New Portfolio German ETF using GB, All Season and Balanced Asset Allocation

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JayFried
Posts: 1
Joined: Tue Feb 11, 2020 9:49 am

New Portfolio German ETF using GB, All Season and Balanced Asset Allocation

Post by JayFried » Tue Feb 11, 2020 9:57 am

Hi everyone,

i am a 41 year old dad from germany and want wo design a low risk portfolio still generating nice returns.
My background is the Balanced Asset Allocation Portfolio, the Golden Butterfly and Ray Dalio´s All Season Portfolio.
I am not sure whether i want to try to add extra returns by also using factor models for stock etf.
So far my allocation is planned as follows:
Aktien 11 MSCI World IE00BZ0PKT83 EUNL
7 World Small Cap IE00BCBJG560 ZPRS
7 Em Markets IE00BKM4GZ66 IS3N
10 WorldMomentum IE00BP3QZ825 IS3R
20-30 Jahre Anhleihen USD 15 IE00BSKRJZ44 IS04
20-30 Jahre Anhleihen Eur 15 LU0290357846 DBXG
7-10 Jahre Anleihen EUR 0 IE00B1FZS806 IBCM
Commodities inkl Gold 7,5 DE000A1CXBV8 ETL2
Gold 7,5 DE000A1MECS1 8PSG
LT TIPS EUR. 10 LU1645381689 FRC4
LT TIPS USD 10. LU1459802754

I decided not to use the 7-10 year bonds but instead use the long term tips.
Any thoughts, advice?
Thank you, best regards
Jochen

User avatar
tre3sori
Posts: 48
Joined: Wed Jul 24, 2019 3:13 am

Re: New Portfolio German ETF using GB, All Season and Balanced Asset Allocation

Post by tre3sori » Fri Feb 14, 2020 4:43 pm

German dad answering:

I would simplify the stock part (no factors) and make it cheaper along the lines of for example FTSE Global All-Cap Index:
https://research.ftserussell.com/Analyt ... nual=false

Stocks 35%
Vanguard FTSE Developed World UCITS ETF 27 IE00BKX55T58
Vanguard FTSE Emerging Markets UCITS ETF 4 IE00B3VVMM84
iShares MSCI World Small Cap UCITS ETF 4 IE00BF4RFH31

Bonds 50%
20-30 Jahre Anhleihen USD 15 IE00BSKRJZ44 IS04
20-30 Jahre Anhleihen Eur 15 LU0290357846 DBXG
LT TIPS EUR. 10 LU1645381689 FRC4
LT TIPS USD 10. LU1459802754

A Ray Dalio'ish portfolio like the one you are considering looks very good in backtests after a thirty year drop in rates. Because of the long duration of that bond heavy portfolio I wouldn't consider it low risk though.

I assume your time in the bond market will match the duration of your bond portfolio. If you retire with 65 and you don't need
the money any time before that, a duration of 25 years could be fine. A bond portfolio with a duration of 25 years could lose half of its value
in between in case of a rise of interest rates by 2-3%. If you look at the AUMs of LU0290357846 or LU1645381689 you can see that not many investors dare to apply such a duration risky strategy in times of very low interest rates. In a global aggregate bond fund as a benchmark, investors hold about half of their bond investments in bonds with maturity between 0-5 years.

You could lower your duration risk and give your european gov bonds a quality tilt by using
Lyxor EuroMTS Highest Rated Macro-Weighted Govt Bond 1-3Y (DR) UCITS ETF - Acc 10 LU1829219556
iShares € Govt Bond 20yr Target Duration UCITS ETF 15 IE00BSKRJX20.
iShares $ TIPS 0-5 UCITS ETF 10 IE00BDQYWQ65
iShares $ Treasury Bond 20+yr 15 UCITS ETF
which is more in line with the Golden Butterfly barbell approach. I'm not aware of any € shortterm tips etf.

Commodities 15%
Commodities inkl Gold 7,5 DE000A1CXBV8 ETL2, TER 0.31,
Gold 7,5 DE000A1MECS1 8PSG

L&G All Commodities UCITS ETF DE000A2DQ7P3 TER 0.16 or iShares Diversified Commodity Swap UCITS ETF IE00BDFL4P12 TER 0.19 are cheaper

The essence of your portfolio can probably also be captured by something more simple like
Vanguard FTSE All-World UCITS ETF 35 IE00B3RBWM25
Vanguard Global Aggregate Bond EUR Hedged ETF 50 IE00BG47KB92
Gold 15 DE000A1MECS1

Greetz :dollar :dollar :dollar
Let every man divide his money into three parts, and invest a third in land, a third in business, and a third let him keep by him in reserve. Talmud.

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