Author Topic: My (not so) simple ETF portfolio  (Read 3439 times)

katthjul

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My (not so) simple ETF portfolio
« on: August 18, 2015, 12:09:52 PM »
I need some second opinions about my portfolio.

I decided on a simple portfolio with one broad ETF per asset class, but I cannot set up automatic investment with my bank for the ETFs I want. Therefore I got creative and found a way to have the portfolio I want and still have automatic investing at a low cost.

However my simple portfolio is now getting rather complex with temporary mutual funds and ETFs.

Am I making things unnecessarily complicated?

My (not so) simple ETF portfolio

My asset allocation is 80% stocks + 20% bonds.

Stocks

VWRL Vanguard FTSE All-World
(TER: 0.25%; Commission fee: 0.30%)

  • Global stock index fund
  • Dividends are distributed
  • Traded on Euronext Amsterdam in EUR (no stamp duty)
  • Requires effort to buy/sell (order over phone)
  • Minimum commission fee is 99 SEK (equals buying for 33k SEK)
  • Not possible to automate monthly buys
  • Amount invested varies from month to month

Current strategy is to manually make a deposit every month to my brokerage account. On the 15th every month any uninvested cash is swept into a stock fund. When it is time to rebalance the portfolio, the shares in the fund is liquidated and used to buy VWRL (and/or bonds).

Bonds

IEAG iShares Euro Aggregate Bond
(TER: 0.25%; Commission fee: 0.079-0.25%)

  • Euro zone bond index fund
  • Dividends are distributed
  • Traded on Xetra in EUR (no stamp duty)
  • Easy to buy/sell over internet
  • Not possible to automate monthly buys
  • Amount is fixed to a tenth of my normal gross salary

Still have not decided on a strategy. I can set up automatic investing into an expensive bond fund, but my bank offers a commission-free automatic investing plan for certain ETFs traded on Xetra. IEAG is not one of those, but I can get close by using:

60% IEGA iShares Core Euro Government Bond
40% IEAC iShares Core Euro Corporate Bond

I made a spreadsheet comparing the costs of the mutual fund and the ETFs. Note that assume I completely sell all shares of IEGA and IEAC to buy IEAG (and/or stock). Another approach is to only sell enough shares to get back to the above allocation.

EarlyStart

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Re: My (not so) simple ETF portfolio
« Reply #1 on: August 18, 2015, 09:53:24 PM »
I'm assuming you're in Europe, per your allocation to EU bonds. Honestly, everything looks fine to me. It's actually fairly simple.

katthjul

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Re: My (not so) simple ETF portfolio
« Reply #2 on: August 19, 2015, 04:53:51 AM »
Yes, I am in Sweden, but the bond market here is dominated by treasury and mortage bonds. Since we still have our own currency, I am adding currency risk but I think it is worth the greater diversification.

Honestly, everything looks fine to me. It's actually fairly simple.

Well, I have read about far more complex porfolios, but those are usually due to multiple accounts with different taxation and choice of index funds. There are not a lot of discussions on dealing with high minimum commission fees or lack of options for automatic investing.

fb132

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Re: My (not so) simple ETF portfolio
« Reply #3 on: August 19, 2015, 05:11:46 AM »
You are fin, KISS (Keep it Simple Stupid) is the way to go.

Kalergie

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Re: My (not so) simple ETF portfolio
« Reply #4 on: August 19, 2015, 07:53:09 AM »
Just out of curiosity. Why do you pay a commission fee? Is this particular to the funds you chose or the broker you use? Cheers.

katthjul

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Re: My (not so) simple ETF portfolio
« Reply #5 on: August 19, 2015, 12:01:40 PM »
Because I do not know of any Swedish broker that offers completely commission-free ETFs.

I could avoid the commission fees completely by using mutual funds, but that would raise the portfolio's TER to 0.50%. The higher fees can be compensated by paying less taxes, but that requires an account with different tax rules.

I prefer the tax rules of my current account, which makes ETFs the best choice for my portfolio.

 

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