My Portfolio Strategy [30 y.o., Bulgaria]: Opinion and Suggestions [Revisited]

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MilitsaCh
Posts: 3
Joined: Sat Feb 08, 2020 11:22 am

My Portfolio Strategy [30 y.o., Bulgaria]: Opinion and Suggestions [Revisited]

Post by MilitsaCh » Sun Feb 09, 2020 5:54 am

Country of Residence: Bulgaria (and I am a Bulgarian).
International Lifestyle: Currently I live in Bulgaria, I don’t have plans moving to another country for now. I do travel in Bulgaria and abroad, however, I have a minimalistic and frugal lifestyle.
Currency: The currency for my investments is EUR. Although my earnings are in USD, I exchange them in EUR as the exchange rate from USD to EUR/BGN is really volatile.
Emergency funds: I do have an emergency fund for like 10-12 months.
Debt: I don’t have any debt, and I never had.
Age: 30
Desired Asset allocation: 100% stocks (Index)
My investor profile: I am a “buy and hold” type of investor. I invest only money I don't need and won’t need in the upcoming 30 years.
NB: I haven’t invested yet in stocks (but I have other investments). My plan is to start with a mid-5-figure portfolio and built from there. [Waiting for Interactive Brokers to verify my account]

Portfolio Plan EUR (acc)
- Vanguard S&P 500 UCITS ETF – 70%
- Vanguard FTSE All-World High Dividend Yield UCITS ETF - 20%
- iShares MSCI Europe Quality Dividend UCITS ETF – 10%

The idea here is to have 70% in S&P and 30% in All-World Emerging and Developed Markets. I am trying to replicate VTI + VXUS strategy for Europeans (all world/global portfolio).

And since I am in no hurry, I don’t plan on holding Bonds and Gold.

- I’ve decided to choose Vanguard over iShares for the first two ETFs. Any thoughts on choosing iShares over Vanguard?
- All my investments will be in EUR, accumulating. Thus, if I don’t find Vanguard S&P and Vanguard All-World ETFs in EUR (acc), I will switch to iShares’ ETFs.
- All ETFs are domiciled in Ireland (or should be traded on the EU regulated exchange). In Bulgaria, we pay 0% taxes on the capital gain when the ETF is bought or sold on the EU regulated exchange.

Questions:
- I’ve decided to choose Vanguard FTSE All-World High Dividend Yield UCITS ETF than Vanguard FTSE All-World UCITS ETF because I like dividends. However, I might be wrong for choosing the High Dividend Yield option (also, if I don't find it in EUR accumulating, I will have to choose iShares).

- I’ve decided to include iShares MSCI Europe Quality Dividend UCITS ETF and experiment with this ETF. I am aware that it is not a good idea to mix MSCI and FTSE, so any thoughts on this decision will be beneficial to my final portfolio.

- Should I postpone a bit my investments in the S&P 500 until the market calm-down (currently, I believe that they are overpriced)?

Other assets I invest in:
- Peer-to-Peer (P2P) investments: Portfolio size mid-5-figure. High-risk investments. Would say that they are even riskier than the stock market. I have quite good ROI of ~10% per year. Also, I like this asset as my investments are quite liquid. This means that I can exit the platforms quickly, without losing the accumulated interest rate.

- Real Estate Crowdfunding investments: Portfolio size: low-5-figure. Similar to P2P investments, however, I own shares of Real Estate assets, where I receive monthly rental income, plus capital growth (of course, in case the RE doesn’t explode again). These are typically 5-year contracts. All investments are in the EU.

- Crypto investments: Portfolio size: low-5-figure. It’s for the sake of seeing where the Crypto is headed. But I do believe in its future.

- Stocks: Portfolio size: really small, experimental. I have invested mainly in FinTech companies (have some shares). I am a big fan of the FinTech industry, and thus I bought some stocks in some start-ups.

I don’t own Real Estate, as a minimalist, I don’t like the idea of owning things. Plus, the current market in Bulgaria is overpriced, with at least 30-40%. Low-interest deposits, low-interest loans, and people got crazy. I think that this won’t end up well.

What else can I share – I don’t go to work, I work on my online businesses (creating multiple streams of income). So depending on my monthly income, will also depend the monthly contribution to my portfolio (I have the cash for the initial investment).

What I like about my investment diversification is that there is a low correlation between the 4 class assets I currently invest in.

Also, I am rebalancing my portfolio monthly based on performance.

Well, that’s it. Let me know what do you think about my portfolio.
Last edited by MilitsaCh on Mon Feb 10, 2020 11:48 am, edited 1 time in total.

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Schlabba
Posts: 526
Joined: Sat May 11, 2019 9:14 am
Location: Netherlands

Re: My Portfolio Strategy [30 y.o., Bulgaria]: Opinion and Suggestions

Post by Schlabba » Sun Feb 09, 2020 3:49 pm

MilitsaCh wrote:
Sun Feb 09, 2020 5:54 am
Country of Residence: Bulgaria (and I am a Bulgarian).
International Lifestyle: Currently I live in Bulgaria, I don’t have plans moving to another country for now. I do travel in Bulgaria and abroad, however, I have a minimalistic and frugal lifestyle.
Currency: The currency for my investments is EUR. Although my earnings are in USD, I exchange them in EUR as the exchange rate from USD to EUR/BGN is really volatile.
Emergency funds: I do have an emergency fund for like 10-12 months.
Debt: I don’t have any debt, and I never had.
Age: 30
Desired Asset allocation: 100% stocks (Index)
My investor profile: I am a “buy and hold” type of investor. I invest only money I don't need and won’t need in the upcoming 30 years.
NB: I haven’t invested yet in stocks (but I have other investments). My plan is to start with a mid-5-figure portfolio and built from there. [Waiting for Interactive Brokers to verify my account]

Portfolio Plan EUR (acc)
- Vanguard S&P 500 UCITS ETF – 70%
- Vanguard FTSE All-World High Dividend Yield UCITS ETF - 20%
- iShares MSCI Europe Quality Dividend UCITS ETF – 10%

The idea here is to have 70% in S&P and 30% in All-World Emerging and Developed Markets. I am trying to replicate VTI + VXUS strategy for Europeans (all world/global portfolio).
Easiest way to do that is just holding the Vanguard FTSE All-World UCITS ETF. A good starting point for your portfolio construction is https://www.bogleheads.org/wiki/EU_investing + https://www.bogleheads.org/wiki/Simple_ ... portfolios

And since I am in no hurry, I don’t plan on holding Bonds and Gold.
You can consider holding some bonds. Its easy to say you won't need the money for the next 30 years, but many expensive experiences in life can pop up at the wrong moment. Think of babies, divorces, lawsuits, unemployment, house downpayment and so on. Maybe it is not an emergency for you, but maybe your parents/siblings/etc have one.
Gold you can safely ignore :happy


- I’ve decided to choose Vanguard over iShares for the first two ETFs. Any thoughts on choosing iShares over Vanguard?
Both iShares and Vanguard are good choices
- All my investments will be in EUR, accumulating. Thus, if I don’t find Vanguard S&P and Vanguard All-World ETFs in EUR (acc), I will switch to iShares’ ETFs.
- All ETFs are domiciled in Ireland (or should be traded on the EU regulated exchange). In Bulgaria, we pay 0% taxes on the capital gain when the ETF is bought or sold on the EU regulated exchange.

Questions:
- I’ve decided to choose Vanguard FTSE All-World High Dividend Yield UCITS ETF than Vanguard FTSE All-World UCITS ETF because I like dividends. However, I might be wrong for choosing the High Dividend Yield option (also, if I don't find it in EUR accumulating, I will have to choose iShares).
Do you have a reason why you want those dividends? Do a google search for something along the lines of "bogleheads total return vs dividend". Many here are for the "total return" approach.

- I’ve decided to include iShares MSCI Europe Quality Dividend UCITS ETF and experiment with this ETF. I am aware that it is not a good idea to mix MSCI and FTSE, so any thoughts on this decision will be beneficial to my final portfolio.
Experimenting with 10% of your portfolio is no problem
- Should I postpone a bit my investments in the S&P 500 until the market calm-down (currently, I believe that they are overpriced)?
Timing the market is impossible. You could just as as well miss out on a lot of money to be made. Simply put it in. If you are not comfortable doing that maybe spread it out over a few months, but don't base it on the market price.

Other assets I invest in:
- Peer-to-Peer (P2P) investments: Portfolio size mid-5-figure. High-risk investments. Would say that they are even riskier than the stock market. I have quite good ROI of ~10% per year. Also, I like this asset as my investments are quite liquid. This means that I can exit the platforms quickly, without losing the accumulated interest rate.

- Real Estate Crowdfunding investments: Portfolio size: low-5-figure. Similar to P2P investments, however, I own shares of Real Estate assets, where I receive monthly rental income, plus capital growth (of course, in case the RE doesn’t explode again). These are typically 5-year contracts. All investments are in the EU.

- Crypto investments: Portfolio size: low-5-figure. It’s for the sake of seeing where the Crypto is headed. But I do believe in its future.

- Stocks: Portfolio size: really small, experimental. I have invested mainly in FinTech companies (have some shares). I am a big fan of the FinTech industry, and thus I bought some stocks in some start-ups.

I don’t own Real Estate, as a minimalist, I don’t like the idea of owning things. Plus, the current market in Bulgaria is overpriced, with at least 30-40%. Low-interest deposits, low-interest loans, and people got crazy. I think that this won’t end up well.

What else can I share – I don’t go to work, I work on my online businesses (creating multiple streams of income). So depending on my monthly income, will also depend the monthly contribution to my portfolio (I have the cash for the initial investment).
You don't need multiple streams of income, just 1 really solid one will be just fine. All money that is spent on some stream of income (like your crypto, P2P and RE crowdfunding) you cannot spend on the stock market. I would only keep those if they are expected to return more than what you are expecting from the stock market.

What I like about my investment diversification is that there is a low correlation between the 4 class assets I currently invest in.

Also, I am rebalancing my portfolio monthly based on performance.

Well, that’s it. Let me know what do you think about my portfolio.
Secretly a dividend investor. Feel free to ask why.

vilpk
Posts: 6
Joined: Mon Feb 10, 2020 7:38 am

Re: My Portfolio Strategy [30 y.o., Bulgaria]: Opinion and Suggestions

Post by vilpk » Mon Feb 10, 2020 7:52 am

Militsa,

Just registered, because of you (I am long time reader of this forum, though). I am Bulgarian too.
You should consider two things - the tax implications of your portfolio (that's of less concern given the current tax rates in Bulgaria) and what's more important - 100% in stocks - are you really sure of that allocation ? Market timing is never an easy task (if possible at all, I am sure for myself I cannot do it), but even 60 stocks/40 bonds appears too risky for me for the time being. I am not trying to advocate anything, but you may consider somehow safer stock/bond allocation. You can have a look at Harry Browne's Permanent Portfolio and some more on http://portfoliocharts.com, too. Bear in mind that markets are volatile as they've always been, and unless you are ready to see 30-40-50% (or who_knows_how_much %) of your money evaporating because of the next BIG thing, you should consider adding bonds (and gold, and etc., up to your preference and risk aversion). Again, bear in mind that I've registered in the forum just because of you :D

Good luck, stay cool and go for an allocation that will make you sleep well,
Vil

Topic Author
MilitsaCh
Posts: 3
Joined: Sat Feb 08, 2020 11:22 am

Re: My Portfolio Strategy [30 y.o., Bulgaria]: Opinion and Suggestions

Post by MilitsaCh » Mon Feb 10, 2020 11:11 am

Thank you both for taking the time to read this thread and care to give your opinion.

Vil, very kind of you to register only to stress out the risk of my portfolio, I highly appreciate it :) The only thing which is for sure is that I am absolutely not sure about having 100% portfolio in equities. But I think that you and Schlabba make a good point on the risk of my portfolio, thus including bonds.
You should consider two things - the tax implications of your portfolio (that's of less concern given the current tax rates in Bulgaria)
From the chosen Indexes below, all are EU domiciled and accumulating, which means that in Bulgaria, we pay 0% taxes capital gain. Did I miss something regarding the taxes in BG in this case? (I've checked this last week)

I do understand that markets are volatile, I've been following the market, but decided to invest first in P2P platforms. Let's say that I can definitely endure a 30-40% in a market drop, I'm not naive that the market will stay bull all the time. But I am sure that I have patience when it comes to investing, and I really put only what I won't need at least in the next 10-20 years. So given the history, when the market drops, I can wait for the recovery (of course, I do understand that it is possible not to recover as it did in Japan, but probably highly unlikely).

I've read what Schlabba recommended and took a look at the portfolios you've mentioned. I've decided to start with a three-fund portfolio I think it is pretty fine for a beginner. I am a big fan of Nassim Taleb essays/books on randomness and market cycles, which make me realize that putting 100% of my portfolio in stocks doesn't protect me at all from the rare event/the black swan.

So here is how I decided to allocate my three-fund portfolio (they are 4, I know;):

1) Equities + Emerging markets - 70% (EUR, accumulating, EU domiciled)
- Vanguard S&P 500 UCITS ETF USD (Acc) EUR /VUAA/ - 40% (or 50%?)
- Vanguard FTSE All-World UCITS ETF USD (Acc) EUR /VWCE/ - 30% (or 20%?)
Aim: to replicate VTI + VXUS strategy for Europeans, buy & hold type of growth.

2) Fixed income - 30% (EUR+USD, accumulating, EU domiciled)
- Vanguard Global Aggregate Bond UCITS ETF EUR Hedged (Acc) EUR /VAGF/ - 20%
- iShares Global Govt Bond UCITS ETF $ Hedged (Acc) USD /SGLU/ - 10% (I earn in USD and my business expenses are mainly in USD, so I think a small portion of my portfolio in USD is OK).
Aim: when babies and some other unexpected events occur and I need some cash, I can rely on this 30%, inflation-protected, so to speak.

These are 4 ETFs and I get that this way the expense ratio of my portfolio is a little bit higher, but it seems doable (seen through the eyes of a beginner, so not sure how doable is in reality:). Also, I am not sure if the bonds I've chosen are optimal in this case. Any suggestions are welcome too. I've chosen the hedged versions for the Bonds. I've read what is the difference, what do you think, which one should I choose?

Also, I wanted to ask one question about the "Base currency, trading currency, and currency of the underlying assets." What's the currency risk when the base currency of the Index is USD, the tracked index is also quoted in USD and I buy the ETF shares in the EUR, as I plan to do so?

As far as I can see, this is exactly the case with Vanguard S&P 500, Vanguard FTSE All-World, and Vanguard Global Aggregate Bd ETF.

Cheers, and thank you!

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BeBH65
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Joined: Sat Jul 04, 2015 7:28 am

Re: My Portfolio Strategy [30 y.o., Bulgaria]: Opinion and Suggestions [Revisited]

Post by BeBH65 » Mon Feb 10, 2020 12:24 pm

It looks like the stocks+bonds are only a quarter or so of your investments - your stable investment (bonds) is "only" 1/10 of your portfolio.
It might be useful tp update your openinig post with the % of each of your investments.
All inverstments together should total 100%.


How are investment taxed in Bulgaria?
- taxation on dividends? also if the are not distributed?
- taxation on capital gains?


FTSE All-World already includes the SP500 stocks, no need to to include these a second time.
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

Topic Author
MilitsaCh
Posts: 3
Joined: Sat Feb 08, 2020 11:22 am

Re: My Portfolio Strategy [30 y.o., Bulgaria]: Opinion and Suggestions [Revisited]

Post by MilitsaCh » Mon Feb 10, 2020 12:56 pm

It looks like the stocks+bonds are only a quarter or so of your investments - your stable investment (bonds) is "only" 1/10 of your portfolio.
It might be useful tp update your openinig post with the % of each of your investments.
All inverstments together should total 100%.
Hi BeBH65, are you talking about the whole portfolio - P2P, RE Crowdfunding, Crypto, so on?
Anyway, in the post above I've decided to invest 70% in stocks and 30% in bonds, a total of a mid-five figure sum (as a start, I will be contributing monthly, depending on my business performance). All other investments mentioned in the opening post will remain as they are (for now).

How are investment taxed in Bulgaria?
- taxation on dividends? also if the are not distributed?
- taxation on capital gains?
So, I have already mentioned that I will invest only in ETFs domiciled in Europe, accumulating, so I don't have to pay any taxes.

FTSE All-World already includes the SP500 stocks, no need to to include these a second time.
Thanks, I know. However, I want a bigger exposure to the US market, thus adding the S&P. Could be wrong by taking this decision, I guess.

vilpk
Posts: 6
Joined: Mon Feb 10, 2020 7:38 am

Re: My Portfolio Strategy [30 y.o., Bulgaria]: Opinion and Suggestions [Revisited]

Post by vilpk » Mon Feb 10, 2020 4:01 pm

Militsa,

2nd post here :oops:
Regarding taxation (in short) - no taxes are due if ETFs are bought on regulated EU stock markets (note that domicile is slightly different thingie). If not - 10%, if you have dividend distributions - 5% (as you say in accumulating ETFs - dividends are 'reinvested', so no taxes here). As you know, Switzerland is not part of EU => SIX trades are taxed (they also have stamp duties and other home taxes as well, so beginners better avoid it...). That leave you the following viable options - Xetra and Euronexts (Paris and Amsterdam mainly). I would not buy ETFs from London SE, given the lack of clarity on how this would be regulated in the future in the context of our laws.

I would not dare to be arrogant saying at the end its your portfolio, and its only purpose should be to make you reach your financial goals. It might be only me staying on the conservative side. I know people on this forum does not like gold as asset to invest in, and many would start complaining, but as rather conservative starter I would think of (just an example) - 40% IQQO (iShares MSCI World Minimum Volatility), 40% DBZB (Xtrackers II Global Gov Bond EUR hedged), 20% GBSE (WisdomTree EUR Daily hedged physical gold) .. by the way first one (IQQO) is considered smart-beta ETF and many people here does not like smart beta-s too .. I will repeat what you might have already seen on many places - do your due diligence and never ever trust forum guys blindly .... :D

vilpk
Posts: 6
Joined: Mon Feb 10, 2020 7:38 am

Re: My Portfolio Strategy [30 y.o., Bulgaria]: Opinion and Suggestions [Revisited]

Post by vilpk » Mon Feb 10, 2020 4:29 pm

> What's the currency risk when the base currency of the Index is USD, the tracked index is also quoted in USD and I buy the ETF shares in the EUR,

In short, when you invest in ETF that has underlying securities denominated in EUR, you are going EUR-long. If you are buying non-hedged ETF following S&P500, MSCI USA, or some of the Russels you are going USD-long. Trade currency does not matter - it is the trade currency at the end. If you go for some of those US-tracking ETFs that are EUR-hedged, you are going again EUR-long. There is no definitive answer which one is better, given we do not know what the future will bring. Its widely circulating advice to have the investments done in the currency you are spending at home. Some diversification would not harm, too. Good exchange rates you can find in Paysera (Transferwise are not that good, but it might be worth to check the FX rates at your broker too).

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