[Romania] Trying to build the laziest possible portfolio through Interactive Brokers

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Topic Author
tzighy
Posts: 4
Joined: Fri Jan 07, 2022 8:27 am

[Romania] Trying to build the laziest possible portfolio through Interactive Brokers

Post by tzighy »

I have about 150k USD from proceedings from an individual stock and it's time to divest.
30 years old, stable job with good pay, 0 debt, I own the apartment I live in and my car, no future bumps in my spending beyond inflation. Already have an emergency fund.

I'm planning on not touching this money until retirement (so 25-30 years), and adding a bit each quarter.

I'm thinking about just dumping into something like a 85-90% VT/VTI + 10-15% some bond etf (recommendations?) combo. I have an Interactive Brokers account since it seems like that's the better option for my country.

Is there something I'm missing? Is it really enough that I buy those and chill? The more I tried reading on the wiki, the more confused I got, especially since they're saying that for the size of the holdings I'm looking at i should avoid us-domiciled etfs (so vt/vti gets out? the more I browse those list the more confused I get)

I guess my question is what's the simplest way of setting up a portfolio that is something like this? I'm fine with reading extra materials you through at me, provided I understand them.

Thank you!
TedSwippet
Posts: 4037
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: [Romania] Trying to build the laziest possible portfolio through Interactive Brokers

Post by TedSwippet »

Welcome.
tzighy wrote: Fri Jan 07, 2022 8:47 am Is there something I'm missing? Is it really enough that I buy those and chill? The more I tried reading on the wiki, the more confused I got, especially since they're saying that for the size of the holdings I'm looking at i should avoid us-domiciled etfs (so vt/vti gets out? the more I browse those list the more confused I get)
You are okay to hold US domiciled ETFs up to a maximum of $60k. Beyond that however, you run the risk of confiscatory US estate tax, 26-40% of everything above that $60k, because Romania has no US estate tax treaty.

Romania does however have a good income tax treaty with the US, with a 10% rate on US source dividends. So you might want to consider holding (part of?) your allocation to US stocks in VTI, to make use of that 10% rate, while making sure not to hold more than $60k in US assets. For your non-US stocks and your bonds though, avoid US domiciled ETFs and prefer EU domiciled ones. Outlined in this wiki page.
tzighy wrote: Fri Jan 07, 2022 8:47 am I guess my question is what's the simplest way of setting up a portfolio that is something like this? I'm fine with reading extra materials you through at me, provided I understand them.
If you have not already found it, the simple non-US portfolios wiki page offers several suggestions. The absolute simplest would be a single holding of V80A or V80D, although this is 5-10% more in bonds and less in stock than your stated target of 85-90% stock and 10-15% bonds. For that target, you would need two ETFs.
Topic Author
tzighy
Posts: 4
Joined: Fri Jan 07, 2022 8:27 am

Re: [Romania] Trying to build the laziest possible portfolio through Interactive Brokers

Post by tzighy »

Ah, that's great, thank you! I managed to miss the simple portfolios, which probably could have prevented a bunch of headaches on my part.

Sounds like a mix of VWCE, VTI and AGGH would fit what I'm looking for? (when I search for the tickers, they say vwce is in france, at least on google.ro, or am I looking at something wrong?)

On a side note, what's the boglehead view on holding some money in something like VOO instead of VTI? too far out?

I'm more than happy to hear any other suggestions, I really appreciate you taking your time to help a fellow noob. Thanks!
TedSwippet
Posts: 4037
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: [Romania] Trying to build the laziest possible portfolio through Interactive Brokers

Post by TedSwippet »

tzighy wrote: Fri Jan 07, 2022 11:21 am Sounds like a mix of VWCE, VTI and AGGH would fit what I'm looking for? (when I search for the tickers, they say vwce is in france, at least on google.ro, or am I looking at something wrong?)
VWCE is listed on multiple exchanges, and in multiple currencies. Are you sure about France? (X)FRA is the exchange code for Xetra Frankfurt, which is one of VWCE's listings.

In practice, you would just buy on whichever exchange and in whichever currency is most convenient (and/or cheapest!) for you to access. Not an Interactive Brokers customer, but my understanding is that they offer most major exchanges, so you probably have a decent set of options for buying this and other EU domiciled ETFs.

VTI and VWCE have considerable overlap. That is, some 60% or so of VWCE will be the same stocks as in VTI (or VOO). That can make rebalancing a bit tricky. Unfortunately, there is no convenient EU domiciled ex-US stocks ETF, so if your full US stock allocation fits into $60k and VTI, you would have to use several other non-US domiciled ETFs to cover Europe, Japan, and Pacific ex-Japan. (Also potentially, another for Emerging Markets). Not all that simple.
tzighy wrote: Fri Jan 07, 2022 11:21 am On a side note, what's the boglehead view on holding some money in something like VOO instead of VTI? too far out?
A Google Finance comparison of VOO and VTI across more than two decades shows almost identical performance. Any reason you're asking? Both would be equally problematic for you from the US estate tax perspective.
Topic Author
tzighy
Posts: 4
Joined: Fri Jan 07, 2022 8:27 am

Re: [Romania] Trying to build the laziest possible portfolio through Interactive Brokers

Post by tzighy »

TedSwippet wrote: Fri Jan 07, 2022 11:49 am Are you sure about France? (X)FRA is the exchange code for Xetra Frankfurt, which is one of VWCE's listings.
Well, I guess that just showed how little I know about the markets and why it's a good idea to go as simple as possible. :mrgreen: I just read "FRA" and said "ah, cool, france".
TedSwippet wrote: Fri Jan 07, 2022 11:49 am VTI and VWCE have considerable overlap. That is, some 60% or so of VWCE will be the same stocks as in VTI (or VOO). That can make rebalancing a bit tricky. Unfortunately, there is no convenient EU domiciled ex-US stocks ETF, so if your full US stock allocation fits into $60k and VTI, you would have to use several other non-US domiciled ETFs to cover Europe, Japan, and Pacific ex-Japan. (Also potentially, another for Emerging Markets). Not all that simple.
VWCE it is, thanks!
TedSwippet wrote: Fri Jan 07, 2022 11:49 am A Google Finance comparison of VOO and VTI across more than two decades shows almost identical performance. Any reason you're asking? Both would be equally problematic for you from the US estate tax perspective.
Curiosity, for the most part, I guess I still am simping for the s&p 500 a bit.

I really appreciate your input and help, thank you!
Laurizas
Posts: 337
Joined: Mon Dec 31, 2018 4:44 am
Location: Lithuania

Re: [Romania] Trying to build the laziest possible portfolio through Interactive Brokers

Post by Laurizas »

tzighy wrote: Fri Jan 07, 2022 8:47 am Is there something I'm missing? Is it really enough that I buy those and chill?
If you have carefully written down your investment plan, if you have determined your risk tolerance (your ability, willingness and need to take risk), if you are familiar with market history, if you are familiar with cognitive bias (recency bias, confirmation bias, survivorship bias, loss aversion etc), if you know you should be immune to FOMO and market crashes then I would say you are not missing much, it is really enough that you buy those and chill.
Topic Author
tzighy
Posts: 4
Joined: Fri Jan 07, 2022 8:27 am

Re: [Romania] Trying to build the laziest possible portfolio through Interactive Brokers

Post by tzighy »

Laurizas wrote: Sat Jan 08, 2022 11:10 am If you have carefully written down your investment plan, if you have determined your risk tolerance (your ability, willingness and need to take risk), if you are familiar with market history, if you are familiar with cognitive bias (recency bias, confirmation bias, survivorship bias, loss aversion etc), if you know you should be immune to FOMO and market crashes then I would say you are not missing much, it is really enough that you buy those and chill.
It's a bit mind-boggling because it seems a bit too easy, you know? I'm familiar with biases (especially my loss aversion) and I'm decent at steering FOMO away, now I'm in a bit of analysis paralysis mode, along with confusion.

I can't really find data when bonds actually performed really well compared to equities, and I don't understand their role in the three-fund portfolio that has performed so well for bogleheads. I understand this comes from what would probably be a recency bias, but I don't understand the mechanism that would help me shed that away and trust bonds. Is it supposed to just be a sort of "resiliency" component that doesn't gain but doesn't lose, either? The vanguard asset allocation tool said the best fit for me is 80% stocks 20% bonds, and I've read that in 2008 bonds have gained a few % while the stock market plummeted, but I don't understand why.
Later Edit: I guess it's because during a bear market you can use proceeds from bonds to buy stocks on the cheap when rebalancing?

I'm also in a bit of a pickle, since, as usual, most of the info that I can find is strongly related to being an U.S. citizen. The 3-fund portfolio, to my understanding, is comprised of a total u.s. equity fund, an intl (non-us) equity fund and an u.s. bond fund. The "3 fund portfolio" for non-us is comprised of a global bond fund, a world equity fund and an emerging markets fund, from the link that TedSwippet so gracefully provided me with (which has been an invaluable resource for me at the moment).

I'm not sure going with VWCE + AGGH/EUNA would end up with a return comparable to the original 3-fund portfolio. From what I read, the usual split is something like 80/20 or 75/25 in the 3fund portfolio, while it's something like 55/45 in VWCE. I know there's no guarantee that the U.S. is going to remain the same powerhouse it has been for quite a while, but there's none that it will start lagging to the rest of the world, either. How do other people usually decide what their allocations should be regarding US/Non-US?
Laurizas
Posts: 337
Joined: Mon Dec 31, 2018 4:44 am
Location: Lithuania

Re: [Romania] Trying to build the laziest possible portfolio through Interactive Brokers

Post by Laurizas »

tzighy wrote: Sun Jan 09, 2022 11:03 am I can't really find data when bonds actually performed really well compared to equities, and I don't understand their role in the three-fund portfolio that has performed so well for bogleheads. I understand this comes from what would probably be a recency bias, but I don't understand the mechanism that would help me shed that away and trust bonds. Is it supposed to just be a sort of "resiliency" component that doesn't gain but doesn't lose, either?
Explore these links
https://www.bankeronwheels.com/do-i-nee ... portfolio/
https://ofdollarsanddata.com/should-i-invest-in-bonds/
https://ofdollarsanddata.com/why-buy-bonds-now/
https://occaminvesting.co.uk/have-bonds-ever-failed/
https://occaminvesting.co.uk/is-the-sto ... -positive/
tzighy wrote: Sun Jan 09, 2022 11:03 am I'm not sure going with VWCE + AGGH/EUNA would end up with a return comparable to the original 3-fund portfolio. From what I read, the usual split is something like 80/20 or 75/25 in the 3fund portfolio, while it's something like 55/45 in VWCE. I know there's no guarantee that the U.S. is going to remain the same powerhouse it has been for quite a while, but there's none that it will start lagging to the rest of the world, either. How do other people usually decide what their allocations should be regarding US/Non-US?
It is never ending story regarding international vs US stocks
viewtopic.php?f=1&t=364498
viewtopic.php?f=10&t=363193
viewtopic.php?f=10&t=367119
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