Portfolio for belgian (Europe) investor

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TM90
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Re: Portfolio for belgian (Europe) investor

Post by TM90 » Thu Jun 22, 2017 11:25 am

Okay so I've sold my stocks and my actively managed fund. Now I just need to get all my cash into my investments account thanks to you guys (many many thanks) I've come up with this portfolio:

Emergency fund: 3K
Investment fund: 17k

75% equity

iShares Core MSCI World UCITS ETF USD (Acc) (EUR) | IWDA - 75%
SPDR® MSCI World Small Cap UCITS ETF (EUR) | ZPRS - 15%
iShares Core MSCI EM IMI UCITS ETF USD (Acc) (EUR) | EMIM - 10%

25% ¨bonds

iShares € Govt Bond 5-7yr UCITS ETF EUR (Dist) (EUR) | IEGY 100%

+

Pension fund (I can't sell it, if I do I have to pay a 33% fine! But I don't like to add it to my portfolio because I'm not contributing to it anymore and I can't sell it either, when I do add it and I view my portfolio on the Morningstar x-ray feature it's tilted a bit more towards European stock and mid caps which is not bad)

BNP Paribas B Pension Growth 3.5k

I think I have a well diversified portfolio what do you guys think?

Valuethinker
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Re: Portfolio for belgian (Europe) investor

Post by Valuethinker » Thu Jun 22, 2017 11:35 am

TM90 wrote:Okay so I've sold my stocks and my actively managed fund. Now I just need to get all my cash into my investments account thanks to you guys (many many thanks) I've come up with this portfolio:

Emergency fund: 3K
Investment fund: 17k

75% equity

iShares Core MSCI World UCITS ETF USD (Acc) (EUR) | IWDA - 75%
SPDR® MSCI World Small Cap UCITS ETF (EUR) | ZPRS - 15%
iShares Core MSCI EM IMI UCITS ETF USD (Acc) (EUR) | EMIM - 10%

25% ¨bonds

iShares € Govt Bond 5-7yr UCITS ETF EUR (Dist) (EUR) | IEGY 100%

+

Pension fund (I can't sell it, if I do I have to pay a 33% fine! But I don't like to add it to my portfolio because I'm not contributing to it anymore and I can't sell it either, when I do add it and I view my portfolio on the Morningstar x-ray feature it's tilted a bit more towards European stock and mid caps which is not bad)

BNP Paribas B Pension Growth 3.5k

I think I have a well diversified portfolio what do you guys think?
This looks fine. Count the pension fund as equities, assuming that is what it holds.

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BeBH65
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Re: Portfolio for belgian (Europe) investor

Post by BeBH65 » Thu Jun 22, 2017 11:56 am

Hello TM,

Looks like a good portolio
TM90 wrote:Okay so I've sold my stocks and my actively managed fund. Now I just need to get all my cash into my investments account thanks to you guys (many many thanks) I've come up with this portfolio:

Emergency fund: 3KWhere have you saved this? If you look around you will still find a few savings accounts in Belgium with an interest of 0,7% or more; granted with a monthly limit of 500euro, but that would suit you.
Investment fund: 17k
Last edited by BeBH65 on Thu Jun 22, 2017 12:52 pm, edited 1 time in total.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

TM90
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Re: Portfolio for belgian (Europe) investor

Post by TM90 » Thu Jun 22, 2017 12:33 pm

I have it in a low interest savings account maybe a good idea to put it into my kbc start2save account?

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BeBH65
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Re: Portfolio for belgian (Europe) investor

Post by BeBH65 » Thu Jun 22, 2017 12:50 pm

TM90 wrote:I have it in a low interest savings account maybe a good idea to put it into my kbc start2save account?
KBC start2save seems to give 0.4% + 0.1%.
On this siteyou see a number of alternatives.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

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BeBH65
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Re: Portfolio for belgian (Europe) investor

Post by BeBH65 » Thu Jun 22, 2017 12:52 pm

BeBH65 wrote:Hello TM,

Looks like a good portfolio
TM90 wrote:Okay so I've sold my stocks and my actively managed fund. Now I just need to get all my cash into my investments account thanks to you guys (many many thanks) I've come up with this portfolio:

Emergency fund: 3KWhere have you saved this? If you look around you will still find a few savings accounts in Belgium with an interest of 0,7% or more; granted with a monthly limit of 500euro, but that would suit you.
Investment fund: 17k
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

TM90
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Re: Portfolio for belgian (Europe) investor

Post by TM90 » Sun Jun 25, 2017 1:21 pm

TM90 wrote: 25% ¨bonds

iShares € Govt Bond 5-7yr UCITS ETF EUR (Dist) (EUR) | IEGY 100%
Okay I've been researching a bit and this ETF only holds 23(!) positions? When I looked at the holdings of the 3-5yr duration ETF it only has 9(!!!) positions well that does certainly not look like buying the haystack to me.

Need help choosing between these two:

iShares € Aggregate Bond UCITS ETF EUR (Dist) | EUN4 - govt and corp bonds unsure about this because corp bonds are correlated with stocks but has 2000+ positions, average duration: 6,51

iShares Core € Govt Bond UCITS ETF EUR (Dist) (EUR) | IEGA govt bonds, has 315 positions, duration: 7,21

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BeBH65
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Re: Portfolio for belgian (Europe) investor

Post by BeBH65 » Sun Jun 25, 2017 2:16 pm

Hello tm,


Finding a good bond fund for Europeans is indeed not easy; between the low interest rate and the lower quality countries that make up the bulk of the government bonds.

Personally I use iShares € Aggregate Bond UCITS ETF EUR (Dist) IEAG for a good part of the protection portion of my portfolio. I choose IEAG as it seems in some ways similar to the BND fund that many like on this forum. Both contain about 20% corporates, have a similar duration.

Next to that I also have government insured savings accounts (yes little return, not even inflation, but also little downside risk) some old term accounts, other fixed income accounts and old individual bonds.

In previous threads it was also mention that non-us investors could use a global bond fund including us-bonds.

Regards,
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

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nedsaid
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Re: Portfolio for belgian (Europe) investor

Post by nedsaid » Sun Jun 25, 2017 2:54 pm

This is Ned, checking in. It sounds like TM90 has received some really good feedback from European Bogleheads, it is cool that we could help a young investor in Belgium. Hopefully, TM90 is happy with his new mix of investments.
A fool and his money are good for business.

TM90
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Re: Portfolio for belgian (Europe) investor

Post by TM90 » Sun Jun 25, 2017 3:08 pm

Thanks for the fast replies! But BeBH65 isn't volatility higher in that ETF?

Yes Ned I'm quite happy with it I think this is a good portfolio for a Belgian investor. Sometimes I still ponder about choosing this 4 fund portfolio or a simple 2 fund portfolio but returns are almost identical and IMO the 4 fund portfolio is more diversified. Only downside is transaction costs are higher for rebalancing.

Also this afternoon I was researching whether to use the "age in bonds" AA or a static AA. The age in bonds makes more sense to me and I've read some topics on the forum about it but opinions are divided. But I like the glide path idea so I guess I'll stick with that.

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nedsaid
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Re: Portfolio for belgian (Europe) investor

Post by nedsaid » Sun Jun 25, 2017 3:15 pm

My general rule is that I favor broad diversification over narrow diversification. If your 4 fund portfolio is more diversified than your 2 fund portfolio, I would go with the 4 fund portfolio. It is still a simple portfolio, it isn't much of a jump to rebalance a 4 fund portfolio over a 2 fund portfolio. As you have gathered from discussions on other threads, there gets to be a diminishing benefit as you add more and more funds. Probably either portfolio would be just fine.
A fool and his money are good for business.

Valuethinker
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Re: Portfolio for belgian (Europe) investor

Post by Valuethinker » Sun Jun 25, 2017 4:14 pm

TM90 wrote:
TM90 wrote: 25% ¨bonds

iShares € Govt Bond 5-7yr UCITS ETF EUR (Dist) (EUR) | IEGY 100%
Okay I've been researching a bit and this ETF only holds 23(!) positions? When I looked at the holdings of the 3-5yr duration ETF it only has 9(!!!) positions well that does certainly not look like buying the haystack to me.

Need help choosing between these two:

iShares € Aggregate Bond UCITS ETF EUR (Dist) | EUN4 - govt and corp bonds unsure about this because corp bonds are correlated with stocks but has 2000+ positions, average duration: 6,51

iShares Core € Govt Bond UCITS ETF EUR (Dist) (EUR) | IEGA govt bonds, has 315 positions, duration: 7,21
I would tend to go for the latter. It doesn't matter how many corporate bonds you have, if the equity risk shows up, it will show up.

BTW the one above, if they are 23 bonds from low credit risk countries, that's not a big worry. One German government bond is much the same as any other *except for* years to maturity and yield (coupon matters slightly, but not enough to worry about, generally).

TM90
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Re: Portfolio for belgian (Europe) investor

Post by TM90 » Mon Jun 26, 2017 10:24 am

It has been done! I chose the government bond fund for minimum correlation to equities.

Emergency fund: 3K

Investments:
Pension fund: 3.5K
iShares Core MSCI World: 9.9K
iShares Core € Govt Bond: 4.4K
SPDR® MSCI World Small Cap: 2K
iShares Core MSCI EM IMI: 1.3K

Total invested: 21.1K

75% equity / 25% bonds
TER: 0,36%
Regions: Europe 32,79%, America 50,01%, Asia 17,2%

Now let's stay the course, see you in 40 years! :D

TM90
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Re: Portfolio for belgian (Europe) investor

Post by TM90 » Thu Aug 03, 2017 4:44 pm

Hi everybody

Just a quick update on my portfolio (transaction costs are included in returns and are around 1%)

Ishares MSCI World -3.98%
Ishares Euro govt bond -1.40%
Ishares Emerging Markets IMI -2.35%
SPDR MSCI World Small Cap -4.77%

Total return: -3.3%

Pretty suprising to me considering the rise in markets of last month. But I think the exchange rate is doing a lot of harm to my portfolio.

Opinions?

imperia
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Re: Portfolio for belgian (Europe) investor

Post by imperia » Thu Aug 03, 2017 11:54 pm

See you in 40 years.

USD has lost about 10% compared to EURO but in next 40years there will bi many surprises

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BeBH65
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Re: Portfolio for belgian (Europe) investor

Post by BeBH65 » Fri Aug 04, 2017 8:46 am

Hello TM,

The one month performance of the funds is:
Ishares MSCI World -2.24%
Ishares Euro govt bond +0.45% - I think this fund also paid out some dividend
Ishares Emerging Markets IMI +0,22%
SPDR MSCI World Small Cap -2,75%
The exchange rate $/€ changed from 1.13 to above 1.18.

- The World funds are suffering from the sudden exchange rate volatility of its major region ( US >50%) . It is generally expected that in the long term the impact of exchange rates volatility will not be decisive.
- The Emerging Market funds proves its diversification value to balance out the equity.
- The Euro bonds fund provides the stability in Euro that we expect from it.


So the performance that you see is not fully unexpected. Buy & Hold is something to get used to. Look at it as an opportunity to buy at a lower price in the short term.



What I noticed is the 1% transaction costs; this means >200€ on a 20k€ investment, this seems a lot even if one includes taxes on the transactions. For transactions up to 5k€ I would expected a cost of less then 20€ + some taxes.
Is your transaction costs a lot higher?
How many transactions did you execute?
What is your strategy for extra contributions/purchases.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

TM90
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Re: Portfolio for belgian (Europe) investor

Post by TM90 » Tue Aug 08, 2017 8:36 am

My transaction costs:

IWDA:
Transaction cost: 15 euro
Tax: 26,8 euro

Euro bond:
Transaction cost: 15 euro
Tax: 4 euro

EMIM:
Transaction cost: 7,5
Tax: 3,55

Small cap:
Transaction cost: 15 euro
Tax: 5,37 euro

Total: 92,22

So around 0,6% I think I added the drop in the NAV to the transaction costs.

Broker charges 7,5 euro for transactions on Euronext up to 2500 euro. 15 euro on transactions from 2500 up to 70 000 euro. The small cap etf is listed on Xetra and they charge 15 euro for transactions up to 2500 euro.

I rebalance and do transactions annually. So maximum 4 transactions/year.

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BeBH65
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Re: Portfolio for belgian (Europe) investor

Post by BeBH65 » Tue Aug 08, 2017 1:28 pm

TM90 wrote: Broker charges 7,5 euro for transactions on Euronext up to 2500 euro. 15 euro on transactions from 2500 up to 70 000 euro. The small cap etf is listed on Xetra and they charge 15 euro for transactions up to 2500 euro.

I rebalance and do transactions annually. So maximum 4 transactions/year.
ok that corresponds to what I expected.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

ignition
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Re: Portfolio for belgian (Europe) investor

Post by ignition » Wed Aug 16, 2017 4:50 am

I'm also a bit in doubt with the bond part of my portfolio (also Belgian).

What do you guys think about db x-trackers II Global Government Bond UCITS ETF (DR) 1C | DBZB?

-Globally diversified government bond fund hedged to EUR
-TER: 0,25%
-Yield: 1,03%
-Duration: 7,81 years
-Credit rating: 87% is rated A or higher, only 13% to Spain and Italy. 35% to USA
-Fund assets: 670M€
-Domiciled in Luxembourg
-Direct replication (optimized sampling)

TM90
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Re: Portfolio for belgian (Europe) investor

Post by TM90 » Sun Apr 15, 2018 1:50 pm

Dear Bogleheads I have some questions,

Lately I've been reading about and researching the slice and dice portfolios by Rick Ferri, David Swensen and Merriman.

My current portfolio still is 75/25 stocks and bonds in the following allocation:

Msci world IWDA 56,25%
Emerging markets EMIM 7,5%
World small cap ZPRS 11,25%
European government bonds IEGA 25%

So as I was reading I noticed a lot of these "model portfolios" include an allocation to REIT and small cap value stocks. Research suggests these asset classes have outperformed so I am wondering if it is worth it to add them to my portfolio? It certainly isn't more work for me to rebalance so that's not an issue.

My second question is about TIPS, these were also included in a lot of portfolios so should I add them? What about a small allocation to corporate high yield bonds? Should they be global TIPS and high yield hedged to euro or European?

My last question is about the whole bond portion of my portfolio. At the moment I hold European government bonds which did quite nicely this year, but recently new ETFs have become available which allow me to invest in global bonds hedged to euro. Should I sell the European government bonds for a more global approach on my next rebalancing?

Valuethinker
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Re: Portfolio for belgian (Europe) investor

Post by Valuethinker » Mon Apr 16, 2018 6:22 am

TM90 wrote:
Sun Apr 15, 2018 1:50 pm
Dear Bogleheads I have some questions,

Lately I've been reading about and researching the slice and dice portfolios by Rick Ferri, David Swensen and Merriman.

My current portfolio still is 75/25 stocks and bonds in the following allocation:

Msci world IWDA 56,25%
Emerging markets EMIM 7,5%
World small cap ZPRS 11,25%
European government bonds IEGA 25%

So as I was reading I noticed a lot of these "model portfolios" include an allocation to REIT and small cap value stocks. Research suggests these asset classes have outperformed so I am wondering if it is worth it to add them to my portfolio? It certainly isn't more work for me to rebalance so that's not an issue.
Given the amounts you are investing every month, probably not.

REIT you can live without. Main advantage is a theoretically higher correlation with inflation than stocks as a whole. Main disadvantage is a small quoted sector, and very volatile (dropped c. 70% in the Crash).

Small Cap Value is good news *but* like all "anomalies" we don't understand why it is there, whether it will persist now that it's so easy for investors to try to track it ("smart Beta" strategies and funds). If you traded your Small Cap for Small Cap Value you *might* outperform in the long run. You'd have to have 10% of total assets to make any difference to outcomes. And you might have 10+ years when that underperforms-- and quite badly. If we rerun the financial crisis, a lot of those companies will simply go broke.
My second question is about TIPS, these were also included in a lot of portfolios so should I add them? What about a small allocation to corporate high yield bonds? Should they be global TIPS and high yield hedged to euro or European?

My last question is about the whole bond portion of my portfolio. At the moment I hold European government bonds which did quite nicely this year, but recently new ETFs have become available which allow me to invest in global bonds hedged to euro. Should I sell the European government bonds for a more global approach on my next rebalancing?
re TIPS. You want inflation linked bonds in your own currency. For theoretical reasons, it doesn't really make sense to do it in someone else's currency. Not all countries issue inflation linked bonds. Some (UK indexed linked gilts) offer truly horrible expected returns for structural reasons (UK pension funds are forced to buy them). So if you found a global inflation linked bond fund, currency hedged to the Euro, that would be OK.

In practice, unless you have at least 12.5% of your bonds in them, it's going to make little or no difference. I would suggest you think again about this when your bonds are up to 40%+ of your total portfolio.

Complexity is the enemy of a good plan.

re Bonds. I prefer global government bonds (Euro hedged) to European ones because some European government bonds are not credit risk free. In particular the largest bond market, the Italian, the bonds are paying significantly higher yields than the German bunds (risk free bonds). Thus, the market is telling you there is a greater than zero (albeit currently small) chance that Italy will default/ reschedule its debt. Spain I would have said was safe and then Catalonia emerged as an issue. There are other Eurozone govt bonds which are not credit risk free.

Thus, by going for a global bond fund, but with no currency risk, you are diversifying on credit risk. OK 20% will be Japan but despite its indebted nature, I actually think Japan is at low risk of default-- they can always print more money to repay their debts (at the cost of higher inflation).

Re High Yield. I do not recommend these. HY bonds are volatile-- if you go back to 2008-09 they followed the stock market down. They have equity risk- -correlation with stock markets. Thus, just when you want your bonds to provide safety and uncorrelated return in your portfolio, they will be correlated with your equity assets. I'd have to get into the detail of how HY bonds are issued & priced, but generally as an investor you take the credit risk (which is a significant risk of default) and don't get all the upside (the bonds are usually callable if the company is upgraded to Investment Grade).

TM90
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Re: Portfolio for belgian (Europe) investor

Post by TM90 » Mon Apr 16, 2018 2:20 pm

Sound advice. Thank you for your reply Valuethinker, very informative. Do you have a slice and dice portfolio?

TroyMcClure
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Re: Portfolio for belgian (Europe) investor

Post by TroyMcClure » Mon Apr 16, 2018 3:22 pm

Valuethinker wrote:
Mon Apr 16, 2018 6:22 am
re Bonds. I prefer global government bonds (Euro hedged)
Another follow-up question: as far as I can see there aren't too many options for this, could you tell us which fund you're using?
Where I live I've seen an iShares (GILE) fund but it's only available on a small marketplace that isn't practical for a couple of reasons.
Other than that there is an Xtrackers Global Inflation-Linked Bond ETF and that's about it.

Valuethinker
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Re: Portfolio for belgian (Europe) investor

Post by Valuethinker » Mon Apr 16, 2018 4:01 pm

TroyMcClure wrote:
Mon Apr 16, 2018 3:22 pm
Valuethinker wrote:
Mon Apr 16, 2018 6:22 am
re Bonds. I prefer global government bonds (Euro hedged)
Another follow-up question: as far as I can see there aren't too many options for this, could you tell us which fund you're using?
Where I live I've seen an iShares (GILE) fund but it's only available on a small marketplace that isn't practical for a couple of reasons.
Other than that there is an Xtrackers Global Inflation-Linked Bond ETF and that's about it.


https://www.ishares.com/uk/individual/e ... dist)-fund

I have access to the Vanguard ones through my pension (some of them).

If in doubt, you could hold 50% US Treasury bonds (EUR hedged) and 50% Eurozone Government bonds. If something horrible happens in the Eurozone, you are not crushingly overexposed.

The other way to go is to invest in an Aggregate Global Bond fund, and accept that you have some credit risk. Over 50% of the fund is govt bonds, so again the risk is not too excessive.

https://www.ishares.com/uk/individual/e ... dist)-fund

not sure if there is a EUR hedged version of same.

Valuethinker
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Re: Portfolio for belgian (Europe) investor

Post by Valuethinker » Mon Apr 16, 2018 4:06 pm

TM90 wrote:
Mon Apr 16, 2018 2:20 pm
Sound advice. Thank you for your reply Valuethinker, very informative. Do you have a slice and dice portfolio?
Only in the sense that I have several different pensions, ISAs, etc. and therefore what is available to me varies depending on which pot it is in.

So I sort of roughly get an asset allocation right and try not to worry too hard about it not being perfect.

The main thing is the bond/ equity split, trying not to take too much risk with the bonds (investment grade only) and to diversify the equities globally.

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