International Lifestyle: Not planning to move anywhere else.
Emergency funds: Three to six months of expenses, but it is generally not part of my asset allocation.
Debt: Only mortgage of 18000 EUR with 1.6% interest rate.
Age: Almost 30
Desired Asset allocation: 70% stocks / 30% bonds
Goal: Retirement and (early) financial independence
Current savings: Will start with a 2500 EUR initial deposit and then continue with 300 EUR per month and gradually increase the amount.
A few months back I came across a blog about investing that introduced me to FIRE, Bogleheads, Mustachianism and other concepts/movements/communities surrounding this whole financial independence and investing thing.
I instantly realized that this type of investing is a perfect fit for my personality and lifestyle.
I've started developing my investment plan (lazy portfolio) by following various advises and rules of thumb seen on wikies, blogs, forums, etc.
- First up was asset allocation. This was easy - bond allocation is equal to my age, I'm almost 30 so 30% of bonds.
- Next up - equity split into local and global. Now this is a little trickier. Since Lithuania's global market share is basically non existent I decided to follow above mentioned blogger's advice and consider the whole Europe as local. The rule of thumb for equity split is 50% global and 50% local (for US), so for Europe I am planning to go for roughly 65% global and 35% local.
- Next - bonds. The rule of thumb is to go all-in with local bonds. However I've seen that general advice floating in the forums is to lean more heavily on global diversification and/or avoid European bonds altogether for a while due to negative yields. So in light of that I've decided to decrease home bias a bit by adding one global bond ETF and go with 35% global and 65% local bond split.
49% iShares Core MSCI World UCITS ETF USD (Acc) (IWDA) (ter 0.20%) (70% of all equities)
14% iShares Core MSCI Europe UCITS ETF EUR (Acc) (IMEA) (ter 0.12%) (20% of all equities)
7% iShares Core MSCI Emerging Markets IMI UCITS ETF (EMIM) (ter 0.18%) (10% of all equities)
16% iShares Core Global Aggregate Bond UCITS ETF EUR Hedged (Acc) (AGGH) (ter 0.10%) (53% of all bonds)
14% Xtrackers Eurozone Government Bond UCITS ETF 1C (DBXN) (ter 0.15%) (47% of all bonds)
All ETFs are accumulating to avoid paying 15% tax on dividends.
1. What do you think about the decision to regard the whole Europe as local/home? What other possible options are there for investors in small countries? I've considered going with all global portfolio but this current setup seems and feels more stable.
2. What do you think about the equity and bond splits into global and local? Do these percentages make sense, especially in regards to home bias?
3. What about the actual portfolio setup? Do you see any viable alternatives to current ETFs?
4. Do you have any other suggestions?
Looking forward to your responses!