My portfolio, investing from Germany

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Topic Author
rustle
Posts: 3
Joined: Wed Jun 20, 2018 10:43 am

My portfolio, investing from Germany

Post by rustle »

Hi everyone!
been reading on this forum for quite a while, I wanted to show my portfolio and get some ideas or suggestions.

I'm 34, currently live in Germany, though I'm not German (actually Israeli), and I just started my 'real' investing actions a few months ago.
My taxed account is handled with the broker DeGiro, and other than this account I have some tax-relieved accounts in Israel (they will all be saved to my pension), and an apartment in Berlin (bought without financing).

My taxed account looks like this:

41.5% - iShares Core MSCI World UCITS ETF (traded in Germany with ticker EUNL)
16% - ISHARES TECDAX UCITS ETF DE (EXS2)
9.5% - ISHARES CORE DAX UCITS ETF DE (EXS1)
33% - iShares Global AAA-AA Government Bond UCITS ETF (traded in Germany with ticker IS0Z)

Now, some further explanations:
- My accounts in Israel are mostly invested in the S&P 500 (plus some other indexes, all passive investments), other than designated pension bonds issued by the Israeli govt. that guarantee 4.8%/year, inflation protected. So in total, if we calculate how much is invested in stocks vs. bonds it's 77%:23%
- why am I investing in the German market un-proportionally? I earn and spend in Euros, but actually most of my other investments are linked to USD. Even my bonds are linked to USD since I couldn't find a safe ETF in Euros that made sense to me (do you know any? especially accumulating ones). So I wanted some of my investments to be unrelated to USD, and besides, I believe in the German economy and I think it has a potential to beat the world market.
- I didn't invest in emerging markets and small-cap indexes, yet. Not sure if I should or not.
- Other than those accounts, I have an emergency cash fund that should be enough for a long while (a few good months, maybe more)
- Married, no children, yet


Appreciate your time and help :)
Topic Author
rustle
Posts: 3
Joined: Wed Jun 20, 2018 10:43 am

Re: My portfolio, investing from Germany

Post by rustle »

Bumping, hope it’s ok :shock:
User avatar
BeBH65
Posts: 1763
Joined: Sat Jul 04, 2015 7:28 am

Re: My portfolio, investing from Germany

Post by BeBH65 »

First post sometimes get delayed.
I am sure that will soon get feedback.
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
imperia
Posts: 224
Joined: Tue Feb 21, 2017 5:31 am

Re: My portfolio, investing from Germany

Post by imperia »

Your portfolio is fine.
I also use dax etf instead europe etf, becouse I belive in Germany.

I suggest adding emerging markets.
TM90
Posts: 132
Joined: Mon Mar 06, 2017 1:13 am

Re: My portfolio, investing from Germany

Post by TM90 »

Hi

Accumulating Bond etf: iShares Global Aggregate Bond ETF Hedged

Sample portfolio for you:
SPDR ACWI IMI ETF
IShares Global Aggregate Bond ETF EUR Hedged

Contains all caps and emerging markets and exposure to global government and corporate bonds with hedging to euro.

If you really want to tilt to Germany you can add 10% DAX ETF.
imperia
Posts: 224
Joined: Tue Feb 21, 2017 5:31 am

Re: My portfolio, investing from Germany

Post by imperia »

SPDR ACWI IMI ucits ETF has TER 0.4, and AUM is just 72million.
It covers appr. 8.500 securities across large, mid and small cap size segments and consists of 46 country indices, of which approximately half are developed and half are emerging markets.

Too much exposure to emerging markets.

If you suggest just one etf than
Vanguard FTSE All- World UCITS ETF TER 0.25 is best option.


IWDA TER 0.2, and EIMI TER 0.18 is most common portfolio
TM90
Posts: 132
Joined: Mon Mar 06, 2017 1:13 am

Re: My portfolio, investing from Germany

Post by TM90 »

Msci world + msci emerging markets + msci small cap:
Europe: 21.68
America: 58.19
Asia: 20.12

Msci ACWI IMI:
Europe: 21.45
America: 57.79
Asia: 20.76

Vanguard FTSE All World:
Europe: 22.11
America: 56.11
Asia: 21.78

No big differences, but lower TER is better I agree. The only thing is the Vanguard etf doesn't hold small caps so you would have to buy an additional etf for that which results in more transaction costs for adding funds and rebalancing.

Me personally I'm looking for an etf that holds all caps, developed and emerging and with a low TER. If anybody knows such an ETF feel free to post.
Valuethinker
Posts: 49011
Joined: Fri May 11, 2007 11:07 am

Re: My portfolio, investing from Germany

Post by Valuethinker »

rustle wrote: Wed Jun 20, 2018 11:14 am Hi everyone!
been reading on this forum for quite a while, I wanted to show my portfolio and get some ideas or suggestions.

I'm 34, currently live in Germany, though I'm not German (actually Israeli), and I just started my 'real' investing actions a few months ago.
My taxed account is handled with the broker DeGiro, and other than this account I have some tax-relieved accounts in Israel (they will all be saved to my pension), and an apartment in Berlin (bought without financing).

My taxed account looks like this:

41.5% - iShares Core MSCI World UCITS ETF (traded in Germany with ticker EUNL)
16% - ISHARES TECDAX UCITS ETF DE (EXS2)
9.5% - ISHARES CORE DAX UCITS ETF DE (EXS1)
33% - iShares Global AAA-AA Government Bond UCITS ETF (traded in Germany with ticker IS0Z)

Now, some further explanations:
- My accounts in Israel are mostly invested in the S&P 500 (plus some other indexes, all passive investments), other than designated pension bonds issued by the Israeli govt. that guarantee 4.8%/year, inflation protected. So in total, if we calculate how much is invested in stocks vs. bonds it's 77%:23%
- why am I investing in the German market un-proportionally? I earn and spend in Euros, but actually most of my other investments are linked to USD. Even my bonds are linked to USD since I couldn't find a safe ETF in Euros that made sense to me (do you know any? especially accumulating ones). So I wanted some of my investments to be unrelated to USD, and besides, I believe in the German economy and I think it has a potential to beat the world market.
- I didn't invest in emerging markets and small-cap indexes, yet. Not sure if I should or not.
- Other than those accounts, I have an emergency cash fund that should be enough for a long while (a few good months, maybe more)
- Married, no children, yet


Appreciate your time and help :)
You should read your fellow Israeli, Dan Ariely "Predictably Irrational" ;-). Or for that matter Kahneman & Tversky (Michael Lewis' book The Undoing Project, about their friendship, between a frightened Holocaust survivor and a brash Sabra (?) is a good introduction).

The behavioural mistake you are making, and we all make it, is investing on the basis of familiarity- overlooking your own (unrepresentative) personal experience against the wisdom of the market (which, at the margin, incorporates all publicly available information about the prospects of different companies).

(if you follow the completely fruitless debate here between the 100% American stock portfolio (usually "I am comfortable with America and American business practices, and I don't like how xxx country runs things") advocates and the global diversifiers, you see "home country bias" writ large ;-). Living as I do in a country with a noted xenophobia to everyone else as in the newspaper headline "Fog in Channel. Continent cut off" and manifested in a distinct distrust of anything Johnnie Foreigner (yes, there is that expression here;-)) does or is, I find this fairly amusing* ;-) )

You are better to hold a global equity fund, weighted that way, than to overweight Germany. Your labour income is in Germany, your housing equity is in Germany, your current account is in Germany, you really don't want more exposure to Germany than that, plus its weight in world markets.

If you work in technology in Germany, you definitely don't want to overweight German technology stocks (or tech stocks in general). Many of us got caught this way in 2000-03, holding lots of our (tech sector) employer's stock, and even tech funds in our pensions, as the tech index dropped by c. 65-70%.

Other than that, I can find nothing to fault in your portfolio.

Re Emerging Markets

- nice to have, but not essential. Right now, the index is about 40% China and includes a few Chinese companies that have arguably been driven up by the general hype. I'd still rather own Microsoft, Google, Facebook than Tencent and Alibaba (you see, as Ariely says, even when I know my biases, I am powerless to go against them ;-)).

Long run you probably want to be in EM indices, but many first world companies are exposed in their operations to EM - German industrial companies, Nestle, Unilever, HSBC etc. You do already have exposure to those economies.

Re Small Cap

- there's great debate whether this effect is "real" or simply the result of historical stock price data which is not accurate, and does not take into account illiquidity (the big bid-ask spreads on dealing in this shares). In any case it is smaller than since Rolf Banz discovered it in the 1980s.

The Small Cap Value effect seems quite real, but again there's a whole debate as to whether one can feasibly exploit it (given the higher dealing costs of such stocks) and whether it is best explained by behavioural factors (as Kahneman & Thaler might say) or it's actually because they are quite high risk (as Fama & French, who document it, say). Quite possibly a combination of both.

So, again, you are not badly served by leaving it out.

Remember to make a "bet" actually have a meaningful effect on your final portfolio wealth, you need (rule of thumb) 10% of your total portfolio in it. So say 10% SCV 65% global equity index 25% bonds. If you don't feel like taking that risk (of being say down 70% in a crash or bad bear market; of underperforming the broader index by say 20-30% over a decade) then you don't really want to do that.

* recent British follies in this regard remind me of those Coyote Road Runner cartoons where Road Runner is at the end of a wooden plank over a canyon, and Coyote saws the plank, and it's Coyote that then plunges to his doom leaving Road Runner suspended in mid air going "Meep! Meep!" ... Frau Dr. Merkel as Road Runner? ;-).
Topic Author
rustle
Posts: 3
Joined: Wed Jun 20, 2018 10:43 am

Re: My portfolio, investing from Germany

Post by rustle »

Thanks everyone, and thanks @valuethinker for your detailed reply and for pointing my flaws :) Happy to know that, at least, we all make this mistake :D but let's see if I'm strong enough to stop it now.. hopefully I am.
Good point about me working in tech and investing in tech companies, I didn't think about it that way. though I work in a small start-up and don't hold any of its stocks other than the options I got when I joined (which are not tradeable anyway).

Regarding the global bond ETF, I'm not sure if I want to invest in corporate bonds at all, and in low-rated government bonds either. But this ETF being accumulating does give it a benefit I can consider.

Again, thanks y'all
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