Advice for creating 1st Portofolio

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chookity
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Advice for creating 1st Portofolio

Post by chookity »

Hello,

I am starting my first portofolio so I've been conducting some research for the past 2 months and I need a bit of advice. I'll just lay out my final conclusions so you can tell me I am wrong :P :D

I was thinking to invest 1300 $ into some core holdings and afterwards maybe do dollar cost averaging.

Considering the brokers, taxes, instruments, posibilities to invest and whatnotelse (i found out my country doesnt offer the huge freedom of investment that other countries do) available in my country i narrowed my searches to 3 specific ETFS: SCHF, ITOT and VWO.

I was thinking, for the sake of diversifying, to invest in all 3, but then I asked myself if maybe its better to invest in 1 or 2?

Also, I know that SCHF and VWO are tracking FTSE INDEX and although one is Developed and other is Emerging Markets, I was wondering if they won't overlap with some of the shares? I was considering that overlapping isn't good, since you already pay some taxes in one of the funds.

After I figure this out and decide upon having a good core of holdings in my portofolio, maybe in aprox 6 months I'll want to add some other holdings that are a bit riskier - at what should I be looking?

My plan is after I have a good core + some other holdings (i think they are called satelites?) to add another layer of short-medium term investments to the portofolio. So it should look like this: good core of strong growth holdings + some riskier dividend holdings + some short medium-term investments trying my luck.

Any thoughts of this?

Later edit: Investing from Romania

Thank you in advance.
Last edited by Misenplace on Tue Jun 08, 2021 11:30 am, edited 2 times in total.
Reason: fixed spelling in title
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tre3sori
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Re: Adive for creating 1st Portofolio

Post by tre3sori »

My first thought: it is hard to give any advice because you don't mention from which country you are investing.
Let every man divide his money into three parts, and invest a third in land, a third in business, a third let him keep by him in reserve. Talmud | 35% Real Estate, 45% Stocks, 15% Bonds, 4% Gold, 1% Cash
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RickBoglehead
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Re: Adive for creating 1st Portofolio

Post by RickBoglehead »

In your research, you didn't read any of the info in the wiki, did you? Start there.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.
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chookity
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Re: Adive for creating 1st Portofolio

Post by chookity »

i am from romania
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tre3sori
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Re: Adive for creating 1st Portofolio

Post by tre3sori »

chookity wrote: Sun Jun 06, 2021 1:20 pm i am from romania
So read this:
https://www.bogleheads.org/wiki/EU_investing

chookity wrote: Sun Jun 06, 2021 11:03 am ... i narrowed my searches to 3 specific ETFS: SCHF, ITOT and VWO ...
These are US-domiciled ETFs. You should stick to European (Ireland) domiciled ETFs.
Here you can read why: https://www.bogleheads.org/wiki/EU_inve ... and_PRIIPs
Or a more elaborate article: https://www.justetf.com/ch/news/etf/us- ... -etfs.html

I would advise you to make one of the funds mentioned in the wiki your core equity holding (and be done with! simplicity!)
If that kind of investing is too boring for you or you have the urge to "take your chances", limit your satellites (strong growth holdings + some riskier dividend holdings) to a smaller percentage (say 38.2 %) of your total equity holdings. Don't let the satellites become your core!
chookity wrote: Sun Jun 06, 2021 11:03 am some short medium-term investments
Bonds and/or cash come to my mind.

I don't know how old you are (I suppose younger then me) and what financial situation you are in, but these are decent and simple accumulating starter portfolios. They do what they are supposed to do:
https://www.bogleheads.org/wiki/Simple_ ... portfolios

So for example (younger investor with some risk tolerance):
80% SSAC / ISAC / IUSQ - iShares MSCI ACWI UCITS ETF Acc, IE00B6R52259
20% AGGH - iShares Global Aggregate Bd ETF EUR Hedged Acc, IE00BDBRDM35

80% VWRP / VWRA / VWCE - Vanguard FTSE All-World UCITS ETF Acc, IE00BK5BQT80
20% VAGU / VAGF - Vanguard Global Aggregate Bd ETF EUR Hedged Acc, IE00BG47KH54

No professional advise. Just my thoughts!
Let every man divide his money into three parts, and invest a third in land, a third in business, a third let him keep by him in reserve. Talmud | 35% Real Estate, 45% Stocks, 15% Bonds, 4% Gold, 1% Cash
DJN
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Re: Adive for creating 1st Portofolio

Post by DJN »

VNGA80 ETF
Vanguard Life Strategy® 80% Equity UCITS ETF
(EUR) Accumulating
Looks good for a younger person, if you can buy it.
good luck
DJN
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.
Topic Author
chookity
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Re: Adive for creating 1st Portofolio

Post by chookity »

hey, thank you so much for taking your time giving me your opinion.

tre3sori, i haven't gotten to read the links you gave me, but I will later this night.

i am 31 years old, no family yet.

problem is that it seems I can only invest with Etoro in my country - there might be others, but it seems this one is the least expensive.

And Etoro doesn't offer only some of the ETFS.

Is there a problem if I am from Europe and I'm investing into USA stocks?
Also, I have considered bonds (BND etf) for a core holding as well, but it seems there is a drop in etf bonds at the moment and i don't know if it's a good time.
cristianvr
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Re: Adive for creating 1st Portofolio

Post by cristianvr »

Hi,
I'm from Romania too.
As a broker platform, you can use xtb too. (0% commission for ETFs)

My first portfolio is:
76% EUNL
8% IS3N
8% IUSN
8% BVB BET index replication (first 11 from 17 stocks)

Hope it is useful.
DJN
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Re: Adive for creating 1st Portofolio

Post by DJN »

chookity wrote: Mon Jun 07, 2021 3:24 pm Is there a problem if I am from Europe and I'm investing into USA stocks?
You should probably stick to UCITS ETFs domiciled in Ireland. I don't know if Romania has a tax treaty with the US. If not then you may run into difficulties in regards to estate tax and also pay too much dividend tax.
Read the Bogleheads Wiki for non-US investors.
https://www.bogleheads.org/wiki/Outline ... _of_the_US
DJN
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.
TedSwippet
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Re: Adive for creating 1st Portofolio

Post by TedSwippet »

DJN wrote: Tue Jun 08, 2021 12:36 am I don't know if Romania has a tax treaty with the US. If not then you may run into difficulties in regards to estate tax and also pay too much dividend tax.
Romania has an income tax treaty with the US, and is one of just a few countries with a 10% US dividend tax rate, so slightly undercutting the 15% US/Ireland rate for Ireland domiciled ETFs. It has no US estate tax treaty, so US assets above $60k would be at risk.

Taxes aside, EU PRIIPs regulations will make it hard to access US domiciled ETFs from Romania anyway.
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chookity
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Re: Adive for creating 1st Portofolio

Post by chookity »

I can see what you're telling me, I've also read the topic on wiki about US tax traps for non US citizens, but I'm still trying to wrap my head around.

It seems easy to get a hold of any shares. I used Revolut to buy 4-5 shares of HIMAX TECHNOLOGIES out of fun. And I deposited 1500$ into Etoro to start buying the Etfs I mentioned. I stopped because of what I learned here, now i'm a bit confused.

Why would Etoro let you buy US domiciled ETFS? Doesnt it have anything to do with their contract for difference? Wouldn't this be a solution to the problem?
Ed 2
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Re: Adive for creating 1st Portofolio

Post by Ed 2 »

chookity wrote: Sun Jun 06, 2021 11:03 am Hello,



I was thinking, for the sake of diversifying, to invest in all 3, but then I asked myself if maybe its better to invest in 1 or 2?

If you will go with ITOT 50% and IXUS 50% you will do yourself a huge favor. Don’t complicate things where is not meant to be.
Good luck . Ed
"The fund industry doesn't have a lot of heroes, but he (Bogle) is one of them," Russ Kinnel
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Re: Adive for creating 1st Portofolio

Post by TedSwippet »

Ed 2 wrote: Tue Jun 08, 2021 5:38 am
chookity wrote: Sun Jun 06, 2021 11:03 am I was thinking, for the sake of diversifying, to invest in all 3, but then I asked myself if maybe its better to invest in 1 or 2?
If you will go with ITOT 50% and IXUS 50% you will do yourself a huge favor. Don’t complicate things where is not meant to be.
Good luck . Ed
IXUS, ex-US stocks, is particularly tax-inefficient for non-US investors. They will pay US taxes on the dividends paid out by this US domiciled ETF, at rates of 10%-30% (depending on treaty), even though those dividends originate from non-US stocks. Holding non-US stocks in a non-US domiciled ETF completely avoids this deadweight US dividend tax drag. An Ireland domiciled ETF will pass through dividends to investors from non-US stocks with no tax interference, either US or Ireland.

For ITOT, US stocks,, the picture is more nuanced. A non-US investor would pay US tax on the ETF's dividend, at rates of 10%-30% (depending on treaty; Romania has an unusually good 10% rate). If they held the underlying US stocks directly, the US tax drag on dividends would be the same -- so 10% for Romania.

So the optimal tax-efficient course for a Romanian investor is to use a US domiciled ETF for their US stock holding (if not prevented by PRIIPs), and Ireland domiciled ETFs for their non-US stock holdings, and to ensure that total US situs holdings -- that is, the sum of all US stocks and US domiciled ETFs -- does not exceed $60k, so as to avoid any and all interactions with the US's confiscatory estate tax for nonresident aliens.

Clearly though, this optimal course is far from simple. And for all but the largest portfolios, the tax savings for all of this could be quite small in dollar terms, so that something far simpler, for example the suggestions upthread from tresori, will often be preferable.
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Re: Adive for creating 1st Portofolio

Post by Ed 2 »

TedSwippet wrote: Tue Jun 08, 2021 6:02 am
Ed 2 wrote: Tue Jun 08, 2021 5:38 am
chookity wrote: Sun Jun 06, 2021 11:03 am I was thinking, for the sake of diversifying, to invest in all 3, but then I asked myself if maybe its better to invest in 1 or 2?
If you will go with ITOT 50% and IXUS 50% you will do yourself a huge favor. Don’t complicate things where is not meant to be.
Good luck . Ed
IXUS, ex-US stocks, is particularly tax-inefficient for non-US investors. They will pay US taxes on the dividends paid out by this US domiciled ETF, at rates of 10%-30% (depending on treaty), even though those dividends originate from non-US stocks. Holding non-US stocks in a non-US domiciled ETF completely avoids this deadweight US dividend tax drag. An Ireland domiciled ETF will pass through dividends to investors from non-US stocks with no tax interference, either US or Ireland.

For ITOT, US stocks,, the picture is more nuanced. A non-US investor would pay US tax on the ETF's dividend, at rates of 10%-30% (depending on treaty; Romania has an unusually good 10% rate). If they held the underlying US stocks directly, the US tax drag on dividends would be the same -- so 10% for Romania.

So the optimal tax-efficient course for a Romanian investor is to use a US domiciled ETF for their US stock holding (if not prevented by PRIIPs), and Ireland domiciled ETFs for their non-US stock holdings, and to ensure that total US situs holdings -- that is, the sum of all US stocks and US domiciled ETFs -- does not exceed $60k, so as to avoid any and all interactions with the US's confiscatory estate tax for nonresident aliens.

Clearly though, this optimal course is far from simple. And for all but the largest portfolios, the tax savings for all of this could be quite small in dollar terms, so that something far simpler, for example the suggestions upthread from tresori, will often be preferable.
If I had a choice performance or saving taxes I would choose performance first and yet, the portfolio I propose is for long term 20+ years. My entire life goal was to pay more taxes hint- making more money/ more return.
"The fund industry doesn't have a lot of heroes, but he (Bogle) is one of them," Russ Kinnel
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Re: Adive for creating 1st Portofolio

Post by TedSwippet »

Ed 2 wrote: Tue Jun 08, 2021 6:25 am If I had a choice performance or saving taxes I would choose performance first and yet, the portfolio I propose is for long term 20+ years. My entire life goal was to pay more taxes hint- making more money/ more return.
If you like. However, you have missed my point. Note that this is the 'Non-US Investing' forum, and the US tax rules for nonresident aliens are entirely different to those for US investors (specifically, mostly they are worse). The deadweight 10%-30% US tax drag on non-US stocks held within a US domiciled ETF is, for a non-US investor, entirely avoidable by instead holding equivalent Ireland domiciled ETFs. There is no performance/tax trade-off.

Paying more tax because you have a higher return is one thing. Paying unnecessarily more tax on the exact same return is another, and it is dumb. The underlying assets in these ETFs are the same. It is just that choosing a US domiciled one can add damaging and needless US tax drag. (And when assets exceed $60k, also uncompensated US estate tax risk.)
Topic Author
chookity
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Re: Adive for creating 1st Portofolio

Post by chookity »

TedSwippet wrote: Tue Jun 08, 2021 7:03 am
TedSwippet, your insight is very much apreciated. I feel as if at least some of the fog lifted.

So I understand:
* ITOT would indeed be a good investment for me as a romanian investor, but no more tha 60k since Romania has income tax treaty, but no estate tax treaty.
* VEA and SCHF wouldn't be as good since they are US domiciled funds that are investing outside US. A better option would be to find etf variants that do the same investments, but are EU domiciled

Please correct me if I am wrong!

Thanks a lot!
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Re: Adive for creating 1st Portofolio

Post by TedSwippet »

chookity wrote: Tue Jun 08, 2021 8:01 am So I understand:
* ITOT would indeed be a good investment for me as a romanian investor, but no more tha 60k since Romania has income tax treaty, but no estate tax treaty.
* VEA and SCHF wouldn't be as good since they are US domiciled funds that are investing outside US. A better option would be to find etf variants that do the same investments, but are EU domiciled
Right. The US tax drag in an Ireland domiciled ETF holding US stocks is 15%, paid internally by the ETF, but a Romanian investor using a US domiciled ETF holding US stocks could use the US/Romania treaty to get a 10% rate.

Putting some numbers on this ... US stocks produce dividends of around 2%, and you would want to restrict yourself to $60k of US holdings to avoid rapacious and confiscatory US estate tax. So, $60k of US domiciled ETFs holding US stocks produce $1,200/year. The 5% you save in lower tax drag -- 15% US/Ireland rate less your 10% US/Romania rate -- comes to just $60/year.

And this is the upper limit of the benefit, before US estate tax problems start to loom. For smaller holdings, the effect of the reduced tax drag is even less. On your initial $1,300 investment, perhaps 60% US so $780 in ITOT (approximately market cap weight), the 5% lower tax drag of a US domiciled ETF provided by the US/Romania treaty would save you less than $1/year!

At these levels, it is far better to not over-optimise but just do the simple thing and invest through readily available EU domiciled UCITS ETFs. That way you entirely avoid any and all direct contact with US taxes.

As for non-US stocks, as already noted, the 10% dividend tax paid to the US on holdings such as VEA and SCHF is pure deadweight loss.

Finally, investigate how these tax rates interact with your local Romanian tax laws. Sometimes they interact in ways that can change the outcomes enough so that things switch around, but usually not. And even where this happens, the actual benefit is normally small enough that unless your portfolio runs to millions the added complexity is mostly not worth accepting.
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chookity
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Re: Adive for creating 1st Portofolio

Post by chookity »

TedSwippet wrote: Tue Jun 08, 2021 9:40 am
chookity wrote: Tue Jun 08, 2021 8:01 am So I understand:
* ITOT would indeed be a good investment for me as a romanian investor, but no more tha 60k since Romania has income tax treaty, but no estate tax treaty.
* VEA and SCHF wouldn't be as good since they are US domiciled funds that are investing outside US. A better option would be to find etf variants that do the same investments, but are EU domiciled
Right. The US tax drag in an Ireland domiciled ETF holding US stocks is 15%, paid internally by the ETF, but a Romanian investor using a US domiciled ETF holding US stocks could use the US/Romania treaty to get a 10% rate.

Putting some numbers on this ... US stocks produce dividends of around 2%, and you would want to restrict yourself to $60k of US holdings to avoid rapacious and confiscatory US estate tax. So, $60k of US domiciled ETFs holding US stocks produce $1,200/year. The 5% you save in lower tax drag -- 15% US/Ireland rate less your 10% US/Romania rate -- comes to just $60/year.

And this is the upper limit of the benefit, before US estate tax problems start to loom. For smaller holdings, the effect of the reduced tax drag is even less. On your initial $1,300 investment, perhaps 60% US so $780 in ITOT (approximately market cap weight), the 5% lower tax drag of a US domiciled ETF provided by the US/Romania treaty would save you less than $1/year!

At these levels, it is far better to not over-optimise but just do the simple thing and invest through readily available EU domiciled UCITS ETFs. That way you entirely avoid any and all direct contact with US taxes.

As for non-US stocks, as already noted, the 10% dividend tax paid to the US on holdings such as VEA and SCHF is pure deadweight loss.

Finally, investigate how these tax rates interact with your local Romanian tax laws. Sometimes they interact in ways that can change the outcomes enough so that things switch around, but usually not. And even where this happens, the actual benefit is normally small enough that unless your portfolio runs to millions the added complexity is mostly not worth accepting.
So finally I have decided to get all my money out from Etoro (1 day after deposit lol) and put them into XTB, since they offer me European ETFS.

But I still have some questions.

* 1st of all I am wondering if ETFS as Contract for difference would save you any tax?
* 2nd how can I verify what taxes I would pay on income? XTB platform has a lot of ETFS that are .NL, .DE etc and they seem to be domiciled in Amsterdam etc - I wonder if there's a trap here as well? Since all I've heared is "go for the one domiciled in Irleand" - but maybe I got it wrong
* 3rd it seems that European ETFS are just a bit not so atractive? With Fees of 0.10 and 0.12 the smallest. Vanguard, Charles Schwab and Ishares have down to even 0.5. Or maybe I need to look deeper? I've just explored a bit googlen on "best european ETFS".

Thank you!
Genghis
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Re: Advice for creating 1st Portofolio

Post by Genghis »

I’m UK based so I’m offering a perspective based on general information. I’ve no idea of Romanian tax law.

1) I’d avoid CFDs since if you don’t know what you’re doing, you may get burned. In the UK, there’s no difference from a capital gains tax perspective but you don’t pay “stamp duty”, ie a tax on some holdings when you buy. There’s also no dividends of course.
2) the income is what you receive in dividends from the fund. You may be able to apply any 15% withholding tax in the fund against your local taxes, I’ve no idea. N/A in the UK. In the UK there’s also excess reportable income in taxable accounts whereby you get taxed as income on monies retained in the fund. Once again, no idea on the Romanian situation.
3) European ETFs are the best option for you given no estate treaty with US.
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Re: Adive for creating 1st Portofolio

Post by TedSwippet »

chookity wrote: Wed Jun 09, 2021 10:27 am * 1st of all I am wondering if ETFS as Contract for difference would save you any tax?
Avoid. These are for traders, not for investors.
chookity wrote: Wed Jun 09, 2021 10:27 am * 2nd how can I verify what taxes I would pay on income? XTB platform has a lot of ETFS that are .NL, .DE etc and they seem to be domiciled in Amsterdam etc - I wonder if there's a trap here as well? Since all I've heared is "go for the one domiciled in Irleand" - but maybe I got it wrong
The Ireland domiciled ETFs you want are traded on multiple European exchanges, but there are no additional tax implications from the exchange you use. Holding an ETF on a Netherlands exchange does not expose that ETF to NL taxes.

Take VWRD as an example. It trades as VWRL, VWRD, and VGWL on five different exchanges and in four different currencies (EUR, GBP, USD and CHF), but this is all one single ETF, IE00B3RBWM25. The "IE" here is confirmation that the fund is domiciled in Ireland.

If you want this fund, you could choose any of its traded facets. Typically, you would pick the one that is most convenient; that is, the exchange that is easiest for you to access through your broker, and/or the currency that is cheapest for you to access (ideally of course, your home currency; unfortunately few if any ETFs trade directly in RON).
chookity wrote: Wed Jun 09, 2021 10:27 am* 3rd it seems that European ETFS are just a bit not so atractive? With Fees of 0.10 and 0.12 the smallest. Vanguard, Charles Schwab and Ishares have down to even 0.5. Or maybe I need to look deeper? I've just explored a bit googlen on "best european ETFS".
The TERs on UCITS ETFs can sometimes be a bit higher than US ones -- probably the price of a smaller ETF market leading to less competition for customers -- but the simplicity and the tax saving from avoiding US tax on dividends usually more than compensates.
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chookity
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Re: Adive for creating 1st Portofolio

Post by chookity »

TedSwippet wrote: Wed Jun 09, 2021 11:02 am
chookity wrote: Wed Jun 09, 2021 10:27 am * 1st of all I am wondering if ETFS as Contract for difference would save you any tax?
Avoid. These are for traders, not for investors.
chookity wrote: Wed Jun 09, 2021 10:27 am * 2nd how can I verify what taxes I would pay on income? XTB platform has a lot of ETFS that are .NL, .DE etc and they seem to be domiciled in Amsterdam etc - I wonder if there's a trap here as well? Since all I've heared is "go for the one domiciled in Irleand" - but maybe I got it wrong
The Ireland domiciled ETFs you want are traded on multiple European exchanges, but there are no additional tax implications from the exchange you use. Holding an ETF on a Netherlands exchange does not expose that ETF to NL taxes.

Take VWRD as an example. It trades as VWRL, VWRD, and VGWL on five different exchanges and in four different currencies (EUR, GBP, USD and CHF), but this is all one single ETF, IE00B3RBWM25. The "IE" here is confirmation that the fund is domiciled in Ireland.

If you want this fund, you could choose any of its traded facets. Typically, you would pick the one that is most convenient; that is, the exchange that is easiest for you to access through your broker, and/or the currency that is cheapest for you to access (ideally of course, your home currency; unfortunately few if any ETFs trade directly in RON).
chookity wrote: Wed Jun 09, 2021 10:27 am* 3rd it seems that European ETFS are just a bit not so atractive? With Fees of 0.10 and 0.12 the smallest. Vanguard, Charles Schwab and Ishares have down to even 0.5. Or maybe I need to look deeper? I've just explored a bit googlen on "best european ETFS".
The TERs on UCITS ETFs can sometimes be a bit higher than US ones -- probably the price of a smaller ETF market leading to less competition for customers -- but the simplicity and the tax saving from avoiding US tax on dividends usually more than compensates.
Alright, great. Now I just have to make up my mind on which ETFs to buy into... and wait for Etoro to return my money, lol.

Normally I considered a bond ETF as a core holding, but the last reads around the internet made me think twice. The price difference between the actual bond and the bonds etfs is getting bigger, should this be a concern or bond etfs are still a good buy? And I skipped read some articles about ETFs bonds being in a somewhat degrading state. Might that just be smoke and noise?

Side-note - I am thinking only of ETFs because of my small investment, but if you have any different ideas, I'm happy to hear them out!
stocktrader
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Re: Advice for creating 1st Portofolio

Post by stocktrader »

I'm learning more as I've read the info on this forum and I think I'd like to know more about what the overall strategy is. Are you looking to maximize returns sooner or later? For example, I've been following some of the former penny stocks that I traded in the past which have now grown and gone on to become part of the Russell Indexes, including the 2000 and, of course, the 30000. I think with the Biden administration in office right now, the sentiment surrounding "the little guy" and small business has skewed this idea of small-cap investing as a way to get exposure to this ideology. Personally, I don't agree but I'm also not one to fight the market.

So if you look at some of the recent additions, you can get a gauge of what the next year holds right now. I say the next year because this Index, in particular, updates annually. So an example of a company I've watched, Ideanomics, it's a highly speculative company but this week it announced that it would be added to the Russell 3000. The beauty of the small-cap Indexes, in my opinion, is that it gives a little more alpha during times like these. In my limited investing experience, I believe small caps tend to perform well even if rates are higher and in light of government spending initiatives, I'm putting my money on that right now. I will revisit it next year or if things drastically change before then.

Here's some info on the Russell if you're interested in that:

Vanguard Russell 2000 ETF
iShares Russell 2000 ETF
ProShares Ultra Russell 2000
FTSE Russell Indexes information
TedSwippet
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Re: Adive for creating 1st Portofolio

Post by TedSwippet »

chookity wrote: Thu Jun 10, 2021 11:04 am Normally I considered a bond ETF as a core holding, but the last reads around the internet made me think twice. The price difference between the actual bond and the bonds etfs is getting bigger, should this be a concern or bond etfs are still a good buy? And I skipped read some articles about ETFs bonds being in a somewhat degrading state. Might that just be smoke and noise?
The quality of the bonds inside an ETF should be fine (perhaps except for ETFs that focus on 'junk bonds'). The real question is if, at age 31, you want bonds at all?

The forum splits on this. Some folk believe bonds are an essential part of a balanced portfolio, if for no other reason than they provide 'dry powder' to rebalance into stocks in the event of a significant market downturn or crash. Others will opine that for younger investors (that's you, not me!), going for 100% stocks is fine, since you have plenty of time to recover from any bear markets.

Up to you, then. Personally, I've kept the bond funds I held when covid pushed interests rates below the floorboards, but have not bought any new ones. For now, around half of my non-stock holdings (the parts that are not in my UK pension) are all in short-term CD-like deposits, typically one year. These provide a mildly positive return; less than inflation, but more than the almost-guaranteed loss of current bond prices.

Maybe using CD-like things would work for you too, as an alternative to bonds and if you do not wish to stomach a 100% stocks portfolio. It's a decision that only you can make.
chookity wrote: Thu Jun 10, 2021 11:04 am Side-note - I am thinking only of ETFs because of my small investment, but if you have any different ideas, I'm happy to hear them out!
ETFs should be ideal. You may or may not have the choice of some mutual fund-like things in your country; don't know. But even if you do, there will probably be little difference between them and ETFs. If possible, usually the sort of decision that can be made for preference or convenience rather than for long-term performance differences.

The one thing to watch for with ETFs is that you (usually) find that you have to buy whole shares. Where an ETF's price is €10 this isn't a problem, but for an ETF priced at €100/share, this can leave you with a visible percentage of your money uninvested where monthly or quarterly investment amounts are small. Just one more consideration there. Beyond this, use 'best practices' for ETF trading and you should be fine. Avoid trades at the beginning and end of market hours, use limit orders (typically inside the bid/offer) to ensure you do not get a price that is out of line with where it should be, and so on.

A web or forum search will turn up those rules for you. Here is something to get you started:

https://static.vgcontent.info/crp/intl/ ... 8%7C091500
Topic Author
chookity
Posts: 8
Joined: Sun Jun 06, 2021 10:23 am

Re: Advice for creating 1st Portofolio

Post by chookity »

TedSwippet wrote: Thu Jun 10, 2021 11:26 am Here's some info on the Russell if you're interested in that:

Vanguard Russell 2000 ETF
iShares Russell 2000 ETF
ProShares Ultra Russell 2000
FTSE Russell Indexes information
thank you!
TedSwippet wrote: Thu Jun 10, 2021 11:26 am The quality of the bonds inside an ETF should be fine (perhaps except for ETFs that focus on 'junk bonds'). The real question is if, at age 31, you want bonds at all?

The forum splits on this. Some folk believe bonds are an essential part of a balanced portfolio, if for no other reason than they provide 'dry powder' to rebalance into stocks in the event of a significant market downturn or crash. Others will opine that for younger investors (that's you, not me!), going for 100% stocks is fine, since you have plenty of time to recover from any bear markets.
I probably have the time, but I don't feel I have the time :D I need to play it conservative. Not very conservative, but I'm thinking about 60-70% risk. So yes, I do want some bonds. How do I know what bonds are junk?
TedSwippet wrote: Thu Jun 10, 2021 11:26 am Up to you, then. Personally, I've kept the bond funds I held when covid pushed interests rates below the floorboards, but have not bought any new ones. For now, around half of my non-stock holdings (the parts that are not in my UK pension) are all in short-term CD-like deposits, typically one year. These provide a mildly positive return; less than inflation, but more than the almost-guaranteed loss of current bond prices.
I wanted to use CD-like deposits at first, but the bank offerings in my country are ****. So I changed my mind into investing.
TedSwippet wrote: Thu Jun 10, 2021 11:26 am ETFs should be ideal. You may or may not have the choice of some mutual fund-like things in your country; don't know. But even if you do, there will probably be little difference between them and ETFs. If possible, usually the sort of decision that can be made for preference or convenience rather than for long-term performance differences.

The one thing to watch for with ETFs is that you (usually) find that you have to buy whole shares. Where an ETF's price is €10 this isn't a problem, but for an ETF priced at €100/share, this can leave you with a visible percentage of your money uninvested where monthly or quarterly investment amounts are small. Just one more consideration there. Beyond this, use 'best practices' for ETF trading and you should be fine. Avoid trades at the beginning and end of market hours, use limit orders (typically inside the bid/offer) to ensure you do not get a price that is out of line with where it should be, and so on.
Yeah, mutual funds in my country are so-so. I'll check them out as well. I have a feeling that I want all my eggs in one basket, even if I diversify. But anyways, I am oriented towards ETFs that are priced 50-100$ / share. I think that should do the trick for the start, buying 5-10 shares now and then 1-2 / month.
TedSwippet wrote: Thu Jun 10, 2021 11:26 am A web or forum search will turn up those rules for you. Here is something to get you started:

https://static.vgcontent.info/crp/intl/ ... 8%7C091500
Thank you!

Btw, What platform do you use? I started with Etoro, but they have limited ETFs so now I'm exploring XTB, although Interactive Brokers seems to be the best of them - although I can't see popular ETFs like Ishares and Vanguard there.
TedSwippet
Posts: 3674
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Advice for creating 1st Portofolio

Post by TedSwippet »

chookity wrote: Thu Jun 10, 2021 4:45 pm Btw, What platform do you use? I started with Etoro, but they have limited ETFs so now I'm exploring XTB, although Interactive Brokers seems to be the best of them - although I can't see popular ETFs like Ishares and Vanguard there.
I'm in the UK, and use a handful of UK based platforms who don't operate internationally and so whose names won't mean anything to you.

For Interactive Brokers, I believe you need to 'activate' the relevant markets/exchanges, for example London or Amsterdam, before you can see the Ireland domiciled ETFs that you want. I'm not an Interactive Brokers customer, so I don't know the details of exactly how to do that -- just mentioning what I've seen others on this forum talk about. If you have problems doing this, maybe post more details here so that forum members who do use Interactive Brokers can chime in. Or ask Interactive Brokers directly.
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