Does this simple portfolio make sense?


#1

I’m about to invest for the first time. Probably going to open a CornerTrader account. Goal is to invest my first 30k over the course of 3 months, and then I’ll probably manage to invest 10k per quarter.

What do you think of this small portfolio?

  • 65% Vanguard FTSE All-World UCITS ETF
  • 20% Vanguard S&P 500 UCITS ETF
  • 15% iShares Core SPI

Since it’s the first portfolio, I want to keep it as simple as possible, until I understand things better. I’m particularly not sure about how much sense it makes to have All-World + S&P500. My idea is to have everything, with some bias to US markets and a smaller bias to CH market.

EDIT: I also recently opened a VIAC account and will max it out yearly.

EDIT2: I opened an account at degiro and started investing in Vanguard FTSE All-World UCITS ETF as the single ETF so far. At some point I’ll get an additional IB account and start buying Vanguard VT.


#2

I thought CT is a good idea too, but I lasted 6 months and am now switching over to IB. I’ve spent way more on comissions and currency exchanges than I had planned to. This wouldn’t have happened if I went straight to IB.

As to your portfolio:

  • Vanguard funds have high spreads on SIX (~1%) and the TER of VWRL is not that attractive, even in comparison to other European ETFs.
  • you are missing small caps
  • you are missing EM
  • you are likely already biased to CH with your Pillar 2 and 3a (are you with VIAC? if not, consider to be. By law you’ll be required to be CH biased with 40% CHF denominated assets in 3a).

I’d suggest you go with Vanguard US funds in any of the following configs:

  1. VT
    around 8000 stocks over all caps

  2. VTI + VXUS
    around 10000 stocks over all caps

  3. VTI + VEA + VWO
    around 12000 stocks over all caps, easy to under/overweight the US or EM.

You may also add small cap bias if you wish to do so. There are VB and VSS as well as many others to chose from.

Of course if you insist on home bias, you can add Ishares Core SPI as well and still pay only 2$ per trade instead of 25$.


#3

Thanks for your reply!

What exactly happened? Aren’t the costs more or less transparent and you should be able to anticipate them?

Hm, the fact that I don’t even know why I would want small caps and why this aspect is not covered by “all world” shows that there is more research to do… :confused:
What’s interesting about small caps? More fluctuations, but less “going with the herd”?

True, I forgot to mention this. Just opened a VIAC account. This will be the first time I contribute to the 3rd pillar.

Thanks, I’ll look into these compositions over the weekend.


#4

I found myself wanting to buy more often than once in a quarter. And why should I, if I can contribute monthly at IB and save money, then at every rebalancing, with way lower spreads, with better currency exchange rates and possibly also with withholding tax.

The TER of funds is arguably the smallest cost contributor. I will keep both accounts (CT and IB), but will only contribute once or twice a year to CT, while I will do monthly purchases at IB.

My CT contributions will be mostly used to balance out my VIAC portfolio which is Small Cap tilted.

Regarding “Small Caps” - these are companies with small market capitalization ($300M-$2B, as per “investopedia”). They are generally more volatile but are thought to give better returns over long term.

edit: corrected small cap capitalization


#5

No institutional (especially ETFs) will ever go in the $100 million market cap territory. When they say small cap, they usually mean > $ 1 billion. Below there is not enough liquidity (especially compared to the size of their assets under management). For institutionals, stocks below $500 million is unknown territory. Which also means that this is where most market inefficiencies are located. Furthermore, around 1/3 of all US listed companies are below $500 million…


#6

I am also a beginner and I am looking to have a simple portfolio to start with. I had intended to just invest in one single fund : VT (maybe I will also invest a very small amount in bond - but honestly I prefer a higher risk investments with larger returns)

I understand that glina recommended VXUS, VEA, VWO - to diversify your portfolio, but it seems to be that the past performances of these funds are not very impressive at all. For example you would have gotten pretty much the same return over 10 years from investing in bonds as you would have gotten from VXUS! (and bonds are much less risky)

I am also curious to know what you think about starting to invest at this point in the economic cycle - its been 9 years since the last recession so for sure a recession is due (given that on average there is a recession every 5.5 years)? (And please don’t tell me that it doesn’t matter about recession for long term investments - cos that’s total bullshit - regardless of whether or not my investment is long term or short term I will profit more if I invest when the market is down) I am considering to wait for a recession before starting with my investing, in the mean time I’m researching like hell. At least, at present the markets are very volatile so I do intend to hold off for a few months before starting to invest.


#7

You know VXUS is half of VT? There can be no major difference between VT and VTI+VXUS, because they are practically the same thing. The second is just marginally cheaper to own and has a few more smaller companies in it.


#8

No I did not know that VXUS is half of VT (still learning these sort of things). Thanks for the info the recommendation now makes more sense to me.


#9

I’m thinking the same. But, not investing at all now also doesn’t make sense. Maybe something will happen next month, maybe in two years or even later… November 2018 has already seen some decline and many ETFs are already in the red for 2018. The Vanguard FTSE All-World UCITS ETF which I’m going to buy at first, is currently at -2.88% for this year.

Personally I started investing yesterday (it was very exciting) with the first 20% of the money that I want to have in stocks. 20% because buying with the entire stash all at once sounds risky. Over the next few months I’m going to invest twice or triple the amount planned in my budgett, until I use up the pile of cash I want to have invested :slight_smile: This should balance out the buying price in case something crazy happens in the next few months.

Another thing that to me now seems more important than ever, is to keep this pile of stash. In case of drops, I can then simply buy more of the same stuff.

The gambler inside of me is now looking at EURO STOXX 50, which dropped 10-12% this year. Also because I feel like the US market is way overrated. But then again I am too much of a noob and trying to outsmart the market will most likely only end in tears.

Two weeks ago I wanted to get S&P500 in addition to the all-world stocks, and now I’m complaining the US is overrated :sweat_smile: Proof that I should stick to the simple stuff for now.


#10

I once put a graphic representation of the most popular ETFs in the wiki:


#11

Thanks guys for all the info - its really helping me to learn.

Sorry, some more beginner questions: From Bojack’s graphic (thanks Bojack!) I can see that VWRL is an ETF which is domiciled in Ireland and VTI is a ETF domiciled in USA. What does this actually mean, what significance does it have for me as investor based in Switzerland?

Which one is best for investors based in Switzerland, ETFs domiciled in USA or ETF’s based in Ireland? (I think i read somewhere that ETFs domiciled in USA are better for Swiss investors for some tax reasons - I didn’t understand fully the tax reasons)

Finally, am I correct to say that a good portfolio would be either:
VWRL + an ETF which covers small cap (dont know of any right now); or,
VTI + VXUS;
which would be best for an investor based in Switzerland?


#12
  1. There is no European based small cap compliment to VWRL based on FTSE Indices. Nada!

If you want all world exposure including small caps you need to do this with MSCI index trackers and to achieve this you could use:
XDWL + WOSC (or IUSN / WSML) + EIMI.

Total TER will be less than VWRL so this is a very viable option and you’ll have exposure to the entire MSCI ACWI IMI index (8800+ stocks).

  1. VTI + VXUS (or VTI + VEA + VWO) will be the cheapest and therefore the best.

#13

Hi @glina

In your opinion, what percentage should each ETF take of the total investment: would it be best that each ETF have an equal percentage of my total investment i.e. VTI (50% of total investment amount) + VXUS (50% of total investment amount) (e.g. if I have 10k to invest I would invest 5k in VTI and 5k in VXUS)?

(Since @Bojack mentioned that “VXUS is half of VT” I assumed that the VTI(50%) + VXUS (50%) is a good distribution as it would be equivalent to the distribution in VT.)

(Likewise, for the other option I guess VTI (50%) + VEA (25%)+ VWO (25%) would be a good way to distribute the investment)

Thanks


#14

As of today it is approx 55% vti, 35% vea, 10% vwo.


#15

So I started to set up a trial account in IB. I tried to add the above recommended ETF’s (i.e. VT, VTI, VXUS, VEA, VWO) to a watchlist, only to find that it’s not as straight forward as I thought it would be since these ETF’s seems to be available on different stock exchanges. For example, ARCA, NASDAQ, LSE and MEXI.

On which stock exchange is it best to buy each ETF? (Since I intend to buy ETFs using USD (I will convert CHF to USD on IB) I assume that I should buy each ETF on the ARCA (the New York Stock Exchange) and/or NASDAQ (American Stock Exchange) and not on any other stock exchange?)

Thank you for your help.
(sorry if this post belongs somewhere else but I didn’t want to start a new thread for this because I suspect my question is a very trivial question for most)


#16

IB will execute the trade in the cheapest exchange for you:
https://www.interactivebrokers.com/en/index.php?f=1685

In my case typically it’s VT on NYSE Arca.