First time investor

[Velvet4268]

Hi all!
I'm a first time 38 year old investor living in Spain now, and would really appreciate if you could look over my IPS, and let me know if it's OK.
So far, I've opened a myinvestor account and am waiting for the money to transfer in. For the RV MSCI World Index, I see 3 very similar funds I could choose:

• iShares Developed World Index Fund (IE) D Acc EUR (IE00BD0NCM55)
  Fidelity MSCI World Index Fund P-ACC-EUR (IE00BYX5NX33)
  Vanguard Global Stock Index Fund Investor EUR Acc (IE00B03HCZ61)

I'm not sure, but the datasheet of the iShares seems to suggest a huge minimum investment amount (100k). If so, I'll go to the Fidelity.

Investment objectives
1. To have over 900k euro when 60 in 22 years
2. Invest 20-30% income monthly, starting at 800 euro a month (increasing 4% a year minimum).
3. Retire at 60 withdrawing 36k euro (assuming 3.3% inflation)

Risk tolerance
Measured by stocks to bonds ratio, where in the first decade, I’m more interested in maximising gains vs later, where minimising losses is the goal. Shall stay the course, stick to the strategy, and not worry about paper value at any time.

Target allocation
- [128 - age] % iShares Developed World Index Fund (IE) D Acc EUR (IE00BD0NCM55)
- [age - 28] % Vanguard Global Bond Index Fund EUR Hedged Acc (IE00B18GC888)

Selection criteria
- Mutual funds (to take advantage of no tax when rebalancing in Spain as opposed to ETFs (traspaso).
- Diverse world market
- Simple 2-fund portfolio (without developing market as prefer simple rebalancing and not convinced developing market is worth the extra work)

Review process
Yearly increasing of amount to invest to keep it between 20-30% income (depending on yearly goals. ie. house renovation priorities etc.). Expected the first 2 or 3 years to be 20% while house renovations take priority, and then moving to 30%. In 14 years (when mortgage is repaid, then an additional 445 euro a month will be invested too.

Rebalancing
Yearly will rebalance according to the target allocation.

Here's a calculation I did to work some of this out:


And a link to curvo analysis:
https://curvo.eu/backtest/en/portfolio/ ... jxmcu4-oqA

Any advice greatly appreciated!

[typical.investor]

.bump for more views.

[Oceanl]

A few things:
1) Is your 900,000 target nominal? For retirement, I'd use real targets (post inflation). Real is what matters for spending.

2) Using historical rates of returns, and zero capital, I don't get to your 900,000 target, neither nominal or real.
A nominal compound rate of 9% over 22 years leads to 630,000. A Real rate of 6% leads to 433,000.
I maybe wrong because I do not include your increase in saving rate of 4%/year in my calculations. Does that come from your expected pay raises? Do you have a specific skill that gives you confidence you can get that consistently over 22 years? Or a more frugal lifestyle?

2) Having emerging markets in an ETF is not extra work, because it is in the composition of the MSCI World index. It's extra diversification at zero cost or complexity.
Investing in the full MSCI World index would not change dramatically the final performamce, but I would rather capture Chinese and Indian future wealth creation in my portfolio. Starting today.

3) Your IPS implies your AA as 90% Equity, 10% bonds. You are using 100% equity in your simulator.

4) Your IPS reflects a very high risk tolerance. It's fine considering your time horizon. But less so considering your limited experience as an investor. Key question: in ten years, assuming the market performs well, you now have 200,000 in capital , as per your graphe. Now the market drops by 50% in only six months (equities down, bonds up) and your new capital is at 100,000. This is the worst recession in 20 years, TV news and market commentators predict it could deteriorate further etc. Do you sell your investments or rebalance your portfolio back to your IPS i.e..80/20 at that time, implying... you sell bonds and buy equities? This is a theoritical scenario only.

5) At retirement: does your 36,000.spending include taxes? (It should, and probably more than today's rates).

6) Other than that, congrats for taking your financial.future seriously, having a plan and an above average saving rate.

[Velvet4268]

Thanks so much for the advice! Really appreciate it, and you bring up some great points.

1. That'd be real post inflation yeah. Assuming, that we could live on a current 18k (36k with inflation). (Also, there would be the state pension too, which I need to look into more, but seems like it'd be 11.5k?)

2. Yes, I agree with your calculations, and it's the reason I added that 4% increase. However, now you point it out, that's a crazy assumption I can do that continuously.

2b. It was more that I couldn't find an index fund that tracked the full world at myinvestor.es, so assumed I'd have to track it myself with 2 funds. But yes, if there was one that could do that, I'd be up for that. Let me have another look.

3. Yes, I'm not really sure how I can simulate the rebalancing between equity and bonds over the years, but yes, you're absolutely right in that my numbers will be way off.

4. Call me naive, but in my head (albeit much easier said now without anything in the pot!) I'm seeing this as a gamble that if it pays off great, but if I lose all my money, then I'm guessing that it'll be a very different world, and hoping I'll be OK just with the state pension. And if I get my same money back, well still great as I've saved a nice amount of money.

5. That is based on currently spending 1200 on necesities a month, but that includes a 445 mortgage. In 14 more years, without the mortagage that'll be 755. So 9k a year. So currently 18% tax would be due on my prediction of needing 18k. Meaning 14.8k take-home. Which seemed a good margin.


Any further thoughts, greatly appreciated, as this is all very new to me. Also, I'm under the mayb naive assumption that if we had to, we could live on the state pension, and anything extra is a bonus. And worst comes to worst, I could always continue working (I'm in software dev, so not physically taxing, and probably underpaid in the current market, so room to gain more in the coming years).

So I guess the next tasks for me is to see if there's an index at myinvestor.es that follows emerging market too. And then plug in some numbers without my 4% increase of contributions. Plus if I can do a spreadsheet maybe accounting for the yearly rebalancing between stocks and bonds, I should be closer to what reality may have to offer.