Please rate my ETF-Portfolio, thanks! [Germany]

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Topic Author
DrChef
Posts: 5
Joined: Fri Dec 15, 2017 9:53 am

Please rate my ETF-Portfolio, thanks! [Germany]

Post by DrChef »

Hello Bogleheads, first Post here, hope you forgive me.
Great Forum from what i read!
Thankg you very much in advance for taking your Time! :)

Okay here is the Background:
I am 33 years old and started to invest just this Year.
I have zero debt and a five figure Emergency Fund
I have a small four figure sum of Euros in my ETF Portfolio.
I am on my way to become a full time Teacher here in Germany which is quiet beneficial.
(You get some nice state official-advantages like top notch health insurance and a pension way above average)
My ETF-Portfolio consists of
3 ETFs
40% MSCI World
40% Stoxx Europe 600
20 % Emerging Markets
All ETFs are capital growth funds which automatically reinvest the gains into the ETFs.
I plan to invest 1000 Euros monthly.
My Plan is not to FIRE as soon as i can. First of all i like my Job and i started too late to invest and earn too little to retire early.
My Plan is just to have some Cash at my disposal, to go part time with my job when i feel i am stressed out.Thats it.

Thanks in advance,
André from Germany
imperia
Posts: 224
Joined: Tue Feb 21, 2017 5:31 am

Re: Please rate my ETF-Portfolio, thanks! [Germany]

Post by imperia »

Nice portfolio.
I have
65 %MSCI World
25% DAX
10% Emerging Markets

You have invested in Europe and Emerging Markets more than others, but I think you would be fine with your choice.
Topic Author
DrChef
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Joined: Fri Dec 15, 2017 9:53 am

Re: Please rate my ETF-Portfolio, thanks! [Germany]

Post by DrChef »

Thanks for the Feedback :)

Yours also looks really logical.
Maybe i have to rethink my amount of emerging markets percentage,
i don´t want to put too much risk there.

Best wishes, André
imperia
Posts: 224
Joined: Tue Feb 21, 2017 5:31 am

Re: Please rate my ETF-Portfolio, thanks! [Germany]

Post by imperia »

People usually put 10-15% in Emerging Markets, but 20% is also acceptable.
More than 20% is too risky.
For 20+ years we will see the result.
I want to say that final decision is your, others can give you advice, but it is your money and nobady do nit know the future.
I predict for example that your and mine portfolio will produce almost same reault, because all indexs are in correlation with each other
Topic Author
DrChef
Posts: 5
Joined: Fri Dec 15, 2017 9:53 am

Re: Please rate my ETF-Portfolio, thanks! [Germany]

Post by DrChef »

Yeah i agree with you absolutely!
People (myself obviously included) tend to overanalyze and make science out of it.
I have to remind myself every day that it should be simple and boring,
otherwise i can go to the casino as well.
Like Bogle himself says: buy a part of every business in the world and hold it forever.

I am just not sure if i made a good decision with the capital growth funds which automatically reinvest the gains.

What type did you choose if i may ask?

Best wishes and thanks,
André
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alpine_boglehead
Posts: 683
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Location: Austria

Re: Please rate my ETF-Portfolio, thanks! [Germany]

Post by alpine_boglehead »

André, welcome to the bogleheads!

Your portfolio looks fine to me, I suppose you're using the respective iShares ETFs. Is the tilt to Europe some kind of home bias? Or do you expect better returns here? (there's quite some threads on the topic of "international" investing)

Distributing vs. accumulating should not make a big difference, usually the accumulating ETFs are cheaper (lower TER, e.g. iShares Core MSCI World is at 0.20% vs iShares MSCI World Distributing at 0.50%). I'm not sure if there's a difference tax-wise anymore, you should be able to read up on the taxation impact of the 2018 mutual fund tax changes on German-language sites.

I'm personally a bit partial to Vanguard FTSE All-World (also mentioned in the wiki https://www.bogleheads.org/wiki/Investing_from_Germany), because of the simplicity - it gives you all (large cap) stocks in the world at market weight in a single ETF.
It's the most comprehensive one available (3000 stocks) and the TER at 0.25% is very ok for a European distributing ETF. Previously it would probably have been a headache tax-wise, but with the taxation changes starting with the beginning of 2018 not anymore, it's now also available on XETRA. The disadvantage is that it's probably not (yet) offered for automated investing plans (Sparpläne), and it's distributing, so you have to reinvest the dividends yourself.
My Plan is just to have some Cash at my disposal
If you stick to your plan for the next 20 years, you should have some serious "cash" at your disposal, a simplistic calculation with 12k invested per year and 3% real growth should give you in the ballpark of 300k at age 53. Time's on your side, you may think you're late, but because here in Europe we don't (really) have to save ourselves for retirement (yet), you're actually early on. Early retirement with 40 is probably out of reach, but e.g. 60 is very realistic, and can still be considered early when the actual retirement age is 67 (and god knows what it will be when we get to that age).

As you say you have already read the forum, you're probably aware of asset allocation, risk tolerance, staying the course, ... if not, start here https://www.bogleheads.org/wiki/Getting_started

The "If you can" manifesto (easily googleable) is also a very good read for starters.

Best wishes from the snowy mountains of Austria :beer
imperia
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Joined: Tue Feb 21, 2017 5:31 am

Re: Please rate my ETF-Portfolio, thanks! [Germany]

Post by imperia »

I choose accumulation ETF that reinvest dividend because I can avoid dividend tax in my country.

I use IWDA, EIMI, XDAX
Topic Author
DrChef
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Joined: Fri Dec 15, 2017 9:53 am

Re: Please rate my ETF-Portfolio, thanks! [Germany]

Post by DrChef »

Hey Alpine Boglehead, thanks sooo much for the detailed answer and your perspective!
Really brightened up my start into the Sunday :happy

As for the MSCI World and the Emerging Markets i own the Comstage ETFs which
are also pretty cheap.
A TER of 0.2 p.a and no transaction fees on my Broker Flatex.
Here are more Infos:
https://www.justetf.com/de/etf-profile. ... 0392494562

The Stoxx Europe 600 is from dbx trackers.
Also pretty low costs.

Concerning the tilt to Europe:
This is something i too thought about.
Maybe i have to rebalance this again. :confused

I see the lump risk of being invested to much in Europe,
as i am invested in germany with my human capital,

The only thing left to say is:
I have to convince my Spouse in terms of the aggressive savings rate.
She sees things a little different and wants to own a house etc.
I want to own nothing except the outlook to a financial freedom.
So there will be some things to discuss in the nearer future.

Best wishes from Germany and thanks again! I will check out these helpful links now.
André

P.S.: i drove through the snowy Mountains in Austria in July this Year again,
pretty pretty impressive! I went all way down to Croatia and Bosnia.
I honestly thought the Alps would NEVER stop as i drove through them :D
imperia
Posts: 224
Joined: Tue Feb 21, 2017 5:31 am

Re: Please rate my ETF-Portfolio, thanks! [Germany]

Post by imperia »

I noticed that you use sinthetic ETF for MSCI World and Emerging Markets.
Most people avoid sinthetic ETF, and we use physical replication ETF.

For MSCI World and Emerging Markets you can find same ETF with physical replication with same TER, or even lower.

I also noticed that is your MSCI World ETF Luxemburg domicil.
I do not know for sinthetic ETF, but for physical it is better to use Ireland domucile ETF because Ireland has tax treaty with US, so you just lose just 15% dividend tax from US company, instead of 30%.
rahas
Posts: 25
Joined: Sat Jan 16, 2016 6:38 am

Re: Please rate my ETF-Portfolio, thanks! [Germany]

Post by rahas »

My Plan is just to have some Cash at my disposal
If you stick to your plan for the next 20 years, you should have some serious "cash" at your disposal, a simplistic calculation with 12k invested per year and 3% real growth should give you in the ballpark of 300k at age 53. Time's on your side, you may think you're late, but because here in Europe we don't (really) have to save ourselves for retirement (yet), you're actually early on. Early retirement with 40 is probably out of reach, but e.g. 60 is very realistic, and can still be considered early when the actual retirement age is 67 (and god knows what it will be when we get to that age).

As you say you have already read the forum, you're probably aware of asset allocation, risk tolerance, staying the course, ... if not, start here https://www.bogleheads.org/wiki/Getting_started

The "If you can" manifesto (easily googleable) is also a very good read for starters.

Best wishes from the snowy mountains of Austria :beer
Dear fellow Austrian and German Investors,

I am really happy to have found your thread and to be able to exchange ideas. I habe been reading bogleheads for many years and am on a good track with saving and investing. However reading all those posts and the group of bogleheads might induce unrealistic goals that especially as European investor might not be neccessary.

You state as a European investor you dont need that much as we have a pension system. Over the years i always felt our US boglegeads are so ambitious and also that they earn much more etc. So i always wanted to also achieve FI without considering a future pension. Lots of bogleheads state their goal is 5m or 3m or 2.5m or something in this ballpark. So i also thought my goal has to be 2m to be safe and independent. I noticed however that here in Europe almost nobody accumulates wealth and most consider a few 100k as wealth which to me always feels little. Instead they only worry about owning a house and if they then spend the rest they are cool. While myself the more threads i read here to more i feel i need to save more and that it is not enough.

Do European investors feel the same? Should we have a different retirement goal and strategy? How can we tranalate US posts to Europe? When i read e.g. about house prices and respective rent often a house worth 250k rents for 2k a month. In my region house prices are expensive but yearly rent is around 3 percent of price (a level most bogleheads wouls advice to never buy) and still ppl only invest by buying a house...


Hope this is of interest for more european investors. Also alpine investor since you are also from austria. Do you use an austrian broker or a germany based broker?

Best
Rahas
Topic Author
DrChef
Posts: 5
Joined: Fri Dec 15, 2017 9:53 am

Re: Please rate my ETF-Portfolio, thanks! [Germany]

Post by DrChef »

So first of all i want to reach out to @imperia:

Thanks so much for your cautious advice concerning the ETF choices.
This really made me think about maybe switching gears.
But the thing is: we will have a new Tax Law starting from 01.01.2018
which will treat every ETF equal independent from where it comes
or how it is designed. So it simply wont matter very much what ETF to use in
the end.
Having said that:
I still dont know if i ride a good ride with my automatically reinvesting capital growth funds.

I sooo wish Vanguard will cooperate with a broker here and sets up a free savings plan.
Then i would just switch to Vanguard.

@Rahas:

So nice to read from you, welcome! May i ask you where you are from?
I know what you mean! Your Questions are a little bit philosophical as well :)

I too read Mr. Money Mustache and so on for years now and i am in several
Mustachian Savings Groups on Facebooks.
I would say my mindset shifted very much to the frugal bogle-side of america.

NOBODY here in my local peers has any thoughts on saving and retirement!
Germany is a small country and its citizens are very government-dependent.
There is no D.I.Y attitude like taking the fate in ones own hands.
And why? Because the German basic needs like housing, food and healthcare
are always covered no matter what (at least for now!)

Also Germans are really averse against the stock market, not many people
invest in it yet. It is not seen as a retirement-alternative (again: for now!)

Concerning your Question:

The Bogle-Way European Style will always be different i guess.
That is because of the different tax-laws and Retirement Options.
Also within Europe their are differences when it comes to renting vs. buying
for example.

But soon in Germany and Europe we have to make shift towards a self managed
life when it comes to money and learn to be independent from the government.
The age of retirement will go up, the money you will receive for retirement will go down.
there is no way around it. It will crash some Day.

That is why a minimal lifestyle with less expenses for stuff nobody needs
and more headroom for saving as much money as possible will suit everybody
no matter what circumstance or country you live in! :)
rahas
Posts: 25
Joined: Sat Jan 16, 2016 6:38 am

Re: Please rate my ETF-Portfolio, thanks! [Germany]

Post by rahas »

I am from Austria. I agree with what you say. Although i know that we are in a better position compared than the US i dont trust the pension system as everybody keeps saying it will collapse. So i try to keep up with saving to a similar level as US bogleheads but that seems impossible especiallysince we have no tax benefits and essentially invest after tax money. Still i find myself obessed with saving more to reach target. I guess part of it is good and i like mr money moustache too but sometimes when normal ppl around me hear my thoughts about FI and saving they think i am alien. For them they feel great that they will eventually own their house while i think houses are overpriced at 3 percent yearly rent. I think 1m is not that much money as it throws off 40k pretax while most others having saved 100k cash feels like being wealthy ;)

What are your experiences?

Rahas
rahas
Posts: 25
Joined: Sat Jan 16, 2016 6:38 am

Re: Please rate my ETF-Portfolio, thanks! [Germany]

Post by rahas »

Any further thoughts? Alpine boglehead i would love to exchange more thoughts with a felldow Austrian boglehead. Do you have your portfolio with a German or Austrian broker?

Merry christmas to all of you
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alpine_boglehead
Posts: 683
Joined: Fri Feb 17, 2017 8:51 am
Location: Austria

Re: Please rate my ETF-Portfolio, thanks! [Germany]

Post by alpine_boglehead »

DrChef wrote: Sun Dec 17, 2017 3:02 pm So first of all i want to reach out to @imperia:

Thanks so much for your cautious advice concerning the ETF choices.
This really made me think about maybe switching gears.
But the thing is: we will have a new Tax Law starting from 01.01.2018
which will treat every ETF equal independent from where it comes
or how it is designed. So it simply wont matter very much what ETF to use in
the end.
Synthetic ETFs are considered more risky by some because the basket of securities actually held by the ETF does not correspond to the securities you think you're investing in. The swap contracts are renewed on a frequent basis (AFAIK), but there's still some risk concerning the liquidity of the swap partner especially in turbulent times.
DrChef wrote: Sun Dec 17, 2017 3:02 pm
Having said that:
I still dont know if i ride a good ride with my automatically reinvesting capital growth funds.
There's nothing wrong with accumulating ETFs/funds. If you intend to hold a long time, it's more convenient because you don't have to reinvest the dividends yourself.
DrChef wrote: Sun Dec 17, 2017 3:02 pm I sooo wish Vanguard will cooperate with a broker here and sets up a free savings plan.
Then i would just switch to Vanguard.
I don't really get why there's a preference for free savings plans in German-speaking countries. Choice of asset and fund should be more important than whether you can invest in it for free. If you invest manually e.g. every quarter instead of monthly with a free plan, the fees for buying are not that high. But I think e.g. the iShares ETFs which are more commonly offered for savings plans are also just fine (but i personally prefer Vanguard).
DrChef wrote: Sun Dec 17, 2017 3:02 pm @Rahas:

So nice to read from you, welcome! May i ask you where you are from?
I know what you mean! Your Questions are a little bit philosophical as well :)

I too read Mr. Money Mustache and so on for years now and i am in several
Mustachian Savings Groups on Facebooks.
I would say my mindset shifted very much to the frugal bogle-side of america.

NOBODY here in my local peers has any thoughts on saving and retirement!
Germany is a small country and its citizens are very government-dependent.
There is no D.I.Y attitude like taking the fate in ones own hands.
And why? Because the German basic needs like housing, food and healthcare
are always covered no matter what (at least for now!)

Also Germans are really averse against the stock market, not many people
invest in it yet. It is not seen as a retirement-alternative (again: for now!)

Concerning your Question:

The Bogle-Way European Style will always be different i guess.
That is because of the different tax-laws and Retirement Options.
Also within Europe their are differences when it comes to renting vs. buying
for example.

But soon in Germany and Europe we have to make shift towards a self managed
life when it comes to money and learn to be independent from the government.
The age of retirement will go up, the money you will receive for retirement will go down.
there is no way around it.
DrChef wrote: Sun Dec 17, 2017 3:02 pm
It will crash some Day.
Crash is a strong word. I basically agree with you that there will probably be changes to the worse for future pensioneers, but there's so many forces at work that it's impossible to know how this will exactly play out.
DrChef wrote: Sun Dec 17, 2017 3:02 pm
That is why a minimal lifestyle with less expenses for stuff nobody needs
and more headroom for saving as much money as possible will suit everybody
no matter what circumstance or country you live in! :)
Couldn't agree more. And the best things in life are still free - sunrises, hugs, songs, smiles.
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alpine_boglehead
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Re: Please rate my ETF-Portfolio, thanks! [Germany]

Post by alpine_boglehead »

rahas wrote: Fri Dec 22, 2017 11:22 am Any further thoughts? Alpine boglehead i would love to exchange more thoughts with a felldow Austrian boglehead. Do you have your portfolio with a German or Austrian broker?

Merry christmas to all of you
And a happy new year! :)

Sorry for the delay due to the holidays. I also happy to meet fellow Austrians here, because as you already said, discussing financial matters in the real world is not appreciated.

I prefer Austria-based brokers due to the automated tax reporting. For mutual funds/ETFs it's not really clear to me how to calculate the taxes (stocks alone would be fine), so I take the simpler path by having the broker deal with the intricacies of tax calculation. If you have the knowledge how to correctly declare the taxes for ETFs (the numbers are available on profitweb.at, but the mind-boggling volume of different numbers has kept me from trying this myself), I would be happy to hear more about that.

Flatex is the cheapest one available (the only one with no fee based on the assets, only for trading), the others (e.g. easybank, datat, Hello bank) with fees in the range of 0.12% p.a. of assets are also still acceptable.

I agree with the concerns you mentioned in another thread that putting all assets with one broker could prove problematic in case the broker commits fraud or the assets are somehow stolen. There's a simple remedy for reducing this risk: just use several brokers. And if you're really paranoid, you can use ETFs from different providers.

Regarding the FI(RE) numbers from our fellow US bogleheads - keep in mind that the bogleheads have a tilt towards high earners. Many Americans would also be happy if they had just 500k in retirement savings (the actual average numbers are much lower, still, check out this sad news entry).
Also keep in mind that in Austria/Germany, you get full medical coverage regardless of contributions, so if you have a 5k€ Euro p.a. part-time job, you still get full coverage. The median income in Austria is €2160 gross per month (perthis source), which is net 22.2k€ per year. It's not enough for a lavish lifestyle, but sure enough for half of the population. If you add 2k€ for self-insurance, you've got about 25k€. Thus, for a 4% withdrawal rate you "just" need 625k€. Then there's still taxes, but you can postpone some dividend taxation using tax-loss harvesting (no luck on this one in a bull market like the current one, and it's harder than for US investors because we can only TLH within one calendar year), and eliminate capital-gain taxes by having gains taxed as regular income in FIRE (for which the first 11k are tax-free). At least that's my take on it.

The reports of the impending collapse of the state pension system in Europe are exaggerated in my eyes. Much of that seems to be fear-based marketing by the banks and insurance companies which sell retirement products (helped by corrupt or uninformed politicians), products that are usually a rip-off. E.g for company pension plans in Austria the largest available company (VBV) charges 1% of AUM (in a boglehead worldview, this is similar to Edward Jones). Private pension plans ("prämienbegünstigte Zukunftsvorsorge" in Austria, the analogon to the Riester insurance in Germany) are likely even worse.

Yes, there might be cuts to state pensions and an increase in the general retirement age, but I don't think we'll completely move to a US-style system.

Talking to other people about financial independence doesn't get you anywhere. Silence is golden. Just do it. It's not a concept that's commonly understood.
Which is kind of weird, because most people around here try to retire early (on state pension), but few make the mental connection that a big heap of money equals early retirement. 400k€ house? That one will be well understood.

Luckily there's the internet :) - I'm looking forward to hearing your thoughts on these topics.
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alpine_boglehead
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Re: Please rate my ETF-Portfolio, thanks! [Germany]

Post by alpine_boglehead »

DrChef wrote: Sun Dec 17, 2017 2:22 am She sees things a little different and wants to own a house etc.
I want to own nothing except the outlook to a financial freedom.
This is an important issue. As pointed out in many other posts, having a partner that shares your financials views is one of the cornerstones of wealth and a good relationship.

Think about why you want to have financial freedom and why you can do it (e.g. the power of compounding is not understood by non-investors, few can imagine that a normal person who's a diligent saver and investor can reach 1 million of assets in a lifetime). Then you'll be better able to explain to her why it is important for you.

You can do some research on the bogleheads forum, there's certainly some threads already dealing with this topic.

If you need firepower on renting vs owning, J L Collins has summed it up nicely.

Go Curry Cracker also has an good list of topics of renting vs owning, and as always, there's likely some discussions on bogleheads, too :).
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