Start my Retirement fund in Germany

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Topic Author
Estrelitas
Posts: 6
Joined: Thu Jun 30, 2016 3:01 am

Start my Retirement fund in Germany

Post by Estrelitas »

Hello everyone, I decided to stop procrastinating and would like to ask your opinion on my investment plan. Please bear in mind I am living in Germany (but do not speak German) and for those who live here, I have an account with DKB and therefore use Tradegate for purchases.

Please let me know if I should be considering other options, or what I am doing wrong (or could be improved).


Current situation:
-28 years old
-Emergency fund for 1 year of expenses.
-Certificate of Deposits that could be used if needed.
-I will start investing with 5.000€ (or 10.000€) and add 300€ every month.

ETFs to invest:
Stocks:
World ETF: MSCI ACWI IMI
Europe ETF: STOXX 600
US ETF: S&P 500

Note1: I choose the MSCI ACWI IMI instead of the MSCI World Index because I would like to have more exposer in more countries.
Note2: I am considering the S&P 500 on top on the World ETF in order to have a higher percentage of US stocks in my portfolio and reduce my overall yearly expenses.

Bonds:
ISHARES EURO GOVERNMENT BOND 3-7 UCITS ETF (ACC)

Note3: I also considered the “Barclays Global Government AAA-AA Capped Bond Index” but it distributes the profits. Considering this is for my retirement I would like to have as much as possible in the funds already without have to consider how much I received from each ETF.

Investment strategy:
Since I have several Certificates of Deposit I am giving more weight to Stocks instead of bonds, in order to hopefully have a better return in the long run.
Below is my plan:

Image

The percentages in each fund would allow me to have roughly 50% in European Stocks, 38% in US stocks (the world ETF has 53% US stocks), and 12% in other countries.

Thank you in advance for any help/suggestions given.
Wish you all a very good day.
Topic Author
Estrelitas
Posts: 6
Joined: Thu Jun 30, 2016 3:01 am

Re: Start my Retirement fund in Germany

Post by Estrelitas »

Around 70 people viewed this post but so far, unfortunately, no replies. May I ask if there is anything unclear, misleading or wrong in the previous post?

Or since this is question for Europe (Germany) it is more difficult to judge/comment by investors in America?

Again thank you in advance for comments/feedback.
Micks
Posts: 314
Joined: Tue Feb 25, 2014 11:38 am
Location: the Netherlands
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Re: Start my Retirement fund in Germany

Post by Micks »

Estrelitas wrote:Or since this is question for Europe (Germany) it is more difficult to judge/comment by investors in America?
Hi Estrelitas,

No worries, it most likely is the thing above why you did not receive a reply yet. Even for other non-US investors it is difficult judging your situation because of unfamiliarity with your laws and options.

As you say you do not speak German, also consider the laws where you came from. For US persons, investing in funds not domiciled in the US can be a real pain. See also the wiki page for German investors here.

I think the funds you chose are fine (the acwi a bit expensive though). What I was wondering about, was the high allocation to European stocks. Is there a specific reason for overweighting Europe?

You mention that next to your emergency fund you have some CDs. Do those have a goal or are they part of the emergency fund? It is usually advised to view all your assets as one big portfolio, so if you say you can take more equity risk because of the CDs, I would assume that it is logical to count your CDs as part of your asset allocation as well.

Also, I am not familiar with your brokers, but consider their costs as well. In some cases, transaction costs can really hurt you, while those can for instance be reduced largely be simplifying to a single world fund. Simplifying also makes sense towards your third note, as you would not have to rebalance within your equities.

Hope this helps somewhat.
Kind regards, Mick
FireProof
Posts: 960
Joined: Thu May 05, 2011 12:15 pm

Re: Start my Retirement fund in Germany

Post by FireProof »

Why are you investing in Germany? Tax purposes? Are you planning to retire there?

I live in Germany and I am a German and American dual citizen (who does speak German), but I invest through US funds, because it seems easier and cheaper.
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BeBH65
Posts: 1763
Joined: Sat Jul 04, 2015 7:28 am

Re: Start my Retirement fund in Germany

Post by BeBH65 »

Hello Estralites,


What is your nationality? where are you paying taxes? the answer on these questions will influence your decisions, and our advise.

On this forum we stress the distinction between the different goals of saving/investing: 1/ emergency fund, 2/saving for medium-term goals (car, house, ... ), investing for the long term (retirement, ... ). in which category do you consider the CDs that you mentioned?

To determine your Asset allocation (Split bonds/equity, regional split), you need to look at your need, ability and desire to take risk.

Read the wiki pages references above and provide us a bit more info, and we will guide you through the process.


Regards,
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence). | Have a look at https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles
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SeeMoe
Posts: 1106
Joined: Sat Jul 18, 2015 11:30 am
Location: Near Philly..

Re: Start my Retirement fund in Germany

Post by SeeMoe »

Interesting post. Wonder if the financial experts would suggest a " reverse" USA folio of say, 40% USA Stock funds and 30% USA Bond funds,..? The remainder in Germany and E.U. Or 40% USA, International stock minus Germany? Same for the bond portion at 30%,..?

SeeMoe.. :?:
"By gnawing through a dike, even a Rat can destroy a nation ." {Edmund Burke}
Engineer250
Posts: 1082
Joined: Wed Jun 22, 2016 1:41 pm

Re: Start my Retirement fund in Germany

Post by Engineer250 »

My only comments are that it seems like there's a lot of overlap between the funds. MSCI ACWI IMI is already 50% US stock and includes some European stock as well. Adding in additional european stock in the STOXX and additional us stock in the S&P seems like it would really reduce your emerging markets exposure and overweight you to the US especially. It sounds like you have desired percentages below for your allocations but using the three funds you mention it seems like it would be a lot of tricky balancing to get the allocations you want. I would try to get funds more aligned with your desired allocations. Your existing funds are missing US small cap. It would be nice to have a Total US Stock Market index, and either something like the MSCI EAFE and the MSCI emerging markets, or a total world ex-USA index with an MSCI EAFE depending on how much you want in emerging versus developed countries.

I'm not sure how to touch on your desired allocations by country but as others have stated important to consider what currency you earn money in and pay taxes in. Being overweight in a currency you aren't being paid in and don't have property in for instance opens you up to some currency risk. That doesn't mean your allocations aren't just fine, just something to think about.
Where the tides of fortune take us, no man can know.
Mouro_Emprestado
Posts: 23
Joined: Wed Jan 22, 2014 1:12 am

Re: Start my Retirement fund in Germany

Post by Mouro_Emprestado »

Hi Estrelitas, because of the nickname, are you Portuguese?
Topic Author
Estrelitas
Posts: 6
Joined: Thu Jun 30, 2016 3:01 am

Re: Start my Retirement fund in Germany

Post by Estrelitas »

Hello everyone,
First of all I would like to thank you all for the time taken and the replies given. It really helps me to think about my goals and also have different perspectives.
I will try answering each question by poster. If you could/would like to continue your thought/analysis I would be extremely happy and thankful.

To Micks:
Micks wrote: I think the funds you chose are fine (the acwi a bit expensive though). What I was wondering about, was the high allocation to European stocks. Is there a specific reason for overweighting Europe?
Initially I tried to give similar weights to Europe and US, but since STOXX600 has Large, Middle and Small Caps would allow me to invest more in an broader range of companies, when compared to the S&P500 which, as far as I understood, has only Large Caps.
Micks wrote: You mention that next to your emergency fund you have some CDs. Do those have a goal or are they part of the emergency fund? It is usually advised to view all your assets as one big portfolio, so if you say you can take more equity risk because of the CDs, I would assume that it is logical to count your CDs as part of your asset allocation as well.
This is a fantastic point and to be honest in my mind I wanted to separate between "safe money" and "Investment money". For this reason I didn't consider all as one portfolio. Another reason for the CDs was due to being risk-averse and not knowing better or having a plan for the future. I was just putting the money in CDs as I didn't know what else to do.
Now after reading and understanding a bit better the risks and possible rewards, I would like to start my Pension fund that I do not intend to touch until retirement and it is money that I can "afford" to lose or to see it diminish significantly due to higher exposure to Stocks. This being my first attempt at investing larger amounts I want to have an extra layer of protection by having safe CDs in case of any eventualities that may happen with me or my family.
Micks wrote: Also, I am not familiar with your brokers, but consider their costs as well. In some cases, transaction costs can really hurt you, while those can for instance be reduced largely be simplifying to a single world fund. Simplifying also makes sense towards your third note, as you would not have to rebalance within your equities.
If I buy through my broker I pay 10€ either buying or selling. If it is in another Stock exchanges it will cost me 25-75€ for each buying or selling. Considering the higher costs I have to look for the ETFs that I can by through my broker thus lowering my overall costs.

To FireProof:
FireProof wrote:Why are you investing in Germany? Tax purposes? Are you planning to retire there?

I live in Germany and I am a German and American dual citizen (who does speak German), but I invest through US funds, because it seems easier and cheaper.
I am Portuguese, currently living, working and paying taxes here. I expect to stay here for a long time and get my retirement from Germany. Furthermore comparing my current options in Germany and in Portugal, I have better conditions here and therefore intend to invest here.

To BeBH65:
BeBH65 wrote:Hello Estralites,
What is your nationality? where are you paying taxes? the answer on these questions will influence your decisions, and our advise.
I am Portuguese and paying taxes here in Germany.
BeBH65 wrote: On this forum we stress the distinction between the different goals of saving/investing: 1/ emergency fund, 2/saving for medium-term goals (car, house, ... ), investing for the long term (retirement, ... ). in which category do you consider the CDs that you mentioned?

To determine your Asset allocation (Split bonds/equity, regional split), you need to look at your need, ability and desire to take risk.
As in my answer to Micks, CDs were my only investment instrument as I didn't know any better and I was very risk-averse. I see the CDs as an extra safety net for any unforeseen events, such as losing my job or any other eventualities. This is because initially I tried to divide my "safe money" from my "investment money". By doing so, and talking about allocation and risk, the money set aside for retirement/investing is money I do not need and I will be able to leave it for a long period of time and therefore being able to go through the downturns of the market in order to have a better result in the end.
Lastly, at the moment I do not have any medium-term goals, as I do not intend to buy a house and/or a car. However if it will be necessary I can always get the money from the CDs.

To Engineer250:
Engineer250 wrote:My only comments are that it seems like there's a lot of overlap between the funds. MSCI ACWI IMI is already 50% US stock and includes some European stock as well. Adding in additional european stock in the STOXX and additional us stock in the S&P seems like it would really reduce your emerging markets exposure and overweight you to the US especially.
You are absolutely correct and they overlap significantly. The reason of adding the S&P was to have more weight in US stocks and reducing the overall fees. This distribution would allow me to have a great weight on larger cap companies with the obvious downside of not invest much on smaller companies and therefore miss some possible good returns.
The Wiki page suggest the MSCI World index which has a slight higher weight in US stocks and invests in less countries in Asia which was one of the main reasons for choosing the MSCI ACWI IMI.
Engineer250 wrote: It sounds like you have desired percentages below for your allocations but using the three funds you mention it seems like it would be a lot of tricky balancing to get the allocations you want. I would try to get funds more aligned with your desired allocations. Your existing funds are missing US small cap. It would be nice to have a Total US Stock Market index, and either something like the MSCI EAFE and the MSCI emerging markets, or a total world ex-USA index with an MSCI EAFE depending on how much you want in emerging versus developed countries.
The balancing may be indeed tricky (i haven't given much thought to it) but I believe the yearly percentages are more of a guideline than an exact number to follow, so for example, in any given year 90-95% of all the investment could go to one fund in order to balance it. If this doesn't work, then I can either a)invest more money, if possible or b) sell some of the ETFs in order to balance it.
I fully appreciate your recommendation on the indexes, however at a first glace the MSCI EAFE covers few countries in Asia which was the main reason for thinking about MSCI ACWI. On the other hand the MSCI Emerging market looks to be much more in line with my initial thought and could be a good addition. The downside it the expense ratio of 0.68%. It might be a good idea to have the S&P (40%), STOXX (40%) and the Emerging market (20%).
Engineer250 wrote: I'm not sure how to touch on your desired allocations by country but as others have stated important to consider what currency you earn money in and pay taxes in. Being overweight in a currency you aren't being paid in and don't have property in for instance opens you up to some currency risk. That doesn't mean your allocations aren't just fine, just something to think about.
I have to admit I am lost about this. First I didn't even consider it, and second could you elaborate a bit more on the currency risk? Are you referring to the currency of each country invested or the currency of each ETF?
I am paid in EUR and so are my taxes. Regarding the ETFs they have all been priced in EUR.

To Mouro_Emprestado:
Mouro_Emprestado wrote:Hi Estrelitas, because of the nickname, are you Portuguese?
Yes I am, I assume you are as well and from the south ;)

I would like to thank you all again for your comments and making me rethink my reasons and try to better express my ideas.
Regards,
Estrelitas.
Engineer250
Posts: 1082
Joined: Wed Jun 22, 2016 1:41 pm

Re: Start my Retirement fund in Germany

Post by Engineer250 »

Estrelitas wrote:It might be a good idea to have the S&P (40%), STOXX (40%) and the Emerging market (20%).
I like this balance as it lets you maintain your desired allocation through 3 simple funds rather than trying to deal with US and developed countries weights in multiple funds. The allocation percentages would obviously need to match your personal goals / risk appetite, but I like the approach of managing your allocations with these funds.
Estrelitas wrote:I have to admit I am lost about this. First I didn't even consider it, and second could you elaborate a bit more on the currency risk? Are you referring to the currency of each country invested or the currency of each ETF?
I am paid in EUR and so are my taxes. Regarding the ETFs they have all been priced in EUR.
If someone smarter than me wants to explain this better, I'll definitely defer to their explanation...but roughly; In the case of the S&P 500 your Euro purchase goes through the exchange rate of Euros to USD before stock is purchased. In the future once you sell stock the USD price will get converted back through the exchange rate into Euros. So it's not just a matter of buying/selling stock indices at various prices, but also the variability in the relationship between the two currencies. People might recommend various strategies in order to accommodate this, such as not being too heavily invested outside your "home" currency. What "too heavily" might mean is probably a matter of opinion. Maybe others will chime in with better suggestions.
Where the tides of fortune take us, no man can know.
Topic Author
Estrelitas
Posts: 6
Joined: Thu Jun 30, 2016 3:01 am

Re: Start my Retirement fund in Germany

Post by Estrelitas »

Engineer250 wrote:
Estrelitas wrote:It might be a good idea to have the S&P (40%), STOXX (40%) and the Emerging market (20%).
I like this balance as it lets you maintain your desired allocation through 3 simple funds rather than trying to deal with US and developed countries weights in multiple funds. The allocation percentages would obviously need to match your personal goals / risk appetite, but I like the approach of managing your allocations with these funds.
Estrelitas wrote:I have to admit I am lost about this. First I didn't even consider it, and second could you elaborate a bit more on the currency risk? Are you referring to the currency of each country invested or the currency of each ETF?
I am paid in EUR and so are my taxes. Regarding the ETFs they have all been priced in EUR.
If someone smarter than me wants to explain this better, I'll definitely defer to their explanation...but roughly; In the case of the S&P 500 your Euro purchase goes through the exchange rate of Euros to USD before stock is purchased. In the future once you sell stock the USD price will get converted back through the exchange rate into Euros. So it's not just a matter of buying/selling stock indices at various prices, but also the variability in the relationship between the two currencies. People might recommend various strategies in order to accommodate this, such as not being too heavily invested outside your "home" currency. What "too heavily" might mean is probably a matter of opinion. Maybe others will chime in with better suggestions.
Thank you for your feedback Engineer250. Regarding allocation there are several considerations:
a) Companies capitalization
I like all indexes as I get all sorts of companies i)Large caps in all 3 indexes ii) Middle caps in Europe and Emerging markets and iii) Small caps in Europe

b) Overall fees
US being the cheapest and Emerging markets the most expensive. A 1/3 distribution I would get approximately 0.30% while 40/40/20 (as before) would be around 0.24%. I will need to review this but maybe the extra 0.06% to have a equal distribution is acceptable.

c) Currency risk
Considering your explanation I have a bit of a disadvantage, as the S&P and Emerging market are in USD. I don't know how to analyse this as exchange rates are unpredictable and also I don't seem to have much choice as the funds were created in USD.

d) Volatility/Risk
Surely emerging markets are riskier and more volatile but provide better opportunities. Considering I don't want to remove the money before retirement I may accept more risk (bigger drops) for more reward.

All in all I may be leaning towards a 1/3 distribution in all 3 funds.
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BeBH65
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Re: Start my Retirement fund in Germany

Post by BeBH65 »

Hello Estralites,

Let me first answer some questions and then we can look to your investments.

On currencies - There are several currencies are at play here.
1- the currency of the stock - USD, EUR, Indian roupie, Thai Bath, ....
2- the base currency of the fund
3- the trading currencies of the fund
4- the currency of the investor - EUR in your case.
The evolution of the exchange rate between the first and the last currency is the currency risk that you have. The two other currencies are "transparent". It is best to buy the fund in your currency : I.e. trading currency = EUR otherwise you will pay the cost for currency conversion between your EURO and the trading currency.
For more info have a look at the base_currency_vs._trading_currency_vs._currency_of_the_underlying_asset asset of the EU_investing page.

On capitalization
A Stoxx600 fund contains only the 600 largest European stocks - these are large cap and small cap.
A fund following any MSCI IMI index contains smallcaps - so a fund like iShares Core MSCI Emerging Markets IMI UCITS ETF (EIMI) does contain Emerging market small caps

For your investment plan, It is best to work top down, the selection of the actual funds is only the last step
1- decide desired Asset Allocation split Equity/Bonds
2- within equity decide on regional weights and possible style tilts
3- select the funds that implement the preceding
Estrelitas wrote:
Estrelitas wrote:It might be a good idea to have the S&P (40%), STOXX (40%) and the Emerging market (20%).
I like this balance as it lets you maintain your desired allocation through 3 simple funds rather than trying to deal with US and developed countries weights in multiple funds. The allocation percentages would obviously need to match your personal goals / risk appetite, but I like the approach of managing your allocations with these funds.
This is not a bad choice if it matches your desired asset allocation.
What IS your desired allocation: Are you consciously excluding US small cap, Europe Small cap, Japan, Australia, Developed Asia?
Many people on this site prefer to own the whole stock market, some overweight the small caps, others underweight those smaller companies and only hold SP500.
The US investors on this site are often strongly overweighting the US market. Some even don't have any investments outside of their country.

Some info to reflect on:
- S&P500: includes the largest 500 US companies (total US markets stock indexes >3000 quoted companies)
- STOXX600: includes the largest 600 European companies
- iShares Core MSCI Emerging Markets IMI UCITS ETF (EIMI) contains 1870 stocks of the emerging market
Alternatively:
- Vanguard FTSE All-World UCITS ETF (VWRL) contain 2932 stocks including emerging market, but no small caps - ER 0,25% -
- a fund like SPDR® MSCI World Small Cap UCITS ETF WDSC - contains ~1800 mid and small cap stock of the whole world.

So, depending on your desired AA, maybe VWRL could be sufficient for you - it automatically balances the counties according the sizes of the respective capitalizations (E.g. currently US is 52%)

Some investors do not like that their regional split evolves with the capitalizations.By setting a fixed regional percentage and rebalancing manually they strive to get extra return. (For instance there are a few threads on the forum where people have a European and a Pacific fund instead of one developed market fund -- a forum search for Pacific will show some of these on the top your page)


Regards,
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence). | Have a look at https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles
Topic Author
Estrelitas
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Joined: Thu Jun 30, 2016 3:01 am

Re: Start my Retirement fund in Germany

Post by Estrelitas »

Hello BeBH65, sorry for my absence but after your reply I have to admit I was blocked and I wasn't sure what to write. Anyway now I have some clearer thoughts.
BeBH65 wrote: The evolution of the exchange rate between the first and the last currency is the currency risk that you have. The two other currencies are "transparent". It is best to buy the fund in your currency : I.e. trading currency = EUR otherwise you will pay the cost for currency conversion between your EURO and the trading currency.
If I understood correctly I will be always in a disadvantage position because most funds are managed in USD, despite the fact my broker displays the funds in EUR. Is this correct?
BeBH65 wrote: I.e. trading currency = EUR otherwise you will pay the cost for currency conversion between your EURO and the trading currency.
If my broker displays the ETFs in EUR, aren't these costs already included? If I want to invest outside Euro Zone I will always have this problem, right?
BeBH65 wrote:On capitalization
A Stoxx600 fund contains only the 600 largest European stocks - these are large cap and small cap.
A fund following any MSCI IMI index contains smallcaps - so a fund like iShares Core MSCI Emerging Markets IMI UCITS ETF (EIMI) does contain Emerging market small caps

For your investment plan, It is best to work top down, the selection of the actual funds is only the last step
1- decide desired Asset Allocation split Equity/Bonds
2- within equity decide on regional weights and possible style tilts
3- select the funds that implement the preceding
1. The AA will start at 82/18 (or a more aggressive allocation due to my CDs 90/10) re-balancing yearly. The AA yearly figures are indicative and not a hard line.
2. Definitely would like to invest in Emerging markets (possibly higher returns), Europe (as I live here and to mitigate some currency risk) and USA (cheap ETFs together with the importance the US companies in the world).

Note: I don't know what you mean by styles. If it is capitalization, then I like the S&P and the STOXX as these are the main benchmarks an the ones to "beat".
BeBH65 wrote:This is not a bad choice if it matches your desired asset allocation.
What IS your desired allocation: Are you consciously excluding US small cap, Europe Small cap, Japan, Australia, Developed Asia?
Yes,I am consciously excluding small caps and other Asia countries. I do this for two reasons,
a) I prefer leaning towards large caps because before considering the Boglehead philosophy I was reading on Dividend Paying Stocks, who normally are large caps, safer and with proven track record.
b) I exclude some of Asia countries as I would need to manage and pay more ETFs. Having US and Europe and Emerging markets I believe I would get a diversified array of countries and companies.
BeBH65 wrote:Many people on this site prefer to own the whole stock market, some overweight the small caps, others underweight those smaller companies and only hold SP500.
The US investors on this site are often strongly overweighting the US market. Some even don't have any investments outside of their country.

Some info to reflect on:
- S&P500: includes the largest 500 US companies (total US markets stock indexes >3000 quoted companies)
- STOXX600: includes the largest 600 European companies
- iShares Core MSCI Emerging Markets IMI UCITS ETF (EIMI) contains 1870 stocks of the emerging market
Alternatively:
- Vanguard FTSE All-World UCITS ETF (VWRL) contain 2932 stocks including emerging market, but no small caps - ER 0,25% -
- a fund like SPDR® MSCI World Small Cap UCITS ETF WDSC - contains ~1800 mid and small cap stock of the whole world.
Considering the above I am indeed more focused on large companies and would like a variety of companies and countries in order to hopefully reap benefits from all of them. Also considering the major Indexes are used to determine the evolution of the economy and to determine if a Fund was successful or not I though it would be okay to mirror the benchmarks.
As for the alternative ETFs, thank you for the suggestions, however unfortunately my broker does not provide the alternative ETFs so I cannot use them.

As usual any feedback or ideas are welcome.
Thank you all for your support.
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BeBH65
Posts: 1763
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Re: Start my Retirement fund in Germany

Post by BeBH65 »

Hello Estralites,
Estrelitas wrote:Hello BeBH65, sorry for my absence but after your reply I have to admit I was blocked and I wasn't sure what to write. Anyway now I have some clearer thoughts.
BeBH65 wrote: The evolution of the exchange rate between the first and the last currency is the currency risk that you have. The two other currencies are "transparent". It is best to buy the fund in your currency : I.e. trading currency = EUR otherwise you will pay the cost for currency conversion between your EURO and the trading currency.
If I understood correctly I will be always in a disadvantage position because most funds are managed in USD, despite the fact my broker displays the funds in EUR. Is this correct?
"most funds are managed in USD"
It is the currency of the assets of the fund that is important not the trading currency not the base currency. In many cases funds have multiple listings. A listing in London is typically in USD or GBP, in Amsterdam, Frankfurt, Milan it will be Euro. Buy one of the latter if you have EUROs

BeBH65 wrote: I.e. trading currency = EUR otherwise you will pay the cost for currency conversion between your EURO and the trading currency.
If my broker displays the ETFs in EUR, aren't these costs already included? If I want to invest outside Euro Zone I will always have this problem, right?
Not necessarily: look carefully what you buy

Code: Select all

Naam				Ticker		Valuta
iShares Core MSCI World USD	LSE:IWDA		USD
iShares Core MSCI World GBP	LSE:SWDA		GBP
iShares Core MSCI World EUR	XAMS:IWDA	EUR
This is a fund that hold maybe 80% of its assets outside of the ERURO area. However, personally, since I want to buy in EURO I buy on the Amsterdam Stock Exchange and have no currency exchange costs.
[/color]
BeBH65 wrote:On capitalization
A Stoxx600 fund contains only the 600 largest European stocks - these are large cap and small cap.
A fund following any MSCI IMI index contains smallcaps - so a fund like iShares Core MSCI Emerging Markets IMI UCITS ETF (EIMI) does contain Emerging market small caps

For your investment plan, It is best to work top down, the selection of the actual funds is only the last step
1- decide desired Asset Allocation split Equity/Bonds
2- within equity decide on regional weights and possible style tilts
3- select the funds that implement the preceding
1. The AA will start at 82/18 (or a more aggressive allocation due to my CDs 90/10) re-balancing yearly. The AA yearly figures are indicative and not a hard line.
on this foru;, ze like to look at all retirement investing as a whole, independent in which account they are. While we often speak about "bonds" when discussing AA, this is really an abreviation for "fixed income". --> If your CD are part of your retirement investing you can consider them part of you
2. Definitely would like to invest in Emerging markets (possibly higher returns), Europe (as I live here and to mitigate some currency risk) and USA (cheap ETFs together with the importance the US companies in the world).

Note: I don't know what you mean by styles. If it is capitalization, then I like the S&P and the STOXX as these are the main benchmarks an the ones to "beat".
Correct capitalisation is part of style
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence). | Have a look at https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles
Topic Author
Estrelitas
Posts: 6
Joined: Thu Jun 30, 2016 3:01 am

Re: Start my Retirement fund in Germany

Post by Estrelitas »

Hello BeBH65 and thank you again for your insight.

After watching some videos and taking in consideration your comments I convinced myself on what I want to do, and here is the plan:

- AA: 95% Stocks / 5 % Bonds

- Equity Funds: 50% Core MSCI World + 50 % MSCI Emerging markets
I decided to have Large Caps with a wide array of countries and and large number of securities (1611 + 852). This does expose me to currency risk, but since there are so many different currencies and the time frame quite long I hope it is okay and the risk not so big.

- Bond fund: Euro Government Bond 3-7yr
This was suggested in the Wiki page and according to the websites and videos I saw, a short/mid term bonds won't be as affected as long term bonds when the rates eventually rise.

- Rebalance: in the end of each year

-Investment amounts: initial lump sum of 5.000€ + 300€ monthly.

I hope to apply this this month and I also hope this will be a good distribution, at least I do like the idea.

As usual if anyone has any comments or ideas for me to consider please let me know.
Thank you all for your time.
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