Planning portfolio - European investor

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Belgiuminvestor
Posts: 5
Joined: Mon Feb 12, 2018 6:18 pm

Planning portfolio - European investor

Post by Belgiuminvestor » Mon Feb 12, 2018 6:25 pm

Hello everyone,

I am currently 21 years old, live in Belgium and I would like to ask some help to plan my portfolio. Since september last year, I have used the Dollar-cost-averaging method on IWDA. I am buying shares of IWDA the 15th of each month.

After doing some further research, I understand that my portfolio isn't diversified enough. It is likely that you can get better returns when you also take some value,small cap and EM ETF's in your portfolio. I have been searching for several hours to good value and small cap ETF's listed in Europe but it seems to be very hard.

When I want to swam EUR to USD at my broker I need to pay an extra cost of 0,1%. But I assume it is really necessary to find the ETF's matching my needs.

Any help is welcome

Belgiuminvestor
Posts: 5
Joined: Mon Feb 12, 2018 6:18 pm

Re: Planning portfolio - European investor

Post by Belgiuminvestor » Mon Feb 12, 2018 7:01 pm

I found this ETF portfolio for European investors on this forum:

20% iShares Core MSCI World UCITS ETF = IWDA
10% iShares Core MSCI Emerging Markets IMI UCITS ETF = EMIM
20% iShares Edge MSCI World Value Factor UCITS ETF
20% SPDR MSCI World Small Cap UCITS ETF
10% SPDR MSCI Europe Small Cap Value Weighted UCITS ETF
10% SPDR MSCI USA Small Cap Value Weighted UCITS ETF 
10% Amundi Index FTSE EPRA NAREIT Global - UCITS ETF DR

However, because I only buy for 250 euros a month I don't know if the cost of buying the funds would kill me. I will make the calculations tomorrow.

ATope
Posts: 33
Joined: Tue Jan 06, 2015 7:36 am

Re: Planning portfolio - European investor

Post by ATope » Tue Feb 13, 2018 5:02 am

That’s 7 funds - to buy/sell each month to maintain the balance across the portfolio. Perhaps too many if only investing 250 EUR per month.
Why not simply go for IWDA and Emerging Markets/Small Cap if you wish for a little more diversification & risk?
I’d also balance equities with either bonds or cash to keep your portfolio as balanced as possible based on your risk tolerance. Above all keep the costs as low as possible for your intended investment strategy. And keep it simple.

Belgiuminvestor
Posts: 5
Joined: Mon Feb 12, 2018 6:18 pm

Re: Planning portfolio - European investor

Post by Belgiuminvestor » Tue Feb 13, 2018 10:31 am

ATope wrote:
Tue Feb 13, 2018 5:02 am
That’s 7 funds - to buy/sell each month to maintain the balance across the portfolio. Perhaps too many if only investing 250 EUR per month.
Why not simply go for IWDA and Emerging Markets/Small Cap if you wish for a little more diversification & risk?
I’d also balance equities with either bonds or cash to keep your portfolio as balanced as possible based on your risk tolerance. Above all keep the costs as low as possible for your intended investment strategy. And keep it simple.
Because small cap and value ETF's will perform better on the long term. However, when I want to build this portfolio the annual fees are 1,15%, which is very high...

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sunnywindy
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Joined: Sat Jan 18, 2014 4:42 pm
Location: Wilmington, NC

Re: Planning portfolio - European investor

Post by sunnywindy » Tue Feb 13, 2018 10:52 am

The MSCI World Index https://www.msci.com/documents/10199/14 ... fcb5bd6523 consists of all developed markets. That means you own the US, Europe, Australia, etc.... What you do not own are the emerging markets which consist of China, Brasil, Poland, Mexico, etc... https://www.msci.com/documents/10199/c0 ... 6fd5678111

I don't know where you read that you were not 'diversified', but the MSCI World Index is highly diversified. You could, and I recommend that you do, is allocate about 10% of your portfolio to Emerging Markets and that way you will own 98% of the planet's equity markets.

The only other equity asset class that you will not own (and there isn't much of a reason to own unless it is for your 'fun' money account or if you live in a Frontier Market) are Frontier Markets. https://www.msci.com/documents/10199/f9 ... 0848afe026
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imperia
Posts: 115
Joined: Tue Feb 21, 2017 6:31 am

Re: Planning portfolio - European investor

Post by imperia » Tue Feb 13, 2018 10:58 am

[/quote]

Because small cap and value ETF's will perform better on the long term. However, when I want to build this portfolio the annual fees are 1,15%, which is very high...
[/quote]

If you are so sure in that than invest all in small cap, and value etf.

You can use three fond portfolio:
1.IWDA
2.EIMI
3. SPDR MSCI World Small Cap UCITS ETF, WDSC

I also must say that 250€ is relay too small amount for slice,and dice portfolio.

Use justetf.com ti to find ETF you are looking for

Belgiuminvestor
Posts: 5
Joined: Mon Feb 12, 2018 6:18 pm

Re: Planning portfolio - European investor

Post by Belgiuminvestor » Tue Feb 13, 2018 12:22 pm

imperia wrote:
Tue Feb 13, 2018 10:58 am
Because small cap and value ETF's will perform better on the long term. However, when I want to build this portfolio the annual fees are 1,15%, which is very high...
[/quote]

If you are so sure in that than invest all in small cap, and value etf.

You can use three fond portfolio:
1.IWDA
2.EIMI
3. SPDR MSCI World Small Cap UCITS ETF, WDSC

I also must say that 250€ is relay too small amount for slice,and dice portfolio.

Use justetf.com ti to find ETF you are looking for
[/quote]

Indeed. I can also invest 3.000 euro each year. The costs will be a lot lower then. I am aware that I am enough diversified with IWDA but I just want to give my returns a little boost by investing in small cap en value ETF's. Using a 3 fund portfolio is also interesting.

ATope
Posts: 33
Joined: Tue Jan 06, 2015 7:36 am

Re: Planning portfolio - European investor

Post by ATope » Thu Feb 15, 2018 10:18 am

I too have the three equity portfolio approach, just slightly different fund providers:

VWRD
VDEM
SPDR MSCI World Small Cap UCITS ETF, WDSC

I balance this with cash & bonds:
IUAA.

So 4 funds in total. Rebalance 2 times per year to minimize transactions. Leave it and get on with my life
:happy

Belgiuminvestor
Posts: 5
Joined: Mon Feb 12, 2018 6:18 pm

Re: Planning portfolio - European investor

Post by Belgiuminvestor » Thu Feb 15, 2018 12:53 pm

ATope wrote:
Thu Feb 15, 2018 10:18 am
I too have the three equity portfolio approach, just slightly different fund providers:

VWRD
VDEM
SPDR MSCI World Small Cap UCITS ETF, WDSC

I balance this with cash & bonds:
IUAA.

So 4 funds in total. Rebalance 2 times per year to minimize transactions. Leave it and get on with my life
:happy
Do you have (historical) returns of this portfolio compared with for example just VWRD?

silverex
Posts: 46
Joined: Sun Jan 07, 2018 1:05 pm
Location: Vilnius, Lithuania

Re: Planning portfolio - European investor

Post by silverex » Wed Feb 21, 2018 5:01 pm

My portfolio looks like this:
61% db x-trackers MSCI World Index UCITS ETF (DR) 1C
6% SPDR MSCI World Small Cap UCITS ETF
8% iShares Core MSCI Emerging Markets IMI UCITS ETF
20% iShares Global Aggregate Bond UCITS ETF EUR Hedged (Acc)

The stocks part reflects world market capitalization ratios. You could easily skip small cap and emerging markets. Such portfolio, with or without small cap/emerging markets, has a TER of 0.18%.

I buy only one of the funds each month - the one which is furthest from its ideal percentage. This way I keep transaction costs very low, also basically get rebalancing for free.

It doesn’t matter if funds base currency is USD or EUR. If you buy from Xetra or Amsterdam Euronext exchange, there all these funds are priced in euros, so you save one currency conversion.

buylowbuyhigh
Posts: 37
Joined: Thu Dec 21, 2017 8:34 am

Re: Planning portfolio - European investor

Post by buylowbuyhigh » Tue Feb 27, 2018 11:18 am

silverex wrote:
Wed Feb 21, 2018 5:01 pm
My portfolio looks like this:
61% db x-trackers MSCI World Index UCITS ETF (DR) 1C
6% SPDR MSCI World Small Cap UCITS ETF
8% iShares Core MSCI Emerging Markets IMI UCITS ETF
20% iShares Global Aggregate Bond UCITS ETF EUR Hedged (Acc)

The stocks part reflects world market capitalization ratios. You could easily skip small cap and emerging markets. Such portfolio, with or without small cap/emerging markets, has a TER of 0.18%.

I buy only one of the funds each month - the one which is furthest from its ideal percentage. This way I keep transaction costs very low, also basically get rebalancing for free.

It doesn’t matter if funds base currency is USD or EUR. If you buy from Xetra or Amsterdam Euronext exchange, there all these funds are priced in euros, so you save one currency conversion.
That seems like an ideal portfolio for Europeans using accumulating ETFs, as close as you can get to the three fund portfolio in US (or 4 funds/target retirement fund with the international bonds). Your numbers don't add up to 100% though, is 5% in cash?

silverex
Posts: 46
Joined: Sun Jan 07, 2018 1:05 pm
Location: Vilnius, Lithuania

Re: Planning portfolio - European investor

Post by silverex » Tue Mar 20, 2018 11:59 am

buylowbuyhigh wrote:
Tue Feb 27, 2018 11:18 am

That seems like an ideal portfolio for Europeans using accumulating ETFs, as close as you can get to the three fund portfolio in US (or 4 funds/target retirement fund with the international bonds). Your numbers don't add up to 100% though, is 5% in cash?
My mistake, should have been 25% of bonds.

Valuethinker
Posts: 35355
Joined: Fri May 11, 2007 11:07 am

Re: Planning portfolio - European investor

Post by Valuethinker » Tue Mar 20, 2018 12:59 pm

Belgiuminvestor wrote:
Mon Feb 12, 2018 6:25 pm
Hello everyone,

I am currently 21 years old, live in Belgium and I would like to ask some help to plan my portfolio. Since september last year, I have used the Dollar-cost-averaging method on IWDA. I am buying shares of IWDA the 15th of each month.

After doing some further research, I understand that my portfolio isn't diversified enough. It is likely that you can get better returns when you also take some value,small cap and EM ETF's in your portfolio. I have been searching for several hours to good value and small cap ETF's listed in Europe but it seems to be very hard.

When I want to swam EUR to USD at my broker I need to pay an extra cost of 0,1%. But I assume it is really necessary to find the ETF's matching my needs.

Any help is welcome
Get it down to 2 or 3 funds.

Why not a global Small Cap Value fund (developed markets), an EM fund, and a bond fund?

At age 21 there is plenty of time to add a standard index fund later.

If there is no total world market fund, then you probably should have an EM fund. But beware, it's heavily weighted towards China, and a few stocks in China.

But you could literally have 75% developed world markets and 25% global bonds. Simple and easy. Add more funds when your portfolio gets bigger. Main thing is to minimized taxes and costs as best you can, with the broadest possible diversification.

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