more than 10bps (similar to ETFs). Unlike ETFs, no annual management fee, although I guess I'll need to remember to reinvest my cash on maturity.

As a retail guy just trying to get general fixed income exposure to balance my equities, I don't get why I'd want to risk higher duration *and* have a lower yield for my troubles. 4.61% guaranteed short duration return seems quite nice.

Treasuries on the secondary market can be found above 4.5% at any broker ... IBKR has a fixed income dashboard as well, I expect you can use it to search for treasuries and sort by yield-to-worst just like I'm doing at Fidelity. There's nothing special that I'm doing, you can do it at any broker e.g. https://www.interactivebrokers.com/en/trading/products-bonds.php This is news to me and seems quite interesting. Buying US govt bonds outright has a few useful advantages over Ireland domiciled bond ETFs, notably Fixed maturity with no reinvestment Low costs (IBKR seem to take a 0.002% commission. An ETF at least has the 0.1% management fee, plus trading commission) What other considerations are there in direct US bond buying? Edit: I will upd...

nalor511 wrote: ↑Thu Oct 20, 2022 8:48 pm I am no expert but if you are doing a 14mo fixed income then Treasuries on the secondary market can be found above 4.5% at any broker (bought a couple days ago and it's up since then even). No state tax either

Only on a US broker for US citizens I suspect.

If there is a way to do this for international investors (this is the non US forum) I'd be very interested. Maybe IBKR offers a way

BogleJohn wrote: ↑Thu Oct 13, 2022 10:43 am glorat , I'm not an expert in bonds, but does this mean if I hold IBTA for 2 years (average of 1-3 years which is the duration of the ETF), I will be almost guaranteed to get an appreciation of 4.28 * 2 % (which was the yield of 2 year bonds when you wrote the post)?

Some good replies since then so I'll be short and slightly simplified... if you hold IBTA for 2 years, the underlying bonds you had at the time are guaranteed to annually yield 4.28%. The ETF itself may still be up or down because in the interim, bonds are being disposed of and replenished (to maintain the duration of 1-3yrs) and the values of those replenishment may cause yields to change, equally likely up/down. (Reinvestment risk)

Stork wrote: ↑Fri Sep 30, 2022 3:17 pm The market has now changed so much we consider putting some of our cash into bond ETFs, and as we are in Euroland we think it should be Euro or Euro hedged.

Both Eurozone and G7 bond ETFs have a significant part of Italian bonds, we are not sure if we are totally happy with that.

Alternatively there are German government bonds or US Treasuries, Euro hedged. I believe both are pretty safe from default.

Theory says return for similar rated bonds should be the same after hedging, am I missing something?

You are correct on the point of theory. USD hedged to EUR will return the same as EUR bond direct. Except EUR bonds may have slightly higher expected returns because of the Italy issue.

I'm saying a whole bunch of advanced stuff in my previous posts for education. If that's too much, I'll break it down into actionable advice

Option 1) You don't mind losing principal
Invest in a global bond ETF. You'll save at least 0.5% in fees by choosing this over HSBC time deposits

Option 2) You have enough cash to invest and need to protect principal
Put money into a real CD. I think even HSBC may offer them but the minimum investment amount is high (e.g. 100k). Rates will be higher than time deposit

Option 3) You need to protect principal and want simplicity and bank protection
Time deposits with a bank are fine and convenient. You're just paying north of 0.5% for that.

it seems that the total return (value + interest/dividends hence the real return I assume) was negative in 2021 and currently sits at -4.45% YTD in 2022. I mean sure it is likely go up as the fund get rid of past lower yielding treasuries/bonds but isn't it market timing (you mention it auto replenishes which put the principal at risk)? Also I might be mistaken again but it seems this requires more of an active strategy to manage (check the markets and FED rates/policies) and adapt the investment/deinvestment in this fund? I know very little about bonds / treasuries / fund bunds hence I might be confused Past performance does not predict future performance. But in bonds, which are fixed income, expected future performance is perfectly know...

Yes, they seem to be time deposits which act like CDs where your money is locked in for that period. If you care about protecting your notional, it is a decent option. The downside is that bank rates are always terrible compared to market rates. I'm shifting a lot of my cash into the ETF IBTA, which is iShares $ Treasury Bond 1-3yr UCITS ETF. This hits the current peak of the USD yield curve and gets a yield to maturity of 4.28%. This is much better than the bank. The risk is that since it is an auto-replenishing ETF, your principal is at some risk but if you hold for 1-2 years, you'll be on average 0.5% better off than the bank - and you can exit at any time. EDIT: Relevant link: https://www.ishares.com/uk/individual/en/products/287340/ish...

please do not move this post to the international sub-forum as I see the topic to be more relevant for the “Investing - Theory, News & General” sub-forum. Lol... looks like you didn't get your wish! I suppose because that theory forum remains US centric, which is why I read there less frequently and almost never post there. In the mods defence, the question is rather non-US specific since I suspect that US folks wouldn't have your dilemma so you might indeed get better response here. My 2c on the topic... 10% reduction in scope of a highly diversified global portfolio is still very diversified. The risk adjusted return is the theoretically the same and any volatility would only be marginally higher (if it is even observable). Therefore...

Brokers don't actually hold your assets - they are just facilitating you to perform buys/sells. The upshot is that if a broker goes under, this doesn't affect your assets. Assets instead are held by Custodians on your behalf. If you take your broker statement to the right parties, they'll be able to locate your assets at the Custodian. So the real questions you need to think about are who are the custodians your broker are using, where are they, how reputable are they and how is the segregation of assets managed. Regulations also matters as that covers how brokers interact with custodians and how brokers report back to clients via broker statements. I use IBKR as my broker and did my due diligence on the above and was satisfied, which is wh...

I suggest asking IBKR directly yourself in terms of where funds of different currencies are held on your behalf and/or custodied. They tend to be responsive on such matters.

My general guess is that that USD is custodied in US, GBP in UK etc, based on the bank accounts they use for remittance with clients.

Fixed income/FX expert here... Option 2) Theoretically valid but a total PIA to calculate the correct amount of contracts to be maintaining at any given time and roll them over properly. Your time cost on doing this right would outweigh the time costs of the simpler options Option 3) Using SPOT isn't hedging at all. As you've said yourself, you're speculating on when you "fell the Euro is going to appreciate". You would massively deviate from a properly hedged ETF The other down sides of options 2) and 3) are the mental stress of seeing separate FX P&L all the time and be tempted to switch strategies over time or keep trading - both anti-boglehead. Options I would consider are Option 1) Get out of USCR and into AGGH or equival...

I was going to try to criticise based on cost or diversification but looking into it... I see with a TER of only 0.24% and holding 5000+ stocks it seems actually quite reasonable, especially if one likes the ESG angle, which as OP says, seems quite a lightweight filter here.

bogged wrote: ↑Sat Jul 30, 2022 9:10 pm Do you guys think now is the right time to put more of it into ETFs? Thanks for all the help!

65% of the time, the right time is right now - time in the market beats timing the market.

Since noone has any idea if now is in the 65% or the 35%, all you can do is play the odds. Spread it out if you want to reduce the volatility

Protection is not free, meaning you can't expect to find an a product that will track exactly inflation since inflation is higher than the risk free rate of return.

Your risk free option is to buy a EUR inflation linked bond ETF from ishares which will pay inflation+X%

I haven't checked what X is today but it is definitely negative

If you really need to track inflation, only risky products can do it

michoco911 wrote: ↑Mon Jun 27, 2022 9:40 pm I found $IDBT as a potential alternative.
iShares US Treasury Bonds 1-3 Years, USD, Ireland Domiciled.
Anybody is using it?

I've basically being doing this... Buying only IBTA in the past year to lower duration in my regular investments whereas previously I'd been all AGGG

Last I checked, VUAA and other Ireland domiciled funds are not available to buy through HSBC HK. Hsbc only allow trading on HKSE and NYSE (whereas you want a broker with LSE access)

Actually, extremely few HK brokers offer LSE access, certainly not the brokers that are most heavily marketed.

IBKR is the solution for those in the know

Good thinking already to try to find the lowest fee option.

Since those are about the same cost, next consideration for would be maximum diversification.

Third consideration is how it fits in my AA, which is less of a consideration in HK since there is no tax sheltering.

If have it down to money market, global bond and global equity. I'd probably go with global equity and forget about it for the next few decades.

nadavaf wrote: ↑Tue May 03, 2022 7:22 am Thank you for this educational response!
I'm trying to confirm this with IBKR.
I've seen people note they were still charged with the withholding tax, though, some have had it refunded later.

You would only need to check with IBKR on distributing ETFs. On accumulating ETFs (like DLTA), your broker never sees a "dividend" - only iShares. You can check with iShare by reading their annual report.

On a data point of one, HSBC HK withheld 30% dividend when I bought BND (before I knew better). I'm not sure if they refunded it eventually... but I sold it quickly, moved to IBKR and settled on AGGG for my bond allocation.

I'll also try to explain one last time with the actual numbers taken from the graph...

The graph says that if you'd invested
100 EUR, you'd now have 97 EUR
100 USD, you'd now have 89 USD.

What the graph doesn't tell you but Ted did is that EUR fell by 7.75% in the same period. So let's also pretend that 2 EUR was 1 USD at the start (don't worry it still works if you used the real FX)

So... let's say you invested 200 EUR at the start (or 100 USD at the start, same thing)
200 EUR at the start is worth 100 USD at the start

If you went with the EUR fund, your 200 EUR would be now be worth 194 EUR. But in USD, that's 89 USD
If you went with the USD fund, your 100 USD would now be worth 89 USD (which is also 194 EUR)

...and therefore I am affected by a 30% withholding tax for distributions which I am not able to reclaim. This should not true because the ETF in question holds only fixed income products. Therefore they are not technically dividend distributions (which would be subject to dividend tax) but interest rate distributions which are withholding tax exempt. To take advantage of this, ensure you are buying accumulating ETFs like DTLA. (Not distributing ETFs, where brokers might accidentally screw you over with withholding). To confirm I'm telling the truth, check the iShares annual reports. And since it is in a IRE wrapper, you're exempt from estate tax too. I don't know about STRIPS but am interested in learning so hope someone posts about it. I...

You have to compare the performance of the unhedged reference index "USD Treasury Bond 1-3yr" in USD with the perfomance of the hedged reference index "USD Treasury Bond 1-3yr (EUR-hedged)" in USD . Then you have the hedging costs. You would only compare performance in USD if USD is your base currency. OP base currency is in EUR. Measured in EUR, Laurizas confirms that fixed income theory happens in practice - risk free bonds in EUR will give the same EUR return as risk free USD bonds hedged back to EUR. Two other points of education * If comparing USD bonds with USD bonds EUR hedged with a USD base currency, this is completely equivalent to comparing EUR with USD over the same period * Hedging costs are nil. (PnL of th...

helloyou wrote: ↑Sun May 01, 2022 12:57 am You mean that If I convert back the sum to EUR the result is the same as with if I had gotten the EUR listed ETF instead?

Exactly!!

helloyou wrote: ↑Sun May 01, 2022 12:57 am I track my assets in USD and I was wondering if it makes any difference at all as well

Equally if you convert the value of both graphs to USD, you'll also find it makes no difference.

helloyou wrote: ↑Mon Apr 25, 2022 1:42 pm Then why the huge difference in performance between the same below MSCI ACWI tracker in EUR and USD

Very misleading tracker. One is measuring the USD fund performance in USD. One is measuring the EUR fund in EUR. (I'd say that is comparing apples vs oranges but actually it is literally comparing USD with EUR)

If the performance of either were measured in your home currency, be that USD or EUR or any other currency, you'd find the performance to be identical

Khan wrote: ↑Tue Apr 26, 2022 1:48 am If you are too worry about forex fluctuations then you can split 50/50 between USD & EUR

If you do that, you'll find that at any point in the future the USD and EUR denominated halves would have the same value always. Irrespective of forex fluctuations.

Anon9001 wrote: ↑Sun Apr 24, 2022 9:43 am If worried about counterparty risk you should consider that counterparty risk is limited to 10% of the ETF as per UCITS Regulations and physical ETF's tend to engage in securities lending so similar counterparty risk exists)

Sorry, I just have to say that the counterparty risk for ETFs that do securities lending is completely different in nature to the counterparty risk of using synthetic ETFs like Lyxor. You just can't equate them. As to whether one of those risks is bigger than the other is a matter of opinion. Suffice it to say I wouldn't go near synthetic replication as something equivalent to an ETF that actually holds the stocks.

I assume OP is a non-US investor, given that he's suggesting Irish domiciled ETFs

In this forum, all the usual all-world vs US arguments can apply from the US forum but there is one unique argument for non-US investors

Non-US investors pay a 15% dividend tax on US stocks and much less for non-US stocks (I can't remember the number off hand but it is single digit %)

US investors pay a 0% dividend tax on US stocks but more on non-US stocks.

The difference in cost due to taxation is significant enough to care about. For non-US, it is enough for me to say that All-world is both better diversified AND lower cost than a pure US play. (Whereas if I were a US person, I'm paying a dividend tax cost to go international)

helloyou wrote: ↑Sun Apr 24, 2022 4:27 am As USD appreciates against EUR, ISAC price goes down.

Incorrect. Read the wiki link of previous poster

maxcellent wrote: ↑Sun Apr 24, 2022 7:56 am Thanks for confirming this. Yea this is what I thought so. So would you say the best option by far is AGGG / AGGU?

For a HK domiciled, yes, I would say that's the best option

It depends on what you consider your base currency to be.

If you don't know, then consider which currency will be most closely linked to your spending by the time you cash out? Will your spending be based on JPY or USD? If JPY, then the USD/JPY volatility doesn't matter - you're fine with either JPY bonds or JPY hedged bonds. If it is USD, then volatility still doesn't matter because you should be using mainly USD bonds.

As a non-US person not knowing where I'll retire or where I'll spend, I take the view that I don't know what my base currency is so I just take an unhedged global bond fund (AGGG) which provides a reasonable market mix of currencies.

jac1 wrote: ↑Tue Mar 29, 2022 10:18 am On the bond front, I may be a bit late but since inflation is going up, I'm curious about selling my AGGU bonds which has been lacklustre at best & putting part of that into my IWDA & rebalance say 10% of my portfolio in IDTP İShares (reflects gov Inflation linked bond index) Since I'm in HK & our currently is pegged to USD?

So again, you want to sell AGGU because they are now cheap (aka lacklustre) and want to put them into IDTP because they are now expensive (inflation has spiked recently).

Do you see you are market timing the way most retail people lose money in the markets by selling low and buying high?

Please read the wikis and learn to set an asset allocation and stick to it...

If I were an unscrupulous advisor, I would gladly accept your terms, ignore/hide/obfuscate your risk profile and invest all your money in some risky leveraged equity product. If I lose all your money, no harm to me. If I make money, happy days.

Or I might invest it in some risky leveraged product that gives me sales kick-backs so I still make money win or lose due to hidden fees.

Jokes aside, best advice is not to play by their games. Great advice already given here.

I'm wondering, if someone has expenses planned over the coming 1-2 years, would it be better to store the sum in cash or invest it in this instrument which should keep on with inflation? It depends on the nature of the expense. If it is a known fixed lump sum, then definitely not. If it is some sort of living expense whose sum is linked with inflation then maybe as it would protect you against unexpected inflation. But it isn't an investment, it is insurance. It works something like this Let's say inflation is expected to be 2% over the coming year. Then for every $100 you put in this instrument, it will payout 100+2-actual inflation. So if inflation is 2% as expected, you just get your money back. If inflation spikes to 12%, you get 110 b...

jac1 wrote: ↑Thu Mar 24, 2022 3:09 am Is there any value in investing in another ETF that tracks similar stocks but has historically better returns?

No - trying to getting into ETFs with historically better returns is how non-Bogleheads lose money as it is akin to buying high. If you start suggesting you should sell stocks with bad historical returns then you've completed the cycle of buying high and selling low.

Just get educated and buy the haystack