[Belgium] IWDA/IEMA or IWDA/EMIM vs VWCE vs SXR8 + general questions

For investors outside the US. Personal investments, personal finance, investing news and theory.
Sister forums: Canada, Spain (en español)
---------------
Post Reply
Topic Author
Diceman1985
Posts: 2
Joined: Thu Jan 20, 2022 4:17 am

[Belgium] IWDA/IEMA or IWDA/EMIM vs VWCE vs SXR8 + general questions

Post by Diceman1985 »

Hi all,

I have been lurking for some time on here and on reddit, and for the last year I have been dipping my toes in actual investment Boglehead style. I see there is a template for these types of questions so I'll try and follow it.

Country of Residence: Belgium

International Lifestyle: I do not expect to move countries before or after retiring or in retirement but who knows what the future will bring. I do not regularly change country either for work or for other reasons.

Currency: EUR

Emergency funds: I have this covered.

Debt: mortgage, 1,25%

Age: mid thirties

Desired Asset allocation: 100% stocks for now, not sure if/when to transition to bond ETF's.

Current total portfolio is mid four-figures.

Current assets

General investment account, taxable

Allocation / exchange / ticker / isin / full name

33% EAM IWDA IE00B4L5Y983 0,2 iShares Core MSCI World UCITS ETF USD (Acc)
33% XET SXR8 IE00B5BMR087 0,07 iShares Core S&P 500 UCITS ETF USD (Acc)
1% XET QDVE IE00B3WJKG14 0,15 iShares S&P 500 Inf Tech Sector UCITS ETF USD Acc
33% XET VWCE IE00BK5BQT80 0,22 Vanguard FTSE All-World UCITS ETF USD Acc

_______________________________________________________________
Questions:
1. As I said, I have been dipping my toes mostly with ETF investing. Based on the reading I have done I concluded I needed accumulating funds for tax reasons. I chose these specific ones based on a list my broker (Degiro) doesn't charge fees for when buying in. This resulted in IWDA SXR8 and VWCE on EAM/XET. Out of curiosity I also included QDVE, but I consider this a newbie mistake. For the three big ones I noticed the past year they more or less move together, up and down, good and bad. This leads me to question if it doesn't make more sense to just focus everything down one or two ETF's, especially as there is considerable overlap between the ones I have. I guess that leaves 100% VWCE as the default option? I should clarify I feel I am too young to consider bonds, but I am open to be challenged on this.

2. This leads me to my next question. There is some discussion in the Belgian FIRE community about a new tax law interpretation (I will spare you the details, but can provide them if needed) for buying and selling ETF's. Normally the tax would be 0,12%, but specifically for VWCE it would rise to 1,32% per buy / sell. With compounding interest effects this adds up in the long term, making 100% VWCE perhaps not the best choice. I read that either IWDA and IEMA or IWDA and EMIM in an ~88/12 composition is virtually the same as VWCE, but that implies another ETF to add while I was looking to reduce my number of ETF's. It also adds the difficulty of having to adjust sometimes to keep the ratio between the two, but perhaps this is not so difficult once you know how to do it? I also wonder if 100% IWDA does not end up being superior then: I am not too keen to invest in China, and I also think there is a systemic tendency in capitalism where those on top are always best positioned to take advantage of changing circumstances. Therefore I question if specifically investing in emerging markets makes sense outside of the ease of buying into an all world ETF like VWCE.

3. A short and perhaps stupid question: given that my denomination is EUR, and the funds listed above are traded in EUR exchanges, any currency conversions are done further down the chain, i.e. not on the level of the broker but on the level of the fund buying e.g. American shares? Maybe I should not worry too much about this and accept there is always some bleeding going on there.

4. Finally a more general question. As the Boglehead strategy is basically buy the whole market and have a long time horizon, should I be rebalancing every time there is some fiscal change (see question 2), or should I just accept this is inevitable and be glad it isn't a capital gains tax? More succinctly, when is too much optimizing...well...too much optimizing?

Thanks for any and all comments, I have to say the world of finance is a lot more interesting than I ever gave it ... credit for :mrgreen:
Laurizas
Posts: 527
Joined: Mon Dec 31, 2018 3:44 am
Location: Lithuania

Re: [Belgium] IWDA/IEMA or IWDA/EMIM vs VWCE vs SXR8 + general questions

Post by Laurizas »

Diceman1985 wrote: Thu Jan 27, 2022 11:04 am I guess that leaves 100% VWCE as the default option?
I concur, if you want overweight US stock, do it and have 90 % VWCE , 10 % SXR8, but that leaves you with 70 % in US. Would it be good for you? I do not know. There are constantly wars of internationals vs US stock in Investing section of the forum.
Diceman1985 wrote: Thu Jan 27, 2022 11:04 am There is some discussion in the Belgian FIRE community about a new tax law interpretation (I will spare you the details, but can provide them if needed) for buying and selling ETF's. Normally the tax would be 0,12%, but specifically for VWCE it would rise to 1,32% per buy / sell.
Would be interesting yo know.
Diceman1985 wrote: Thu Jan 27, 2022 11:04 am I read that either IWDA and IEMA or IWDA and EMIM in an ~88/12 composition is virtually the same as VWCE, but that implies another ETF to add while I was looking to reduce my number of ETF's. It also adds the difficulty of having to adjust sometimes to keep the ratio between the two, but perhaps this is not so difficult once you know how to do it?
There is MSCI ACWI for that
https://www.justetf.com/en/etf-profile. ... 00B6R52259
Diceman1985 wrote: Thu Jan 27, 2022 11:04 am I also wonder if 100% IWDA does not end up being superior then: I am not too keen to invest in China, and I also think there is a systemic tendency in capitalism where those on top are always best positioned to take advantage of changing circumstances. Therefore I question if specifically investing in emerging markets makes sense outside of the ease of buying into an all world ETF like VWCE.
VWCE includes EM.

During last 10 year IWDA outperformed MSCI all world, but who knows what the future will bring.
https://www.justetf.com/en/find-etf.htm ... Field=none
Diceman1985 wrote: Thu Jan 27, 2022 11:04 am 3. A short and perhaps stupid question: given that my denomination is EUR, and the funds listed above are traded in EUR exchanges, any currency conversions are done further down the chain, i.e. not on the level of the broker but on the level of the fund buying e.g. American shares? Maybe I should not worry too much about this and accept there is always some bleeding going on there.
Do not worry.
Diceman1985 wrote: Thu Jan 27, 2022 11:04 am 4. Finally a more general question. As the Boglehead strategy is basically buy the whole market and have a long time horizon, should I be rebalancing every time there is some fiscal change (see question 2), or should I just accept this is inevitable and be glad it isn't a capital gains tax? More succinctly, when is too much optimizing...well...too much optimizing?
If it makes sense from tax perspective, then you sell one fund and buy another, but these fiscal changes should be very rare.
User avatar
BeBH65
Posts: 1763
Joined: Sat Jul 04, 2015 7:28 am

Re: [Belgium] IWDA/IEMA or IWDA/EMIM vs VWCE vs SXR8 + general questions

Post by BeBH65 »

Diceman1985 wrote: Thu Jan 27, 2022 11:04 am Hi all,

I have been lurking for some time on here and on reddit, and for the last year I have been dipping my toes in actual investment Boglehead style. I see there is a template for these types of questions so I'll try and follow it.

Country of Residence: Belgium

International Lifestyle: I do not expect to move countries before or after retiring or in retirement but who knows what the future will bring. I do not regularly change country either for work or for other reasons.

Currency: EUR

Emergency funds: I have this covered.

Debt: mortgage, 1,25%

Age: mid thirties

Desired Asset allocation: 100% stocks for now, not sure if/when to transition to bond ETF's.

Current total portfolio is mid four-figures.

Current assets

General investment account, taxable

Allocation / exchange / ticker / isin / full name

33% EAM IWDA IE00B4L5Y983 0,2 iShares Core MSCI World UCITS ETF USD (Acc) Is already a big part of your Vanguard world fund
33% XET SXR8 IE00B5BMR087 0,07 iShares Core S&P 500 UCITS ETF USD (Acc) Is already a big part of your MSCI world fund
1% XET QDVE IE00B3WJKG14 0,15 iShares S&P 500 Inf Tech Sector UCITS ETF USD Acc Is already a big part of your SP500 fund
33% XET VWCE IE00BK5BQT80 0,22 Vanguard FTSE All-World UCITS ETF USD Acc
So yes, you have a lot of overlap - there is room for simplification.

_______________________________________________________________
Questions:
1. As I said, I have been dipping my toes mostly with ETF investing. Based on the reading I have done I concluded I needed accumulating funds for tax reasons. I chose these specific ones based on a list my broker (Degiro) doesn't charge fees for when buying in. This resulted in IWDA SXR8 and VWCE on EAM/XET. Out of curiosity I also included QDVE, but I consider this a newbie mistake. For the three big ones I noticed the past year they more or less move together, up and down, good and bad. This leads me to question if it doesn't make more sense to just focus everything down one or two ETF's, especially as there is considerable overlap between the ones I have. I guess that leaves 100% VWCE as the default option? I should clarify I feel I am too young to consider bonds, but I am open to be challenged on this.
Indeed, VWCE is an easy option, The combination IWDA + EMIM has a similar coverage for a slightly lower TER. See also next question

2. This leads me to my next question. There is some discussion in the Belgian FIRE community about a new tax law interpretation (I will spare you the details, but can provide them if needed) for buying and selling ETF's. Normally the tax would be 0,12%, but specifically for VWCE it would rise to 1,32% per buy / sell. With compounding interest effects this adds up in the long term, making 100% VWCE perhaps not the best choice. Not sure if compounding is important, you only have the cost 2x - for the purchase and the sale I read that either IWDA and IEMA or IWDA and EMIM in an ~88/12 composition is virtually the same as VWCE, but that implies another ETF to add while I was looking to reduce my number of ETF's. It also adds the difficulty of having to adjust sometimes to keep the ratio between the two, but perhaps this is not so difficult once you know how to do it? I also wonder if 100% IWDA does not end up being superior then: I am not too keen to invest in China, and I also think there is a systemic tendency in capitalism where those on top are always best positioned to take advantage of changing circumstances. Therefore I question if specifically investing in emerging markets makes sense outside of the ease of buying into an all world ETF like VWCE.
You could leave out the Emerging Markets, as long as you know that you leave out about 1/8th of the current market cap. So you are lowering diversification. Nobody knows which part of the market will do best in the future.
As both are market cap funds, there is no need to rebalance between IWDA and EMIM.


3. A short and perhaps stupid question: given that my denomination is EUR, and the funds listed above are traded in EUR exchanges, any currency conversions are done further down the chain, i.e. not on the level of the broker but on the level of the fund buying e.g. American shares? Maybe I should not worry too much about this and accept there is always some bleeding going on there.
Don't worry about this. As the fund receives EUR, GBP, USD it uses the 'best' currency internally as needed (*)

4. Finally a more general question. As the Boglehead strategy is basically buy the whole market and have a long time horizon, should I be rebalancing every time there is some fiscal change (see question 2), or should I just accept this is inevitable and be glad it isn't a capital gains tax? More succinctly, when is too much optimizing...well...too much optimizing?
you can look at each event separately, and decide on a case by case basis.

Thanks for any and all comments, I have to say the world of finance is a lot more interesting than I ever gave it ... credit for :mrgreen:
(*) not really correct for ETFs, but that is less important.
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
Topic Author
Diceman1985
Posts: 2
Joined: Thu Jan 20, 2022 4:17 am

Re: [Belgium] IWDA/IEMA or IWDA/EMIM vs VWCE vs SXR8 + general questions

Post by Diceman1985 »

Rather then opening a new thread I will post in my initial thread with some additional questions. As explained above VWCE has a higher tax so is not the most optimal option.

Two years down the line I have settled on this portfolio:

Allocation / exchange / ticker / isin / full name

80,3% EAM IWDA IE00B4L5Y983 iShares Core MSCI World UCITS ETF USD (Acc): https://www.justetf.com/en/etf-profile. ... 3#overview

10,5% EAM EMIM IE00BKM4GZ66 iShares Core MSCI Emerging Markets IMI UCITS ETF (Acc): https://www.justetf.com/uk/etf-profile. ... 6#overview

9,3% XET IUSN IE00BF4RFH31 iShares MSCI World Small Cap UCITS ETF: https://www.justetf.com/en/etf-profile. ... 00BF4RFH31

My first question: I get these percentages from the following site: https://marketcaps.site/. On that site they show portfolios with relative weights and absolute weights of indices. I have been using the absolute weight method, but is this correct? The relative method has a slightly lower allocation to emerging markets, which I guess has to do with the difference in emerging markets small caps being counted or not.

My second question: recently XET SPYI IE00B3YLTY66 SPDR MSCI ACWI IMI UCITS ETF: https://www.justetf.com/en/etf-profile. ... 6#overview lowered its TER 0,17% and should be the same portfolio as above, but within one ETF. This is also slightly cheaper than the TER of the portfolio I am currently using (~0,21%). I am however reluctant to switch over as the volume on Xetra is around 5,6K, compared to 52,4K for VWCE, 81,5K for IWDA, 16,1K for Emim, and 262,9K for IUSN.

Thanks for any insights!
jg12345
Posts: 472
Joined: Fri Dec 11, 2020 12:03 pm

Re: [Belgium] IWDA/IEMA or IWDA/EMIM vs VWCE vs SXR8 + general questions

Post by jg12345 »

1) I think your website source from:
https://www.msci.com/our-solutions/inde ... ap-indexes and
https://www.msci.com/documents/10199/17 ... fc565ededb

which is the actual source. Anyway. 80% - 10% - 10% is fine!

2) good thinking. yes the low volume is a risk that you pay a lot in bid/ask spread.
However, I wanted to note: there are cheaper MSCI World ETFs out there with a fund size that is less that IWDA but still acceptable.


https://www.justetf.com/en/search.html? ... CI%2BWorld
Post Reply