[Europe] EUR+USD complicated portfolio for better yield

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bonzai
Posts: 26
Joined: Mon Jun 18, 2018 4:26 am

[Europe] EUR+USD complicated portfolio for better yield

Post by bonzai » Wed Oct 17, 2018 8:48 am

Hi,

I have both EUR and USD (around 50/50) which I want to invest in a hopefully-simple portfolio covering the whole world, 80% equity and 20% bonds.

The situation is that I'm from Europe, and investing in Ireland-domiciled funds is preferable, and - my investable sum is around 50% EUR and 50% USD. I prefer accumulating funds as I avoid having to pay dividend tax this way.

I understand that I can avoid the EUR-USD currency risk by spreading my investment so that any equity/bond that's in the US - uses my USDs, while I can keep my EUR-world(non-US) risk by investing the EUR in the rest.

This means that instead of going for something like FTSE All World or MSCI ACWI - I need to break them down into different sub-funds with appropriate percentages (mimicking the world economy breakdown), and put my USD into US and EUR in the rest.

Also I noticed that the TER of some funds is more expensive depending on whether it's EUR or USD denominated and whether it's a specific fund vs. a global one.

This will probably result in a complex portfolio, that is not very simple to balance - but it should have a lower overall TER.

How do I start with "mimicking the world economy" - e.g. how can I construct an equal of FTSE All World / MSCI ACWI - is there a resource that breaks down the sub-funds I can use and the adequate percentages for each? and is it something I can look at yearly to rebalance and update accordingly?

Does this at all make sense, or is the TER reduction insignificant in comparison to the hassle required to maintain such a complicated portfolio? has anybody done this here and can share their insights?

Opinions please :)
Last edited by bonzai on Fri Oct 19, 2018 5:34 am, edited 1 time in total.

ICH
Posts: 95
Joined: Wed Jun 13, 2018 3:08 am

Re: EUR+USD complicated portfolio for better yield

Post by ICH » Wed Oct 17, 2018 11:52 am

I 've tried it. It was a mistake and I 'm correcting it now...What you are describing goes against simplicity, which is a bogleheads principle for a reason.

1. You are looking at the ERs of the individual ETFs and comparing them with the ER of a global ETF. That's not a correct comparison.
Apart from the ERs, you need to consider the tax drag (TER), increased trading costs, a rebalancing nightmare and the tendency to leave the portfolio drift with the winners. It's a bad choice! I suggest to search the forum for the model portfolios from user DJN and use one of them.

2. For the currency, I would advise to use only one. If you feel better having both EUR & USD, you can buy the same funds in different trading currencies.

User avatar
BeBH65
Posts: 1268
Joined: Sat Jul 04, 2015 7:28 am

Re: EUR+USD complicated portfolio for better yield

Post by BeBH65 » Thu Oct 18, 2018 12:23 am

bonzai wrote:
Wed Oct 17, 2018 8:48 am
I understand that I can avoid the EUR-USD currency risk by spreading my investment so that any equity/bond that's in the US - uses my USDs, while I can keep my EUR-world(non-US) risk by investing the EUR in the rest.
This is a false starting point.

The currency risk is between your home currency and the currency of the underlying asset. This is independend of the currency of the fund.


(If you want to slice and dice you need to determine the regional % that you want and the buy the seperate funds: typically Europe, US, Asia Pacific, Japan and possibly Emerging Market.)

Best to put something like [europe] to attract the international investors to your thread.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

Valuethinker
Posts: 36317
Joined: Fri May 11, 2007 11:07 am

Re: EUR+USD complicated portfolio for better yield

Post by Valuethinker » Thu Oct 18, 2018 5:44 am

bonzai wrote:
Wed Oct 17, 2018 8:48 am
Hi,

I have both EUR and USD (around 50/50) which I want to invest in a hopefully-simple portfolio covering the whole world, 80% equity and 20% bonds.

The situation is that I'm from Europe, and investing in Ireland-domiciled funds is preferable, and - my investable sum is around 50% EUR and 50% USD. I prefer accumulating funds as I avoid having to pay dividend tax this way.

I understand that I can avoid the EUR-USD currency risk by spreading my investment so that any equity/bond that's in the US - uses my USDs, while I can keep my EUR-world(non-US) risk by investing the EUR in the rest.

This means that instead of going for something like FTSE All World or MSCI ACWI - I need to break them down into different sub-funds with appropriate percentages (mimicking the world economy breakdown), and put my USD into US and EUR in the rest.

Also I noticed that the TER of some funds is more expensive depending on whether it's EUR or USD denominated and whether it's a specific fund vs. a global one.

This will probably result in a complex portfolio, that is not very simple to balance - but it should have a lower overall TER.

How do I start with "mimicking the world economy" - e.g. how can I construct an equal of FTSE All World / MSCI ACWI - is there a resource that breaks down the sub-funds I can use and the adequate percentages for each? and is it something I can look at yearly to rebalance and update accordingly?

Does this at all make sense, or is the TER reduction insignificant in comparison to the hassle required to maintain such a complicated portfolio? has anybody done this here and can share their insights?

Opinions please :)
Important understanding

- equity funds - generally does not matter what currency it reports in. It's the currency of the underlying investments that change.

- bond funds (and some equity funds - you have to check) - Currency Hedged - use derivatives (futures, forwards, swaps) in the foreign exchange markets to offset movements in the currency exchange rate.

Thus if you are in a US Treasury Bond fund denominated in Euros, the currency of denomination/ reporting (EUR) is also the currency of economic exposure. EUR moves up and down on the world markets, you will experience that rise or fall - even though the underlying asset, US Treasury bonds, pay in USD.

The hedge is never perfect, it's approximate -- but you can generally ignore the random fluctuations which should be small. It is also true that:

- the consequence of currency hedging is to equate the risk free return into the home currency. Thus for a US Treasury Bond fund hedged into EUR, the returns will be approximately those of the safe European government bond, the Bund (German), whose average yield is close to 0 right now. Any higher yield that you pick up will be as a result of credit risk (for various technical reasons, the market might price US Treasury Bonds as more risky than German ones) and imperfections in the Foreign Exchange hedging.

Most international bond funds hedge currency. Otherwise the volatility in the exchange rate would far outweigh any returns from the bonds.

Most international equity funds do not hedge. The argument is that in the long run it does not matter - stock returns are more volatile than exchange rates most of the time. And, again in the very long run, exchange rate movements should simply reflect the difference in inflation rates between 2 currencies (if the Eurozone has long run higher inflation than USA, the USD should appreciate against the EUR).

Because of the issue with Italian government bonds I encourage Euro zone investors (and others) to diversify out of Eurozone govt bonds. It's OK to have Italy as a small percentage but not a large one.

The issue is that of a Eurozone government bond fund Italy is the largest single category. The yield on Italian government bonds is at a significant premium to German bunds (govt bonds) and thus the market is telling you that there is some risk either Italy will leave the Eurozone (and the debt will be redenominated in New Lire) OR Italy will have a restructuring (a polite word for default) .

It's OK to have a weighting in Italian govt bonds as a small percentage, but over 25% is too much.
Last edited by Valuethinker on Thu Oct 18, 2018 5:59 am, edited 1 time in total.

jminv
Posts: 575
Joined: Tue Jan 02, 2018 10:58 pm

Re: EUR+USD complicated portfolio for better yield

Post by jminv » Thu Oct 18, 2018 5:56 am

bonzai wrote:
Wed Oct 17, 2018 8:48 am
Hi,

I have both EUR and USD (around 50/50) which I want to invest in a hopefully-simple portfolio covering the whole world, 80% equity and 20% bonds.

The situation is that I'm from Europe, and investing in Ireland-domiciled funds is preferable, and - my investable sum is around 50% EUR and 50% USD. I prefer accumulating funds as I avoid having to pay dividend tax this way.

I understand that I can avoid the EUR-USD currency risk by spreading my investment so that any equity/bond that's in the US - uses my USDs, while I can keep my EUR-world(non-US) risk by investing the EUR in the rest.

This means that instead of going for something like FTSE All World or MSCI ACWI - I need to break them down into different sub-funds with appropriate percentages (mimicking the world economy breakdown), and put my USD into US and EUR in the rest.

Also I noticed that the TER of some funds is more expensive depending on whether it's EUR or USD denominated and whether it's a specific fund vs. a global one.

This will probably result in a complex portfolio, that is not very simple to balance - but it should have a lower overall TER.

How do I start with "mimicking the world economy" - e.g. how can I construct an equal of FTSE All World / MSCI ACWI - is there a resource that breaks down the sub-funds I can use and the adequate percentages for each? and is it something I can look at yearly to rebalance and update accordingly?

Does this at all make sense, or is the TER reduction insignificant in comparison to the hassle required to maintain such a complicated portfolio? has anybody done this here and can share their insights?

Opinions please :)
It sounds as if your main concern is currency risk. Why? I ask this particularly because you live in the EU, your expenses are in Euros, and I imagine your income is also in Euros. You shouldn't really care what the Euro does relative to other currencies particularly since your horizon is long-term. If your lifestyle is by and large going to continue to be paid for in euros, then I would keep your money in Euros.

You prefer to accumulate and don't want dividends which I take to mean that besides the tax issues, you don't need the money now or for a long time. I would suggest that this means that you should also only care about currency risks in the long term and shouldn't care about month to month or year to year fluctuations. It could make sense to keep it simple and just invest in Euro denominated ETFs. What you are proposing seems needlessly complicated. While the Euro could depreciate markedly, a resulting loss of value/implosion seems unlikely in the long run even when Italy becomes the next Greece in the next recession. In the short run, it could be unpleasant but then again you don't need the money in the short run. In the long run, the currency issue shouldn't matter since that's more a reflection of inflation and interest rates than you see with the short to medium term fluctuations.

If you're still worried about currency risks, then hedge against it. Hedging has costs and since your need for the funds is very long term, I wouldn't do it since it'll just reduce your long run returns. Since it's the long run you care about and not the short term then it shouldn't matter to you. This includes used hedged bond funds, there's obviously an expense associated with it and those expenses compound over time.

As far as half your investments being in dollars and half in euros, that doesn't really matter except if there are tax consequences. Often people treat converting currencies as something special when the reality is different. If you need dollars in the future, sell euros and buy dollars (wire transfer, atm withdrawal, credit card transactions, debit card transaction, etc I do all of this regularly). If you have ongoing dollar based expenses either sell euros and buy dollars (I do the reverse when I pay my daily expenses in Euros while my assets are in dollars) and/or keep a small account to pay your dollar based expenses (I have a Euro bank account I keep under 10k usd equivalent).

Based on what I see on here and what I see living in the EU, Europeans seem to have very complicated investments with a preference for complexity and some nationalities within the EU seem to be especially negative about what the future holds. Very negative outlook on life. You see this from time to time here. This often leads to complicated schemes to avoid certain risks or a preference for very low return, low risk assets. You see this especially with France. Italy too. On the otherhand, structured products seem particularly popular in the UK for whatever reason and in general they're willing to take on more rik. This isn't directed at you since you are on the right path.
Last edited by jminv on Thu Oct 18, 2018 6:10 am, edited 1 time in total.

DJN
Posts: 144
Joined: Mon Nov 20, 2017 12:30 am

Re: EUR+USD complicated portfolio for better yield

Post by DJN » Thu Oct 18, 2018 6:07 am

Prompted by ICH here are my regular model folios for EU investing as I have found interesting:

SUGGESTED PORTFOLIO 1 - accumulating
BONDS
TICKER: AGGH (iShares) - IE00BDBRDM35
DESCRIPTION: Global aggregate
TER: 0.10%
COMMENTS: Accumulating, hedged

EQUITY
TICKER: SWDA (iShares) - IE00B4L5Y983
DESCRIPTION: Global, developed countries
TER: 0.20%
COMMENT: Accumulating

TICKER: EIMI (iShares) - IE00BKM4GZ66
DESCRIPTION: Emerging mkts
TER: 0.18%
COMMENT: Accumulating

OPTIONAL
TICKER: WSML (iShares) - IE00BF4RFH31
DESCRIPTION: MSCI World Small Cap
TER: 0.35%
COMMENTS: Accumulating

SUGGESTION PORTFOLIO 2 - distributing
BONDS
TICKER: IGLH - (iShares) IE00B3F81K65
DESCRIPTION: World dev, govt
TER: 0.2%
COMMENT: Distributing, hedged (£)

STOCKS
TICKER: VWRD - (Vanguard) IE00B3RBWM25
DESCRIPTION: World dev, em, large, mid
TER: 0.25%
COMMENTS: Distributing

Your choice process will start in my opinion with investigating your local tax position.
good luck
DJN

TedSwippet
Posts: 1865
Joined: Mon Jun 04, 2007 4:19 pm

Re: EUR+USD complicated portfolio for better yield

Post by TedSwippet » Thu Oct 18, 2018 7:15 am

DJN wrote:
Thu Oct 18, 2018 6:07 am
Prompted by ICH here are my regular model folios for EU investing as I have found interesting: ...
You post this regularly. Nothing wrong with that, but could I suggest maybe thinking about making a wiki page out of it. That should save you work in future, provide a place to flesh it out with more details over time, and also perhaps(*) help forum visitors find it readily for themselves.

(*) "Perhaps" because it often seems that new visitors often entirely miss our wiki section. Unfortunately, its link occupies a rather inconspicuous place on the forum front page.

DJN
Posts: 144
Joined: Mon Nov 20, 2017 12:30 am

Re: EUR+USD complicated portfolio for better yield

Post by DJN » Thu Oct 18, 2018 7:18 am

Ok, smart thinking Ted. I’ll work on that one. I’ll have to figure it out first though.

ICH
Posts: 95
Joined: Wed Jun 13, 2018 3:08 am

Re: EUR+USD complicated portfolio for better yield

Post by ICH » Thu Oct 18, 2018 9:56 am

TedSwippet wrote:
Thu Oct 18, 2018 7:15 am
DJN wrote:
Thu Oct 18, 2018 6:07 am
Prompted by ICH here are my regular model folios for EU investing as I have found interesting: ...
You post this regularly. Nothing wrong with that, but could I suggest maybe thinking about making a wiki page out of it. That should save you work in future, provide a place to flesh it out with more details over time, and also perhaps(*) help forum visitors find it readily for themselves.

(*) "Perhaps" because it often seems that new visitors often entirely miss our wiki section. Unfortunately, its link occupies a rather inconspicuous place on the forum front page.
+1

bonzai
Posts: 26
Joined: Mon Jun 18, 2018 4:26 am

Re: EUR+USD complicated portfolio for better yield

Post by bonzai » Fri Oct 19, 2018 4:49 am

ICH wrote:
Wed Oct 17, 2018 11:52 am
I 've tried it. It was a mistake and I 'm correcting it now...What you are describing goes against simplicity, which is a bogleheads principle for a reason.

1. You are looking at the ERs of the individual ETFs and comparing them with the ER of a global ETF. That's not a correct comparison.
Apart from the ERs, you need to consider the tax drag (TER), increased trading costs, a rebalancing nightmare and the tendency to leave the portfolio drift with the winners. It's a bad choice! I suggest to search the forum for the model portfolios from user DJN and use one of them.

2. For the currency, I would advise to use only one. If you feel better having both EUR & USD, you can buy the same funds in different trading currencies.

Thanks for your feedback!

Good point in 1 especially re the trading costs which I didn't consider really - probably those alone would make the complex portfolio equal to or more expensive than that of a simple one.

bonzai
Posts: 26
Joined: Mon Jun 18, 2018 4:26 am

Re: EUR+USD complicated portfolio for better yield

Post by bonzai » Fri Oct 19, 2018 5:34 am

BeBH65 wrote:
Thu Oct 18, 2018 12:23 am
bonzai wrote:
Wed Oct 17, 2018 8:48 am
I understand that I can avoid the EUR-USD currency risk by spreading my investment so that any equity/bond that's in the US - uses my USDs, while I can keep my EUR-world(non-US) risk by investing the EUR in the rest.
This is a false starting point.

The currency risk is between your home currency and the currency of the underlying asset. This is independend of the currency of the fund.


(If you want to slice and dice you need to determine the regional % that you want and the buy the seperate funds: typically Europe, US, Asia Pacific, Japan and possibly Emerging Market.)

Best to put something like [europe] to attract the international investors to your thread.
Thanks, will change the thread name.

Wouldn't you agree that it's more accurate to define the currency risk as actually being between the invested currency (what I use to invest) and that of the underlying asset? Perhaps the definition of 'home currency' is what I mean - it could be defined as "the currency in which you earn money" or "the currency you actually spend in your life".

In my case I already have an equal amount of EUR as USD - I have income from international sources sometimes it's EUR and sometimes USD - so as long as I don't convert them to one another - if I invest them as they are, e.g. USD to US-only equities, and EUR for all besides US - does it not make more sense?

Possibly related question - would the TER of a fund in EUR be generally higher than that in USD? (if both are domiciled in Ireland for example)

bonzai
Posts: 26
Joined: Mon Jun 18, 2018 4:26 am

Re: EUR+USD complicated portfolio for better yield

Post by bonzai » Fri Oct 19, 2018 5:45 am

Valuethinker wrote:
Thu Oct 18, 2018 5:44 am
bonzai wrote:
Wed Oct 17, 2018 8:48 am
Hi,

I have both EUR and USD (around 50/50) which I want to invest in a hopefully-simple portfolio covering the whole world, 80% equity and 20% bonds.

The situation is that I'm from Europe, and investing in Ireland-domiciled funds is preferable, and - my investable sum is around 50% EUR and 50% USD. I prefer accumulating funds as I avoid having to pay dividend tax this way.

I understand that I can avoid the EUR-USD currency risk by spreading my investment so that any equity/bond that's in the US - uses my USDs, while I can keep my EUR-world(non-US) risk by investing the EUR in the rest.

This means that instead of going for something like FTSE All World or MSCI ACWI - I need to break them down into different sub-funds with appropriate percentages (mimicking the world economy breakdown), and put my USD into US and EUR in the rest.

Also I noticed that the TER of some funds is more expensive depending on whether it's EUR or USD denominated and whether it's a specific fund vs. a global one.

This will probably result in a complex portfolio, that is not very simple to balance - but it should have a lower overall TER.

How do I start with "mimicking the world economy" - e.g. how can I construct an equal of FTSE All World / MSCI ACWI - is there a resource that breaks down the sub-funds I can use and the adequate percentages for each? and is it something I can look at yearly to rebalance and update accordingly?

Does this at all make sense, or is the TER reduction insignificant in comparison to the hassle required to maintain such a complicated portfolio? has anybody done this here and can share their insights?

Opinions please :)
Important understanding

- equity funds - generally does not matter what currency it reports in. It's the currency of the underlying investments that change.

- bond funds (and some equity funds - you have to check) - Currency Hedged - use derivatives (futures, forwards, swaps) in the foreign exchange markets to offset movements in the currency exchange rate.

Thus if you are in a US Treasury Bond fund denominated in Euros, the currency of denomination/ reporting (EUR) is also the currency of economic exposure. EUR moves up and down on the world markets, you will experience that rise or fall - even though the underlying asset, US Treasury bonds, pay in USD.

The hedge is never perfect, it's approximate -- but you can generally ignore the random fluctuations which should be small. It is also true that:

- the consequence of currency hedging is to equate the risk free return into the home currency. Thus for a US Treasury Bond fund hedged into EUR, the returns will be approximately those of the safe European government bond, the Bund (German), whose average yield is close to 0 right now. Any higher yield that you pick up will be as a result of credit risk (for various technical reasons, the market might price US Treasury Bonds as more risky than German ones) and imperfections in the Foreign Exchange hedging.

Most international bond funds hedge currency. Otherwise the volatility in the exchange rate would far outweigh any returns from the bonds.

Most international equity funds do not hedge. The argument is that in the long run it does not matter - stock returns are more volatile than exchange rates most of the time. And, again in the very long run, exchange rate movements should simply reflect the difference in inflation rates between 2 currencies (if the Eurozone has long run higher inflation than USA, the USD should appreciate against the EUR).

Because of the issue with Italian government bonds I encourage Euro zone investors (and others) to diversify out of Eurozone govt bonds. It's OK to have Italy as a small percentage but not a large one.

The issue is that of a Eurozone government bond fund Italy is the largest single category. The yield on Italian government bonds is at a significant premium to German bunds (govt bonds) and thus the market is telling you that there is some risk either Italy will leave the Eurozone (and the debt will be redenominated in New Lire) OR Italy will have a restructuring (a polite word for default) .

It's OK to have a weighting in Italian govt bonds as a small percentage, but over 25% is too much.
Very informative as always, thank you!

Okay so if for equity funds the currency does not matter much, I reckon the only reason to choose EUR vs. USD is in case of the funds TER being cheaper in one versus the other.

About bonds - do you think it's best to stick to eurozone (e.g. with diminished percentage of italy) or global bonds?

bonzai
Posts: 26
Joined: Mon Jun 18, 2018 4:26 am

Re: EUR+USD complicated portfolio for better yield

Post by bonzai » Fri Oct 19, 2018 5:50 am

jminv wrote:
Thu Oct 18, 2018 5:56 am
bonzai wrote:
Wed Oct 17, 2018 8:48 am
Hi,

I have both EUR and USD (around 50/50) which I want to invest in a hopefully-simple portfolio covering the whole world, 80% equity and 20% bonds.

The situation is that I'm from Europe, and investing in Ireland-domiciled funds is preferable, and - my investable sum is around 50% EUR and 50% USD. I prefer accumulating funds as I avoid having to pay dividend tax this way.

I understand that I can avoid the EUR-USD currency risk by spreading my investment so that any equity/bond that's in the US - uses my USDs, while I can keep my EUR-world(non-US) risk by investing the EUR in the rest.

This means that instead of going for something like FTSE All World or MSCI ACWI - I need to break them down into different sub-funds with appropriate percentages (mimicking the world economy breakdown), and put my USD into US and EUR in the rest.

Also I noticed that the TER of some funds is more expensive depending on whether it's EUR or USD denominated and whether it's a specific fund vs. a global one.

This will probably result in a complex portfolio, that is not very simple to balance - but it should have a lower overall TER.

How do I start with "mimicking the world economy" - e.g. how can I construct an equal of FTSE All World / MSCI ACWI - is there a resource that breaks down the sub-funds I can use and the adequate percentages for each? and is it something I can look at yearly to rebalance and update accordingly?

Does this at all make sense, or is the TER reduction insignificant in comparison to the hassle required to maintain such a complicated portfolio? has anybody done this here and can share their insights?

Opinions please :)
It sounds as if your main concern is currency risk. Why? I ask this particularly because you live in the EU, your expenses are in Euros, and I imagine your income is also in Euros. You shouldn't really care what the Euro does relative to other currencies particularly since your horizon is long-term. If your lifestyle is by and large going to continue to be paid for in euros, then I would keep your money in Euros.

You prefer to accumulate and don't want dividends which I take to mean that besides the tax issues, you don't need the money now or for a long time. I would suggest that this means that you should also only care about currency risks in the long term and shouldn't care about month to month or year to year fluctuations. It could make sense to keep it simple and just invest in Euro denominated ETFs. What you are proposing seems needlessly complicated. While the Euro could depreciate markedly, a resulting loss of value/implosion seems unlikely in the long run even when Italy becomes the next Greece in the next recession. In the short run, it could be unpleasant but then again you don't need the money in the short run. In the long run, the currency issue shouldn't matter since that's more a reflection of inflation and interest rates than you see with the short to medium term fluctuations.

If you're still worried about currency risks, then hedge against it. Hedging has costs and since your need for the funds is very long term, I wouldn't do it since it'll just reduce your long run returns. Since it's the long run you care about and not the short term then it shouldn't matter to you. This includes used hedged bond funds, there's obviously an expense associated with it and those expenses compound over time.

As far as half your investments being in dollars and half in euros, that doesn't really matter except if there are tax consequences. Often people treat converting currencies as something special when the reality is different. If you need dollars in the future, sell euros and buy dollars (wire transfer, atm withdrawal, credit card transactions, debit card transaction, etc I do all of this regularly). If you have ongoing dollar based expenses either sell euros and buy dollars (I do the reverse when I pay my daily expenses in Euros while my assets are in dollars) and/or keep a small account to pay your dollar based expenses (I have a Euro bank account I keep under 10k usd equivalent).

Based on what I see on here and what I see living in the EU, Europeans seem to have very complicated investments with a preference for complexity and some nationalities within the EU seem to be especially negative about what the future holds. Very negative outlook on life. You see this from time to time here. This often leads to complicated schemes to avoid certain risks or a preference for very low return, low risk assets. You see this especially with France. Italy too. On the otherhand, structured products seem particularly popular in the UK for whatever reason and in general they're willing to take on more rik. This isn't directed at you since you are on the right path.
Thank you!

User avatar
BeBH65
Posts: 1268
Joined: Sat Jul 04, 2015 7:28 am

Re: [Europe] EUR+USD complicated portfolio for better yield

Post by BeBH65 » Fri Oct 19, 2018 5:51 am

Have a look at this wiki page on currencies that was recently added.

I would consider the currency that you "think" in your home currency. If people ask you your "net worth" do you mention an amount in Euro or in USD. That is your reference.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

bonzai
Posts: 26
Joined: Mon Jun 18, 2018 4:26 am

Re: EUR+USD complicated portfolio for better yield

Post by bonzai » Fri Oct 19, 2018 6:08 am

Thank you DJN - this is priceless :)

As you're planning on making this into a wiki page I suggest adding the fund currency and domicile to each entry, as depending on people's tax position they might prefer one fund or another.

Some questions with regards to your portfolio suggestions:
DJN wrote:
Thu Oct 18, 2018 6:07 am
SUGGESTED PORTFOLIO 1 - accumulating
BONDS
TICKER: AGGH (iShares) - IE00BDBRDM35
DESCRIPTION: Global aggregate
TER: 0.10%
COMMENTS: Accumulating, hedged
If the point of the bonds is to offset the risk/volatility of the equities, it should be better achieved, if I understand things i'm slowly learning correctly, by sticking to government only bonds. This global aggregate fund includes corporate bonds which relate to equity performance of the related corporates. Why go for a global aggregate rather than a government-bonds only funds?
DJN wrote:
Thu Oct 18, 2018 6:07 am
EQUITY
TICKER: SWDA (iShares) - IE00B4L5Y983
DESCRIPTION: Global, developed countries
TER: 0.20%
COMMENT: Accumulating

TICKER: EIMI (iShares) - IE00BKM4GZ66
DESCRIPTION: Emerging mkts
TER: 0.18%
COMMENT: Accumulating
SWDA (MSCI World) + EIMI (MSCI EM) = MSCI ACWI - am I correct in assuming that you recommend to combine these two manually because the overall TER is lower than that of an MSCI ACWI fund such as SSAC (0.60%)?

Another question is - what is the optimal way of determining the EM percentage of allocation, if the intention is to mimick the world economy? I saw that 10-11% is generally recommended, but is there a resource I can use for rebalancing where this is specified and calculated?

Thank you for your advice.

bonzai
Posts: 26
Joined: Mon Jun 18, 2018 4:26 am

Re: [Europe] EUR+USD complicated portfolio for better yield

Post by bonzai » Fri Oct 19, 2018 7:44 am

BeBH65 wrote:
Fri Oct 19, 2018 5:51 am
Have a look at this wiki page on currencies that was recently added.

I would consider the currency that you "think" in your home currency. If people ask you your "net worth" do you mention an amount in Euro or in USD. That is your reference.
This is a really good resource - thank you!

I understand it now. I think :)

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