Thanks a lot for your input!
1. Most of our money is still in Germany. Do you see any risk (except the costs I have to bring it over) in bringing it all over and invest it? What about currency risks connected to that? I personally do not see the EURO value increasing in the next few years, but who knows.
No, there's no risk. What are the costs to bring it over? 1% exchange each way? I wouldn't do it if you are staying two years.
The costs are pretty much exactly 1% currency conversion costs, yes. So would you move it or just leave it without having it invested? I got confused by "no risk, but would not do it"
What's the downside to investing in Germany? German taxes? Can't you claim a credit for foreign taxes paid?
German banks do now allow to have a German broker account as soon as you live in the US due to the fact that they will need to report to the US and this is too much of a burden for them, so since some years all German banks ask you to close your account as soon as you are in the US.
I assumed you could just keep it invested in Germany. So the questions is if you can earn more than the round trip 1% currency conversion cost. I assume you'd earn nothing in Germany (that even a bank deposit would be about zero OR can't you even do that).
Even using low expected future returns of 3% over inflation for US Stocks, it would seem to make sense. International is "expected" to return more too. [OK International is priced cheaply to encourage you to buy it, but that's because it's not a sure thing at the moment].
Yes, I probably would then.
3. Is bond investing still a valid option with the Fed raising interest rates?
Yes of course it is. The market could tank and you could lose your job and it'd be dandy to have bonds in that case. You have to pay attention to duration and understand that NAV loss from a rate hike will recover it time.
For you though, I am not sure about USD bonds. Expat investors usually keep fixed income in their expected retirement currency. It'd be difficult for you to do that (keeping bonds in Germany) and rebalance (if your money is in the US). So maybe you want to keep bonds and some holdings in Germany to rebalance if needed.
I would like to only invest in bond ETFs with a global coverage and not in single bonds, so I will not need to pay attention to duration etc that much. Can you recommend any bond ETFs that balance risk and gain? I thought about bond ETFs covering bonds with intermediate duration
Some International bond funds such as BNDX are hedge to the USD. I am not sure that's what you want.
iShares seems to have a number of international non-hedged funds:
https://www.ishares.com/us/products/etf ... &fac=43515
EMB iShares J.P. Morgan USD Emerging Markets Bond ETF
IGOV iShares International Treasury Bond ETF
LEMB iShares Emerging Markets Local Currency Bond ETF
IAGG iShares Core International Aggregate Bond ETF
EMHY iShares Emerging Markets High Yield Bond ETF
GHYG iShares Global High Yield Corporate Bond ETF
ISHG iShares 1-3 Year International Treasury Bond ETF
CEMB iShares Emerging Markets Corporate Bond ETF
HYXU iShares International High Yield Bond ETF
I don't have good advice here.
Unhedged Global bonds will subject you to currency risk which will probably have a bigger impact on returns than coupon.
I think I would want to take risk in stocks and hold bonds that I can use to rebalance in a downturn - so reserve currencies.
IGOV might do that (doesn't have the US though) but I think you need to watch the duration. It's 7.87 yrs. Japan and Euro using countries are heavily represented so you probably should be prepared to hold it for the duration.
iShares Germany seems to have the same fund in EUN3 (not 100% sure though):
https://www.ishares.com/de/privatanlege ... &fac=43515
So if rates hiked and you lost NAV and you left the US, you could sell and buy back into the German fund to keep the same exposure and let the investment recover though dividend reinvestment like bond funds do.
Just thinking of the top of my head here.
3. Do I have any chance of tax loss harvesting in case my ETFs do not perform? I read about the wash sale rule, which would mean I would need to either wait for 31 days or buy an alternative ETF for the time being. What would be alternative ETFs I would be allowed to legally buy without hitting the wash sale rule?
Vanguard Total Stock Market --> SCHB (Schwab Broad Market) or ITOT (S&P Total Market)
Vanguard FTSE Europe and Vanguard FTSE Pacific --> combine into SCHF (Schwab Developed Markets) or VEA (Vanguard Developed Markets)
Vanguard FTSE Emerging Markets --> Vanguard switched indexed to include Chinese A shares, but no-one else has. It's now increasing it's Chinese holdings slowly and will eventually be 50%. The tax loss partners such as Schwab's SCHE or EEM or IEMG don't have the A shares and are now about 26%. (SCHE and EEM don't have small caps).
Thanks! So I if one of my ETFs is reporting losses, I could sell it, directly change to the respective other ETF and do the same backwards without acting against the wash sale rule?[/quote]
Yes. Do brush up on tax loss harvesting though. The above should be fine. Remember the new fund can't be substantially identical, and if you buy shares in an IRA or some other account, that you can trigger the wash sale, or dividend reinvestment can trigger it...