Looking for portfolio advice [Hungary]

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Rest Assured
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Joined: Sat Jun 23, 2018 3:03 am

Looking for portfolio advice [Hungary]

Post by Rest Assured » Sat Jun 23, 2018 3:53 am

Occasional lurker, first-time poster. Grateful that this forum and the wiki exist.

I'm looking to optimize my investments, and am curious what you think.

Emergency funds: 3 months' worth of living expenses, including potential rent (I currently live at home)
Debt: 0
Tax Filing Status: Single
Tax Rate: 34.5% total, including mandatory healthcare contributions etc.
Age: 33
Desired Asset allocation: 70% stocks/30% bonds
Desired International allocation: 100% (By international, I mean U.S.-and-non.U.S. mixed, as I always prefer holding total market over e.g. S&P 500)

Portfolio size: Mid five-figures (converted to USD)

None of my assets are currently in tax-advantaged accounts.

Special considerations:
  • As I am/will be holding assets in EUR/USD I must assume some foreign exchange risk.
  • I distrust the Hungarian government, and therefore don't want to hold too much government securities.
  • I distrust Hungarian companies, too, and therefore don't want to hold any Hungarian stock.
(Both are related to political events of the past.)



Portfolio breakdown:
There are several things that I feel uneasy about:
  • That 48% sitting in cash needs to be put to better use.
  • I am not comfortable investing more in government securities even though the return rate is considered to be quite good. After all, the track record of the Hungarian government is not the best looking back on the past ~65 years...
  • Those mutual funds are actively managed and cost lots each month.
  • I am probably quite tax inefficient at the moment, not taking advantage of tax breaks when investing for 3 or 5 years' time. There are two reasons for that:
    • I don't know if/when I want to buy an apartment. I currently live at home and plan to stay that way for some time to come. I may end up inheriting some part of the apartment at some point, but don't want to base any economical plans on that.
    • I may move abroad in a few years' time and don't want to tie down my money for too long meanwhile. On the other hand, it's not as if I would be forced to forfeit my accounts. I could just wait the prerequisite 3 or 5 years, get the associated tax break, then withdraw my money.
  • I don't feel like planning for retirement at all. My generation will be lucky to see any money returned to us when/if we retire... I am only 33 and 65 is very, very far away, if I will even live that long.
  • My portfolio feels somewhat random, and I'm looking to move to a three- or four-fund portfolio.
About me:
  • I am thrifty in general and the only item I spend lots of money on is food. I am lucky in that I save at least 50% of my income each month.
  • I'm not much of a risk taker, but accept that some small risk can lead to great reward later and can therefore be worth it.
  • I'm not planning to have a family or to get married.
  • I appreciate simplicity, and the three-fund portfolio appeals to me for that reason.
Some questions that I have:
  • What to do with that cash? (I think I should invest it :happy )
  • How can I move closer to a three-fund portfolio approach? Are there any funds or ETFs that you can recommend?
  • Are my current ETF investments appropriate?
  • What to do with those mutual funds? I've decided to sell them, because I looked at the underlying asset allocation and found that there is nothing special about them that I can't do myself without paying fund management fees. Here is the breakdown of allocation:
    • MoneyMaxx Express Total Return Fund: 6% stocks, 90% bonds, 3% cash
    • Money Market Fund: 75% bonds, 25% cash
    • Ózon Annual Capital Protected Fund: 50% bonds, 50% cash
    • BondMaxx Total Return Bond Fund: 97% bonds, 3% cash
  • What is a good asset allocation mix? I've decided on 70% stocks/30% bonds, more or less following the 'your age in bonds' rule and taking into account that while current retirement age is 65 years, it may rise all the way up to 72 years within a few years' time.
  • What is a good domestic/international mix? (I'm uneasy buying Hungarian stocks for the same reason as above...). Based on my peculiarities, I see no reason to hold anything domestic save for some government securities, and will be pursuing 100% international (=not Hungary-specific) investments.
  • I don't hold anything in USD, would that be prudent?

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nedsaid
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Re: Looking for portfolio advice [Hungary]

Post by nedsaid » Wed Jul 04, 2018 11:26 am

I don't know anything about what is available to investors in Hungary or what type of retirement plans are available there.

I think what I would do is make sure that my portfolio is denominated in strong currencies like the US Dollar, the Euro, the UK pound, etc. The easiest way to achieve this would be putting your stock investments in an All-World Stock Index fund or ETF. That alone would get you currency diversification. Your choice of the two stock ETFs looks good to me. My bond investments would probably be in maybe three or so strong currencies.

The expense ratios of the fixed income funds you were considering looked awfully high and not sure I am interested in paying the manager a bonus for beating an index. Problem is the manager is going to be taking some big risks to beat the benchmarks to get that 20% bonus. Bonds are for safety. Take the risk on the equity side of your portfolio.

I was in Hungary back in 2013 and I remembered from back then that the country was soon going to transition to the Euro. Don't know if that is still going to happen or not but that would solve part of your problem.

Best of luck. Hopefully, you will get response from European based Bogleheads who know the investing landscape there.
A fool and his money are good for business.

Rest Assured
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Joined: Sat Jun 23, 2018 3:03 am

Re: Looking for portfolio advice [Hungary]

Post by Rest Assured » Thu Jul 05, 2018 1:45 pm

Thank you. Yes, there have been discussions in the past about Hungary joining the EMU, however I don't think that will happen until at least 2025 if ever.

About EMIM and IWDA. I understand that companies in developed countries are relocating more and more of their operations to low-cost developing countries, and by this mechanism I would have some additional 'EMIM-like' exposure by purchasing IWDA. I'm sure there are wiser splits than 50%-50%.

The following bond ETFs have piqued my interest:

iShares Global Aggregate Bond UCITS ETF (AGGU) - USD hedged, nice coverage of everything, but includes corporate bonds -> risky.
iShares Global Aggregate Bond UCITS ETF (AGGH) - EUR hedged, otherwise the same.
iShares Global Govt Bond UCITS ETF (IGLA) - Government only, nice, but includes 9% BBB rated papers...
iShares Global AAA-AA Govt Bond UCITS ETF (GAAA) - Government only, highly rated papers only. Probably the closest to what I'm looking for, but is not available in EUR.

I'm thinking of holding 10%/10%/10% of that 30% of total in bonds in HUF, EUR and USD. Balancing everything gets difficult...

danielc
Posts: 322
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Re: Looking for portfolio advice [Hungary]

Post by danielc » Thu Jul 05, 2018 2:44 pm

Hello,

I have some specific questions and comments:
Rest Assured wrote:
Sat Jun 23, 2018 3:53 am
  • As I am/will be holding assets in EUR/USD I must assume some foreign exchange risk.
HUF/EUR seems less volatile than HUF/USD (not really a surprise). Maybe keep that in mind.

Rest Assured wrote:
Sat Jun 23, 2018 3:53 am
  • I distrust the Hungarian government, and therefore don't want to hold too much government securities.
  • I distrust Hungarian companies, too, and therefore don't want to hold any Hungarian stock.
Even if you trusted them, Hungary is a small market compared to the rest of the world. You wouldn't be very diversified if you tilted heavily inside Hungary.

Rest Assured wrote:
Sat Jun 23, 2018 3:53 am
  • 48% cash in bank account (don't know what to do with it, bank provides around 0% interest rate, mutual funds are not a great deal here these days and ETFs feel somewhat risky)
Since you live in the EU, maybe you can consider an online bank in another EU country. For example, N26 Savings is in Germany, but they have a website in English, and they are offering a pretty impressive 1.48%. I have never used them, I don't know them, but here's one review and here is another.

Rest Assured wrote:
Sat Jun 23, 2018 3:53 am
That looks like a very heavy tilt toward emerging markets. EM is 10% of the world's equity and you have it set to 50%.

Rest Assured wrote:
Sat Jun 23, 2018 3:53 am
Those look like pretty high fees. I think you can do better. I think I would look at that N26 Savings account as an alternative for money market, and I would consider one of the fixed income ETFs from iShares to replace the Total Bond mutual fund. Though honestly, I couldn't find any European bonds that looked interesting.

Rest Assured wrote:
Sat Jun 23, 2018 3:53 am
There are several things that I feel uneasy about:
  • That 48% sitting in cash needs to be put to better use.
  • I am not comfortable investing more in government securities even though the return rate is considered to be quite good. After all, the track record of the Hungarian government is not the best looking back on the past ~65 years...
  • Those mutual funds are actively managed and cost lots each month.
I agree. In terms of fixed income, the best I've been able to find is that N26 Savings account. If you can get that, it looks pretty good. But other than that, while there are several European bond ETFs (e.g. EXHB, EXHC, and EXHD track German bonds of various maturities) the yields look pretty low.


Rest Assured wrote:
Sat Jun 23, 2018 3:53 am
  • I may move abroad in a few years' time and don't want to tie down my money for too long meanwhile. On the other hand, it's not as if I would be forced to forfeit my accounts. I could just wait the prerequisite 3 or 5 years, get the associated tax break, then withdraw my money.
Staying at home is reasonable and very cheap. You're not going to make any money by buying an apartment.

Rest Assured wrote:
Sat Jun 23, 2018 3:53 am
  • I don't feel like planning for retirement at all. My generation will be lucky to see any money returned to us when/if we retire... I am only 33 and 65 is very, very far away, if I will even live that long.
  • My portfolio feels somewhat random, and I'm looking to move to a three- or four-fund portfolio.
Only 33? You are more than half-way to 65. I do recommend you invest for retirement as soon as you can. The stock market is very risky, but in a way the risk goes down when the investment horizon is longer. A 10-year bad period is common, but a 30-year bad period is very rare.


Rest Assured wrote:
Sat Jun 23, 2018 3:53 am
Some questions that I have:
  • What to do with that cash? (I think I should invest it :happy )
  • How can I move closer to a three-fund portfolio approach? Are there any funds or ETFs that you can recommend?
  • Are my current ETF investments appropriate?
  • What to do with those mutual funds? I've decided to sell them, because I looked at the underlying asset allocation and found that there is nothing special about them that I can't do myself without paying fund management fees.
Let me know what you think of my comments above. I definitely think that you can simplify your portfolio a lot, and I think that a high-interest online savings account would be a reasonable place to put your cash. I think that a world-cap ETF is an excellent idea, but I think you are tilting toward emerging markets way too much.

Rest Assured wrote:
Sat Jun 23, 2018 3:53 am
  • I don't hold anything in USD, would that be prudent?
Currencies are even less predictable than the market. They are 100% risk and no expected reward. I would not recommend adding currency risk. When I lived in Germany I used an ETF denominated in USD but that was only because it had a much lower expense ratio than the alternatives I had locally.
On compound interest: | "Those who understand it, earn it. Those who don’t, pay it." -- Grt2bOutdoors

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BeBH65
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Re: Looking for portfolio advice [Hungary]

Post by BeBH65 » Thu Jul 05, 2018 2:49 pm

Hello Rest Assured,


Welcome to the forum.
Rest Assured wrote:
Thu Jul 05, 2018 1:45 pm
About EMIM and IWDA. I understand that companies in developed countries are relocating more and more of their operations to low-cost developing countries, and by this mechanism I would have some additional 'EMIM-like' exposure by purchasing IWDA. I'm sure there are wiser splits than 50%-50%.
Emerging Markets is very volatile. MSCI Emerging Markets represent about 10% of the global capitalization. With 50/50 you are really taking a gamble on Emerging Markets.


Rest Assured wrote:
Thu Jul 05, 2018 1:45 pm
The following bond ETFs have piqued my interest:

iShares Global Aggregate Bond UCITS ETF (AGGU) - USD hedged, nice coverage of everything, but includes corporate bonds -> risky.
iShares Global Aggregate Bond UCITS ETF (AGGH) - EUR hedged, otherwise the same.
iShares Global Govt Bond UCITS ETF (IGLA) - Government only, nice, but includes 9% BBB rated papers...
iShares Global AAA-AA Govt Bond UCITS ETF (GAAA) - Government only, highly rated papers only. Probably the closest to what I'm looking for, but is not available in EUR.

I'm thinking of holding 10%/10%/10% of that 30% of total in bonds in HUF, EUR and USD. Balancing everything gets difficult...
Choosing a bond fund is not easy. All of the funds that you mention look ok for you.

Some info that could help you: Many US based Bogleheads use the Vanguard Total Bond (BND) for the stable portion of their portfolio. It also includes a part of corporate bonds and 14% of the bonds are BBB quality (which is still investment grade).

If you look at currency then the trading currency of a fund is important as this might led to currency conversion costs.
However the currency of the underlying assets is most important because this will determine your currency exposure.
If you want exposure to multipel currencies then a global fund (non-hedged) might be what you are looking for.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

danielc
Posts: 322
Joined: Sun Dec 10, 2017 4:48 am

Re: Looking for portfolio advice [Hungary]

Post by danielc » Thu Jul 05, 2018 3:24 pm

Rest Assured wrote:
Thu Jul 05, 2018 1:45 pm
The following bond ETFs have piqued my interest:

iShares Global Aggregate Bond UCITS ETF (AGGU) - USD hedged, nice coverage of everything, but includes corporate bonds -> risky.
iShares Global Aggregate Bond UCITS ETF (AGGH) - EUR hedged, otherwise the same.
iShares Global Govt Bond UCITS ETF (IGLA) - Government only, nice, but includes 9% BBB rated papers...
iShares Global AAA-AA Govt Bond UCITS ETF (GAAA) - Government only, highly rated papers only. Probably the closest to what I'm looking for, but is not available in EUR.
What I like about AGGU and AGGH is the low expense ratio (0.10%); what I dislike about them is that they are US-centric. Conversely, IGLA and GAAA are global (good) but a bit more pricey (0.20%). On balance, if I was in your place, I think would pick global. If you go for US bonds, I think EUR hedge makes sense in Hungary, but I don't really know much about currency hedges.

IMO, a bigger concern for all of them is that they all have a duration of 7-8 years. In general that's ok if you are going to hold them until you retire, but these are not suitable for short-term investment. Basically, every time the interest rates go up/down the value of your ETF will move the other way by a factor of 7 or 8. Lastly, I am concerned that I canot find the yield for the global ones. The US ones have a YTM of 1.5% and 1.0% which is depressingly low; especially for a duration so large. So I would be very reluctant to put my money here. The current yield on 5-year treasuries is 2.7% so I don't understand why a US-treasury ETF with a 7 year duration would have a YTM any lower than that.
On compound interest: | "Those who understand it, earn it. Those who don’t, pay it." -- Grt2bOutdoors

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BeBH65
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Re: Looking for portfolio advice [Hungary]

Post by BeBH65 » Thu Jul 05, 2018 3:46 pm

One other option is iShares Global Aggregate Bond UCITS ETF USD (Dist) | AGGG IE00B3F81409 also with an ER of 0.1%
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

Valuethinker
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Re: Looking for portfolio advice [Hungary]

Post by Valuethinker » Fri Jul 06, 2018 8:34 am

danielc wrote:
Thu Jul 05, 2018 3:24 pm
Rest Assured wrote:
Thu Jul 05, 2018 1:45 pm
The following bond ETFs have piqued my interest:

iShares Global Aggregate Bond UCITS ETF (AGGU) - USD hedged, nice coverage of everything, but includes corporate bonds -> risky.
iShares Global Aggregate Bond UCITS ETF (AGGH) - EUR hedged, otherwise the same.
iShares Global Govt Bond UCITS ETF (IGLA) - Government only, nice, but includes 9% BBB rated papers...
iShares Global AAA-AA Govt Bond UCITS ETF (GAAA) - Government only, highly rated papers only. Probably the closest to what I'm looking for, but is not available in EUR.
What I like about AGGU and AGGH is the low expense ratio (0.10%); what I dislike about them is that they are US-centric. Conversely, IGLA and GAAA are global (good) but a bit more pricey (0.20%). On balance, if I was in your place, I think would pick global. If you go for US bonds, I think EUR hedge makes sense in Hungary, but I don't really know much about currency hedges.

IMO, a bigger concern for all of them is that they all have a duration of 7-8 years. In general that's ok if you are going to hold them until you retire, but these are not suitable for short-term investment. Basically, every time the interest rates go up/down the value of your ETF will move the other way by a factor of 7 or 8. Lastly, I am concerned that I canot find the yield for the global ones. The US ones have a YTM of 1.5% and 1.0% which is depressingly low; especially for a duration so large. So I would be very reluctant to put my money here. The current yield on 5-year treasuries is 2.7% so I don't understand why a US-treasury ETF with a 7 year duration would have a YTM any lower than that.
If the fund is currency hedged the cost of the hedging will be approximately the difference in yield between risk free bonds of the 2 currencies. That is called Covered Interest Parity and it holds pretty much.

If it does not hedge currency it is either a product of heavy weighting towards short term bonds or a peculiarity of the way it is calculated.

silverex
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Re: Looking for portfolio advice [Hungary]

Post by silverex » Sat Jul 07, 2018 1:55 pm

For CDs, you can check out some deposit marketplaces like Raisin to get good offers from other European countries. Beware that you might need to explicitly declare such deposits to your country's taxman.

Rest Assured
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Re: Looking for portfolio advice [Hungary]

Post by Rest Assured » Mon Jul 09, 2018 2:44 pm

danielc wrote:
Thu Jul 05, 2018 2:44 pm
Since you live in the EU, maybe you can consider an online bank in another EU country. For example, N26 Savings is in Germany, but they have a website in English, and they are offering a pretty impressive 1.48%. I have never used them, I don't know them, but here's one review and here is another.
1.48% is over 5 years. Not very stellar, and it seems N26 is kind of like a 'bank cloud' - you lend your money to partner banks, so there is extra risk, and well, it seems awfully complicated for such low return.
danielc wrote:
Thu Jul 05, 2018 2:44 pm
I think I would look at that N26 Savings account as an alternative for money market, and I would consider one of the fixed income ETFs from iShares to replace the Total Bond mutual fund. Though honestly, I couldn't find any European bonds that looked interesting.
I have not included my emergency funds in my allocation, so I don't think I need to hold a money market fund.
danielc wrote:
Thu Jul 05, 2018 2:44 pm
But other than that, while there are several European bond ETFs (e.g. EXHB, EXHC, and EXHD track German bonds of various maturities) the yields look pretty low.
I prefer global aggregate bond ETFs over local, European bond ETFs. There is always a risk that the Italian, Spanish etc. economy suddenly implodes, however low.
danielc wrote:
Thu Jul 05, 2018 2:44 pm
I do recommend you invest for retirement as soon as you can.
Understood. However, there is historical precedent which tells me not to use currently tax-advantaged IRA-type accounts.
BeBH65 wrote:
Thu Jul 05, 2018 2:49 pm
If you want exposure to multipel currencies then a global fund (non-hedged) might be what you are looking for.
Duly noted, thanks.
danielc wrote:
Thu Jul 05, 2018 2:44 pm
Basically, every time the interest rates go up/down the value of your ETF will move the other way by a factor of 7 or 8.
Could you please explain this factor further? It seems to be gigantic :happy

danielc
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Re: Looking for portfolio advice [Hungary]

Post by danielc » Mon Jul 09, 2018 4:00 pm

Rest Assured wrote:
Mon Jul 09, 2018 2:44 pm
danielc wrote:
Thu Jul 05, 2018 2:44 pm
Basically, every time the interest rates go up/down the value of your ETF will move the other way by a factor of 7 or 8.
Could you please explain this factor further? It seems to be gigantic :happy
I'll try to explain. You can also see what the wiki has to say about duration. Let me give you an example:

You spend $1000 to buy a bond that will pay $1040 in 1 year. This is a simple 4% return; easy to compute. The day after you buy that bond, interest rates go up to 6%. Now other people can spend $1000 to get $1060 in 1 year. Suppose that you decide you want to sell your bond to someone else for cash right now. Nobody is going to buy your bond for the $1000 that you paid for it. Why would anybody get your measly 4% bond when there are much better 6% bonds in the market right now? No. In order to convince someone to buy your bond, you have to sell it to them for less money than what you paid, so that THEY can get the 6% that is offered in the market right now. This works out to $1040 / 1.06 = $981.13. If you offer your bond at that price, current buyers will be indifferent between buying yours or buying one of the ones being offered by the government.

This is how bonds can lose money. For a safe government bond (e.g. German bond, US bond, etc) a change in interest rates is the ONLY way that a bond can lose money. In this example, the fair market value of the bond went down $18.87. Let's do a little more math:

$18.87 is 1.887% of the original price of the bond. When interest rates went UP by 2%, the value of the bond went DOWN by around ~ 2%. In a similar way, if you repeat the example but instead assume that interest rates go DOWN by 2% you would see the fair market value of the bond go UP by around ~ 2%. In this example, also, the bond payment will come in 1 year -- it has a 1 year maturity.

Now imagine a bond with a 7-year maturity, but let's continue to assume that you just pay $1000 today and at the end of the period you just get all the money back as one lump sum. Let's also continue to assume a 4% yield as in the initial example. Then in 7 years the bond has to pay you back:

$1000 * 1.04^7 = $1315.93

If you spend $1000 on a bond today and it promises to pay $1315.93 in exactly 7 years and nothing in between, this bond has an annualized yield of 4%. Now again, imagine that the day after you buy it, interest rates go up to 6%. In other words, people can now buy a 7-year bond for 6% yield. So now nobody wants to buy your bond unless you sell it at a lower price than you paid for it. The new fair market value of the bond is:


$1315.93 / 1.06^7 = $875.17

Now the market value of the bond went down by $124.83 which is equal to 12.83% of the value that it had before the change in the interest rates. Compare that with my approximation: (7 years) x (2% change) = 14%.

All the examples that I've given so far are called "zero coupon" bonds. A coupon is the regular payment that you get from a bond before the maturity date. Because I wanted to keep the math easy, I assumed that there were no couponds, so therefore it's a zero-coupon bond. But most long-term bonds do have coupons. For example, in the US a treasury note is a multi-year bond that gives you a coupon every year and then you get a final payment at maturity. For bonds that have coupons, the calculation is different, but the principles are the same.

Imagine that the 7-year bond from the example had instead given you a cheque for $40 every year and then $1040 on the final year. Because some of the money arrived earlier than 7 years, the change in the market value of the bond would have been smaller than the 12.83% that we calculated:

$40 in year 1 == $40 / 1.06^1 = $37.74 today.
$40 in year 2 == $40 / 1.06^2 = $35.60 today.
$40 in year 3 == $40 / 1.06^3 = $33.58 today.
$40 in year 4 == $40 / 1.06^4 = $31.68 today.
$40 in year 5 == $40 / 1.06^5 = $29.89 today.
$40 in year 6 == $40 / 1.06^6 = $28.20 today.
$1040 in year 7 == $1040 / 1.06^7 = $691.66 today.

PV = $37.74 + $35.60 + $33.58 + $31.68 + $29.89 + $28.20 + $691.66 = $888.35

PV = Present Value

Notice that the fair market value of the bond changed less because of the couponds. This sensitivity to changes in the interest rate is captured by the concept of duration. Duration is the average time that you have to wait to get your money back, discounted like this:

Duration = (1yr * 37.74 + 2yr * 35.60 + 3yr * 33.58 + 4yr * 31.68 + 5yr * 29.89 + 6yr * 28.20 + 7yr * 691.66) / PV

=> Duration = 6.19 yr

This value once again can be used to estimate the sensitivity of the bond to changes in the interest rate. To verify: 6.19 * 2% = 12.38% which is a much more accurate estimate of how much the value of the bond went down after the change in the interest rates.

I'm sure that I got some details wrong. For example, I'm not really sure what discount rate I should have used to compute the present value and duration of the bond. But what I did here is probably very close to the truth. The key take-away is that the duration is a measure of how volatile the market value of the bond is with respect to changes in the interest rate. Duration also allows you to directly compare two different bonds that have different maturities and different couponds. Because duration is a risk (it's "interest rate risk") all investors demand compensation for that risk. So you will find that bonds (and bond ETFs) with longer durations also have higher yields. If the yield was not higher for longer duration bonds, nobody would buy them.

I hope this makes things clearer.

--------------------------------------
EDIT: Quite coincidentally, I just stumbled on a graphic that I think you'll want to see. The blue line shows the yield (interest rate) of 10-year US Treasury notes for the past two years. The orange line shows the change in price for a 10-year US Treasury note bought on August 2016. Notice how the two cuves move in near-perfect lock-step.

Image
On compound interest: | "Those who understand it, earn it. Those who don’t, pay it." -- Grt2bOutdoors

Rest Assured
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Re: Looking for portfolio advice [Hungary]

Post by Rest Assured » Tue Jul 10, 2018 3:23 pm

Thanks for the detailed explanation, danielc.

I looked at the four bond ETFs mentioned again. They track the following indices:

iShares Global Aggregate Bond UCITS ETF (AGGU) tracks The Bloomberg Barclays Global Aggregate Bond Index
iShares Global Aggregate Bond UCITS ETF (AGGH) tracks The Bloomberg Barclays Global Aggregate Bond Index
iShares Global Govt Bond UCITS ETF (IGLA) tracks FTSE G7 Government Bond Index
iShares Global AAA-AA Govt Bond UCITS ETF (GAAA) tracks Bloomberg Barclays Global Government AAA-AA Capped Bond Index

I was quite surprised that a bond ETF claiming to be global and aggregate tracks a G7 index...

I am thinking hard about whether half the TER makes AGGH worth going for over GAAA.

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galeno
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Re: Looking for portfolio advice [Hungary]

Post by galeno » Tue Jul 10, 2018 7:26 pm

Why don't you keep it simple?

X% VWRL + Y% AGGH. Capitalization weighted for both global equities and global investment grade bonds in 2 ETFs. All denominated in EUROs.

Put "your age in AGGH" and the rest in VWRL. Check your port and rebalance it once every year or every several years.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 3.0%. TER = 0.4%. Port Yield = 2.0%. Term = 35 yr. FI Duration = 6.2 yr. Portfolio survival probability = 100%.

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