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Portfolio based on [fund expenses] (Europe)

Posted: Fri May 10, 2019 5:24 am
by Spgold
Hello all,

I was looking for a 2 fund portofolio 70% equites - 30% bonds.

For the stock part, I was considering

A)
VANGUARD FTSE All-World UCITS ETF (USD) Distributing (VWRL) IE00B3RBWM25 with cost 0,25% nor of shares 3.201
The region exposure is appr. US 57% - EUROPE 20% - PACIFIC 13,5% (Japan 8% rest 5,5%) - EM 10%

Another solution suggested here as well in order to lower expenses is

B)
ISHARES core world IE00B4L5Y983 cost 0,20% 90% p.e. Total no of stocks 1643
ISHARES core EM IE00BKM4GZ66 cost 0,18% 10% p.e. Total no of stocks 2298

This way the total cost comes down to 0,18% for the stock part of the portfolio with more stocks 3941

Since fees and expenses pay a huge role for a long term portfolio, shouldn’t it be wiser to have the same region exposure as VANGUARD with even lower annual cost by using the following strategy ?

C)
ISHARES SnP 500 core IE0031442068 Cost 0,07% for 57% stocks 500
ISHARES MSCI CORE EUROPE IE00B1YZSC51. Cost 0,12% for 20%. Stocks 443
I Shares MSCI CORE PACIFIC X JAPAN IE00B52MJY50. Cost 0,20% for 6% stocks 148
ISHARES MSCI CORE JAPAN IE00BFM15T99. Cost 0,20% for 8%. Stocks 1287
IShares MSCI CORE EM ISIN IE00BD45KH83. Cost 0,18 for 10%. Stocks 2298

This way total cost for the stock part of the portfolio comes down to 0,11% with a wider exposure and owning even more shares (less risk) 4676

Wouldn’t the option C be better as it gives a wider exposure with less total annual cost ?

Or am I miscalculating something ?

Thank you in advance.

Re: Portfolio based on [fund expenses] (Europe)

Posted: Fri May 10, 2019 7:01 am
by imperia
You have made mistake!

For B) total cost is 0.198%

Portfolio C) is too complicated and your trading cost will bi bigger.

What is your resident country?

Portfolio B) contains accumulating ETFs so maybe you can avoid dividend taxation?

I use portfolio B) because I do not pay dividend tax.

I suggest A) or B)

Re: Portfolio based on [fund expenses] (Europe)

Posted: Wed May 15, 2019 1:56 am
by s8r
Don't choose portfolio C. The reduction in expense ratio isn't worth the complexity.

The expense ratios for portfolios A and B are just a little bit higher than I'm comfortable with, but there aren't really better alternatives. Let's hope costs will come down.

Disclaimer: I have portfolio B.

Re: Portfolio based on [fund expenses] (Europe)

Posted: Wed May 15, 2019 7:48 am
by TroyMcClure
I'll chime in to also discourage you from going for C because of the "administrative burden": you'll need to rebalance, you'll multiply your transactions, since your transactions will be smaller any fees applying to it will be comparatively higher, and your tax returns will also be more complicated.

The choice between A and B is down to the preference on distributing/accumulating funds, and the taxation aspects of it in your own country.

Disclaimer: I have portfolio B (plus a EU fund) and I'm switching to portfolio A.

Re: Portfolio based on [fund expenses] (Europe)

Posted: Wed May 15, 2019 8:11 am
by YRT70
In what country are you?

If you're living in Netherlands there are funds from Northern Trust that have a tax advantage over Vanguard and iShares.

Re: Portfolio based on [fund expenses] (Europe)

Posted: Wed May 15, 2019 8:15 am
by TedSwippet
How much, in absolute terms -- so in real dollars, euros, shekels or whatever -- is the annual saving across these portfolios, versus you time cost in hassle to manage them? My own rule-of-thumb is that if this would pay for a coffee or a meal it's not worth it, but if it would fund a decent vacation then it is.

I have a portfolio to which I am not currently contributing, and which holds 'accumulating' funds, so its trading costs are zero. And because I am newly retired, its balance is large enough that for me, portfolio C is worth the time and effort (the saving genuinely does cover me for a decent vacation every year).

From experience, rebalancing isn't as much of a chore as might be expected. If you buy individual country or region funds in proportion to a global tracker, then if one region outperforms (or underperforms) for you it will also outperform (or underperform) in the global tracker. In practice, over time a fragmented portfolio like C tends automatically to stay reasonably well in agreement with whatever global tracker you initially model it on.

If I were just starting out though, I would go for simplicity every time. That way you minimise the risk of losing focus, getting distracted, or otherwise not keeping up with your investments.

Re: Portfolio based on [fund expenses] (Europe)

Posted: Wed May 15, 2019 9:15 am
by Laurizas
TroyMcClure wrote:
Wed May 15, 2019 7:48 am
Disclaimer: I have portfolio B (plus a EU fund) and I'm switching to portfolio A.
Why?