Simple non-US portfolios

Simple portfolios
The simplest portfolios are based on using index funds (where these are easily available) or the corresponding ETFs to build a low-cost structure with a small number of funds (generally five or less) that are easy to re-balance and follow the spirit of the Bogleheads&reg; approach.

The simple index portfolios illustrated here are a collection of portfolios that contain broad based representation from the major asset classes: local or regional bonds; local or regional equities; global bonds and global equities. The choice of broad based funds is dictated by a decision to use a passive investing philosophy to keep costs to a minimum and to accept market returns, which helps keep things simple to manage these portfolios.

Depending on the level of simplicity desired, one can build one of a:


 * Two fund portfolio consisting of a global bond fund and a global stock fund.
 * Three fund portfolio consisting of a global bond fund, global stock fund and a global emerging market stock fund.
 * Four or five fund portfolios consisting of local or regional bond fund, global stock fund, local or regional stock fund, emerging market stock fund and small cap stock fund.

The main Wiki site for Bogleheads can provide ample background for the build-up of various approaches that can accord with the Bogleheads principles while introducing some variety for whatever reason. See for instance: Lazy portfolios

These portfolios are well suited for do-it-yourself (DIY) index investors in the accumulation stage, with retirement as their main goal. Simple index portfolios can also work during the withdrawal stage.

The choice of global aggregate bond fund can be for a global fund that includes both government and corporate debt, or alternatively there are some ETF's that are dedicated to global government debt only.

These generic portfolios as shown below should be made up of the appropriate available ETF's that are consistent with the local tax regime and in particular should be chosen to address the tax reporting requirements that dictate the choice of accumulating or distributing versions of the funds to be used. The actual choice of individual ETF's may be subject to the availability of specific funds.

The illustrated examples are based upon a 50/50 allocation of bonds and stocks. The allocation chosen will depend upon the evaluation of the individuals risk tolerance and their particular stage in the investment lifecycle.

Cash and cash equivalents, property and other investments assets are not included in the build up of these portfolios. These assets can become part of a more complex portfolio for the more experienced investor. Some element of cash is advised for investors as a fund for emergencies and / or predicted expenditure.

Two fund portfolio
The simplest interpretation of the Boglehead approach for non-US retail investors with the minimum number of funds, wide diversity, low cost and modest risk.



Three fund portfolio
A very simple portfolio with the addition of a world emerging market fund.



Four fund portfolio
A simple portfolio which introduces some local bias in stocks.



Five fund portfolio
This version adds small cap stocks to equities.



Sample portfolios
Considering the approach set out in the generic simple portfolio design set out above the following portfolios are presented as possible solutions for the retail investor in a non-US jurisdiction subject to all the caveats regarding jurisdiction, domicile, tax matters and costs. Samples are given using the two and three fund solutions both in accumulating and in distributing versions.

It is incumbent on the investor to carry out the research on their domicile and tax status in order to correctly identify the particular ETF which is appropriate in their case for each asset class.

Indices
When choosing a particular ETF or group of ETF's the investor needs to be aware that the different providers may be using different benchmarks for the tracking of their fund performance. For example the iShares global aggregate bond (AGGH indicated in the accumulating sample above) tracks the Bloomberg Barclays Global Aggregate Bond Index while the Vanguard tracks the same index. However in the case of iShares global stock ETF (SWDA indicated in the accumulating sample above) it tracks the MSCI World index while the Vanguard world stock ETF tracks the FTSE World index.

See: FTSE World Index - Vanguard

See: MSCI World Index

The content of these indices are different and the investor may wish to understand the differences and choose accordingly.

See here for more information on indices: Stock Market Indexing and here: Bond market indexing

The amount in percentage terms of each sub asset class within an index should be followed at least in rough terms to suit the investors overall portfolio management constraints, in other words the rounding of percentages (or cash amounts) to match the exact index allocation is not necessary for the smaller sub asset classes as the emerging market and small cap allocations are relatively minor. It may assist to group your portfolio choices to one provider subject to costs.