Simple portfolio for beginning European investor

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michael.liptak
Posts: 1
Joined: Wed Mar 13, 2019 11:49 am

Simple portfolio for beginning European investor

Post by michael.liptak » Wed Mar 13, 2019 12:16 pm

Hello, I'm 33yo beginning european investor (Slovakia, EU, home currency EUR). After 6 months of investing, my portofolio is only a few thousand dollars small at the moment:

- 33% iShares S&P500 EUR Hedged UCITS ETF (IUSE) - accumulating, TER 0,20%
- 47% Vanguard S&P500 ETF (VUSA) - distributing, TER 0,07%
- 20% Cash (emergency fund)

I consider buying VUSA (Dist) a mistake, because stocks are in EUR, but dividends are paid in USD, and according to our tax law, I have to pay 7% tax from dividends, but if I hold accumulating fund for over a year and then sold it, I would not pay any taxes. So I plan to sell VUSA (after a year) and go for IUSE only.

My plan si to slowly add bonds, either iShares US Aggregate Bond UCITS ETF EUR Hedged (ticker IUAE) - accumulating, TER 0,30% or iShares USD Treasury Bond 1-3 Year UCITS ETF EUR Hedged (ticker IBTE), TER 0,22%

I have a few questions:
1) For a european investor, what do you think of currency diversification? I'm thinking about holding SP500 stocks both EUR hedged and unhedged, or holding USD cash. Would it be a good idea or not?

2) If I would like to have a simple "3 fund portfolio", which fund should I buy for a Total International Ex-US Stocks? I can't find any equivalent of VXUS. Would it be ok to buy iShares MSCI Europe UCITS ETF (Acc) EUR (ticker IMEA) and iShares Core MSCI Emerging Markets IMI UCITS ETF (ticker EMIM)?

It would look something like this (I tend to weigh on US market a little more, that's why I do not like 2 fund global portofolio):

40% SP500 EUR hedged
15% MSCI Europe
5% Emerging markets
20% US Aggregate Bond EUR Hedged
20% Cash or USD Treasury Bond 1-3 Year EUR Hedged

BTW, my retirement fund is 100% MSCI World.

Any input would be greatly appreciated. Thank you

User avatar
BeBH65
Posts: 1344
Joined: Sat Jul 04, 2015 7:28 am

Re: Simple portfolio for beginning European investor

Post by BeBH65 » Wed Mar 13, 2019 5:44 pm

Welcome to the forum.

Please have a look at the "investing from the EU" page that you can find via the URL in my signature.

Please consider diversification of your equity investing over the whole world, not only the US.
It is is always good to consider and analyse your full portfolio as one, excluding your emergency fund as this is not "investing".

What is the role of bonds in your portfolio? If it is for stability you do want to avoid the volatility of currency fluctuations.
It is often said that the cost of hedging equals the difference in interest rates. Consider a global bond fund that hedged to the euro.
Last edited by BeBH65 on Wed Mar 13, 2019 11:45 pm, edited 1 time in total.
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

andrew99999
Posts: 289
Joined: Fri Jul 13, 2018 8:14 pm

Re: Simple portfolio for beginning European investor

Post by andrew99999 » Wed Mar 13, 2019 8:15 pm

michael.liptak wrote:
Wed Mar 13, 2019 12:16 pm
40% SP500 EUR hedged
15% MSCI Europe
5% Emerging markets
20% US Aggregate Bond EUR Hedged
20% Cash or USD Treasury Bond 1-3 Year EUR Hedged
michael.liptak wrote:
Wed Mar 13, 2019 12:16 pm
I have a few questions:
1) For a european investor, what do you think of currency diversification? I'm thinking about holding SP500 stocks both EUR hedged and unhedged, or holding USD cash. Would it be a good idea or not?
Yes I would want some currency diversification. You want to insure against both upside home currency risk as well as downside home currency risk.
I personally like around 50-70% in home currency, but you can decide what you like.
You already have home currency in 40% bonds and in 15% European equities, so you are already at 55% in home currency.
If you have property and or are earning in Euro then you are already more than enough in European currency.

If you had a lower bond allocation and owned no house, then I can see an argument for a little hedged.

DJN
Posts: 256
Joined: Mon Nov 20, 2017 12:30 am

Re: Simple portfolio for beginning European investor

Post by DJN » Wed Mar 13, 2019 9:30 pm

Hi,
have a look here if you haven't already: https://www.bogleheads.org/wiki/Outline ... _domiciles. The portfolios mentioned in the EU section: https://www.bogleheads.org/wiki/EU_investing are probably the best bet in your situation subject to your local tax position.
I don't hedge my equities but I do hedge my bond etf's. I would prefer to have global equities and global bonds.
good luck,

DJN

User avatar
BeBH65
Posts: 1344
Joined: Sat Jul 04, 2015 7:28 am

Re: Simple portfolio for beginning European investor

Post by BeBH65 » Wed Mar 13, 2019 11:47 pm

There have been a number of threads discussions the merits or drawbacks related to home-bias for (international) investors. Do a search in the forum for them.

Look at the posts referencing the Vanguard research papers, and the posts refering to the articles of forum member Siamond on the Boglehead blog.
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

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