# Mustachian portfolios
**URL:** https://forum.mustachianpost.com/t/mustachian-portfolios/108
**Category:** Investing / Portfolios
**Created:** [December 14, 2016, 12:43pm UTC](https://forum.mustachianpost.com/t/mustachian-portfolios/108 "2016-12-14T12:43:48Z")
**Posts on this page:** 20
**Page:** 22
### Author:  [@s-g](https://forum.mustachianpost.com/u/s-g)
#### Post date: [April 25, 2021, 6:35pm UTC](https://forum.mustachianpost.com/t/mustachian-portfolios/108/454 "2021-04-25T18:35:58Z")
> [@mabi](#):
>
> I was actually looking into VWOB… It’s yield is quite high with \>4% but of course for more risk.
Well, if you’re willing to take more risk I guess you could just increase your stock allocation instead.
> [@mabi](#):
>
> Still the volatility of this ETF does not seem to bad or scary.
Keep in mind that these are still USD-denominated bonds (even if they’re emitted by emerging countries), the USD/CHF Fx should add some volatility on top of it.
---
### Author:  [@mabi](https://forum.mustachianpost.com/u/mabi)
#### Post date: [April 25, 2021, 7:11pm UTC](https://forum.mustachianpost.com/t/mustachian-portfolios/108/455 "2021-04-25T19:11:25Z")
> [@s-g](#):
>
> Well, if you’re willing to take more risk I guess you could just increase your stock allocation instead.
Right, good point but then I don’t have any bonds I could sell to rebalance and buy more stock ETFs in periods of downturn… or I guess I should just always keep some cash on the side for that, but then again why not invest this cash directly in stock ETFs in stead of keeping it for downturns…
> [@s-g](#):
>
> Keep in mind that these are still USD-denominated bonds (even if they’re emitted by emerging countries), the USD/CHF Fx should add some volatility on top of it.
Indeed, I remember having calculated -10% for USD/CHF just for 2020, which is a lot if you consider it could continue on like that… of course if you keep these bonds in USD for rebalancing with stock ETFs then it does not matter much as @evertruelife pointed out.
---
### Author:  [@s-g](https://forum.mustachianpost.com/u/s-g)
#### Post date: [April 25, 2021, 7:31pm UTC](https://forum.mustachianpost.com/t/mustachian-portfolios/108/456 "2021-04-25T19:31:30Z")
> [@mabi](#):
>
> or I guess I should just always keep some cash on the side for that, but then again why not invest this cash directly in stock ETFs in stead of keeping it for downturns…
I’d say first thing, establish your desired risk level.
If you can stomach 100% stock, just go for it, keeping cash on the side for downturns would just be market timing and not very efficient
If based on your risk appetite you’d prefer to only invest 80% in stock, than the rest should be in a “safe” uncorrelated asset. Historically this asset was bonds, but now that bonds give negative interests cash is a very good alternative.
> [@mabi](#):
>
> of course if you keep these bonds in USD for rebalancing with stock ETFs then it does not matter much as @evertruelife pointed out
I think it still matters, because it’s adding more risk…when the time for rebalancing comes the value of your bonds will also depend on Fx, and its anyone’s guess if it will be up or down at that point
---
### Author:  [@evertruelife](https://forum.mustachianpost.com/u/evertruelife)
#### Post date: [April 25, 2021, 7:38pm UTC](https://forum.mustachianpost.com/t/mustachian-portfolios/108/457 "2021-04-25T19:38:42Z")
So gentlemen, to sum it up, what decent options do we have for bonds? Of course, usdchf fx fluctuations will always be a factor, but at some point it needs to be assumed…
---
### Author:  [@nabalzbhf](https://forum.mustachianpost.com/u/nabalzbhf)
#### Post date: [April 25, 2021, 7:44pm UTC](https://forum.mustachianpost.com/t/mustachian-portfolios/108/458 "2021-04-25T19:44:54Z")
> [@evertruelife](#):
>
> So gentlemen, to sum it up, what decent options do we have for bonds?
I think the question is: why bonds? Did you run out of guaranteed cash account with no negative interests?
---
### Author:  [@evertruelife](https://forum.mustachianpost.com/u/evertruelife)
#### Post date: [April 25, 2021, 7:47pm UTC](https://forum.mustachianpost.com/t/mustachian-portfolios/108/459 "2021-04-25T19:47:42Z")
> [@nabalzbhf](#):
>
> I think the question is: why bonds? Did you run out of guaranteed cash account with no negative interests?
Cause bonds do go up usually when stocks go down. And until stocks go down you buy cheaper and cheaper bonds and sell at the right moment.
---
### Author:  [@nabalzbhf](https://forum.mustachianpost.com/u/nabalzbhf)
#### Post date: [April 25, 2021, 7:56pm UTC](https://forum.mustachianpost.com/t/mustachian-portfolios/108/460 "2021-04-25T19:56:23Z")
They go up because the negative interests go even further down, I’m not sure that makes it a better idea 🙂
---
### Author:  [@Barto](https://forum.mustachianpost.com/u/Barto)
#### Post date: [April 25, 2021, 9:32pm UTC](https://forum.mustachianpost.com/t/mustachian-portfolios/108/461 "2021-04-25T21:32:05Z")
> [@evertruelife](#):
>
> Cause bonds do go up usually when stocks go down.
That rule has been pretty much broken since 2008. Governments and central banks have printed money to manipulate interest rates to zero and below. Stocks and bond prices have both gone up since 2008 and bond prices can’t go up much more then they already have.
If stocks go down, bond prices should go down by less than stocks, but I would not expect them to go up much
---
### Author:  [@Neville](https://forum.mustachianpost.com/u/Neville)
#### Post date: [April 27, 2021, 6:59am UTC](https://forum.mustachianpost.com/t/mustachian-portfolios/108/463 "2021-04-27T06:59:19Z")
> [@nabalzbhf](#):
>
> They go up because the negative interests go even further down, I’m not sure that makes it a better idea
Exactly.
“Selling the bad because even worse is coming” is not a good long term strategy. 😉
---
### Author:  [@s-g](https://forum.mustachianpost.com/u/s-g)
#### Post date: [April 27, 2021, 9:52pm UTC](https://forum.mustachianpost.com/t/mustachian-portfolios/108/465 "2021-04-27T21:52:57Z")
> [@TeaCup](#):
>
> The Premium you get for Shares over Bonds is as well relatively static.
This is true, but the premium you get for bonds over cash it’s not been static. Bonds used to give higher returns than cash, with higher variability. Nowadays you still get the added variability, with lower expected returns than cash.
Not sure how long this is going to last but at the moment we’re arbitraging the fear of banks of losing customers if they apply negative interests on saving accounts.
A negative correlation with stocks might still give bonds some benefits in a portfolio, but then cash is also uncorrelated with stocks…at a certain point it just becomes a good alternative
---
### Author:  [@Barto](https://forum.mustachianpost.com/u/Barto)
#### Post date: [April 29, 2021, 12:27pm UTC](https://forum.mustachianpost.com/t/mustachian-portfolios/108/466 "2021-04-29T12:27:32Z")
> [@TeaCup](#):
>
> The point ofBonds is not their absolute return. The point of bonds is their low to negative correlation to Shares.
If we buy bonds in the current environment, yes we diversify into an asset not correlated to stocks, however the outcome seems highly likely to be a loss. See this [article](https://www.linkedin.com/pulse/why-world-would-you-own-bonds-when-ray-dalio/)
_“In fact, if you buy bonds in these countries now you will be guaranteed to have a lot less buying power in the future. Rather than get paid less than inflation why not instead buy stuff—any stuff—that will equal inflation or better? We see a lot of investments that we expect to do significantly better than inflation”_
---
### Author:  [@hippo](https://forum.mustachianpost.com/u/hippo)
#### Post date: [June 9, 2021, 9:32pm UTC](https://forum.mustachianpost.com/t/mustachian-portfolios/108/468 "2021-06-09T21:32:37Z")
In Switzerland we actually have a cash-arb as retail investors right now.
If you want some lower volatility (hopefully negatively correlated with equities) exposure then just hold CHF.
Can hold ~CHF100k with a bank + ~CHF100k with IB and pay no interest. This is opposed to an institutional investor holding millions who would have to pay [-0.76% for 2 year bonds or earn 0.138% on a 20 year bond](https://data.snb.ch/en/topics/ziredev#!/chart/rendeidglfzch) with the SNB.
Since interest rate differentials are a thing this is somewhat equivalent to holding cash in other currencies (e.g. USD/EUR) at an arb too. Of course you have FX risk.
Makes cash slightly more appealing in this environment when asset valuations are so crazy. I am about 80/20 right now but scaling back to 100/0 with monthly adjustments over the next 1 year. Still have to be wary of sitting out the market for too long 🙂 .
---
### Author:  [@ChickenFat](https://forum.mustachianpost.com/u/ChickenFat)
#### Post date: [June 26, 2021, 4:45am UTC](https://forum.mustachianpost.com/t/mustachian-portfolios/108/469 "2021-06-26T04:45:38Z")
One thing that has not been mentioned here is that chasing a bond with 1.5% nominal yield in USD or whatever currency which is expected to give maybe zero return long term due to higher USD inflation may give negative return after taxes because the owber pays 15-40% income tax on the 1.5% which reduces the return to somewhere around 1% for most of you.
---
### Author:  [@jay](https://forum.mustachianpost.com/u/jay)
#### Post date: [June 26, 2021, 5:44am UTC](https://forum.mustachianpost.com/t/mustachian-portfolios/108/470 "2021-06-26T05:44:20Z")
Yes, taxation is an important aspect of bond ETFs and in the current low interest rate environment it’s typically even worse than your example as the funds mostly consist of bonds with a higher interest rate (as issued back when the rates were higher) trading at a premium.
E.g. BND has a SEC yield of 1.34%. However, the distribution yield is 2.07%. The expected gross return is close to the former (in absence of rate changes) but you pay income taxes on the latter. At a 35% marginal tax rate the expected net return would only be around 0.6% before any currency risk.
For CHF bonds the tax effect is even worse. E.g. Swiss Gov Bond 7-15 ETF has a YTM of -0.16%, which would be bad enough. However, it still has a distribution yield of 1.72% which you’re taxed on. The net return might be around -0.76% and that’s before deducting the ETF fees.
---
### Author:  [@Fliss](https://forum.mustachianpost.com/u/Fliss)
#### Post date: [June 28, 2021, 12:41pm UTC](https://forum.mustachianpost.com/t/mustachian-portfolios/108/471 "2021-06-28T12:41:37Z")
> [@jay](#):
>
> taxation is an important aspect of bond ETFs
Never worried, or thought, about it since I am not interested in bonds with negative interest rates… but, would that actually be tax deductable?
---
### Author:  [@REandSTOCK](https://forum.mustachianpost.com/u/REandSTOCK)
#### Post date: [June 28, 2021, 12:54pm UTC](https://forum.mustachianpost.com/t/mustachian-portfolios/108/472 "2021-06-28T12:54:42Z")
Why would it be? They are not passive interests (you don’t pay them)
---
### Author:  [@jay](https://forum.mustachianpost.com/u/jay)
#### Post date: [June 28, 2021, 1:26pm UTC](https://forum.mustachianpost.com/t/mustachian-portfolios/108/473 "2021-06-28T13:26:44Z")
> [@Fliss](#):
>
> Never worried, or thought, about it since I am not interested in bonds with negative interest rates… but, would that actually be tax deductable?
The nominal interest rate of these bonds is still positive or 0%¹. They are sold at a premium (above the nominal value of the bond), which results in an overall negative yield to maturity. From the tax perspective the loss is capital loss (decrease in value) and thus, nothing that you can deduct as private investor.
Professional investors who have to pay capital gains taxes should be able to deduct such capital loss from bonds.
¹ At least that’s the typical case. I don’t know whether there are exotic bonds with negative nominal interest rates.
---
### Author:  [@Doffy](https://forum.mustachianpost.com/u/Doffy)
#### Post date: [July 20, 2021, 10:55pm UTC](https://forum.mustachianpost.com/t/mustachian-portfolios/108/474 "2021-07-20T22:55:59Z")
Is there any other reason to chose the combination VTI + VXUS over VT except the funds being more liquid and having lower TER ?
If you replicate VT with the combination you should have the same returns I guess. I like that VT does not need rebalancing, but in case I go with VTI + VXUS I would probably rebalance every quarter or semester (how often do you do it ?).
Based on Vanguard Website if you go 57,90% VTI and 42,10% VXUS it will roughly give you the regional exposure of VT.
My Current Portfolio :
- VT
- VIAC Global 100
---
### Author:  [@Patirou](https://forum.mustachianpost.com/u/Patirou)
#### Post date: [July 21, 2021, 5:57am UTC](https://forum.mustachianpost.com/t/mustachian-portfolios/108/475 "2021-07-21T05:57:26Z")
That was my reason, plus that both fonds are going more in depth (capturing approx. 90-95% of the market instead of around 85% if I remember well, didn’t check the exact value), and that I wanted to underweight the US a bit.
If I would redo it today, I would stick to VT for simplicity. Most of the VTI funds is international anyway (Microsoft, Alphabet etc.) and just happen to have their HQ in the US, and the extra 5% or so of the market represents nearly nothing in the end portfolio, since the market cap of the companies are so small. Basically, it won’t make a noticeable difference in CAGR before a long time, and then, who knows which one will be better.
Personnaly, I keep both of them at around 50/50%, with no rebalancing until I reach a 5% threshold difference from the initially chosen balance.
---
### Author:  [@San\_Francisco](https://forum.mustachianpost.com/u/San_Francisco)
#### Post date: [July 21, 2021, 8:12am UTC](https://forum.mustachianpost.com/t/mustachian-portfolios/108/476 "2021-07-21T08:12:27Z")
I wouldn’t split it unless you want to deviate from VT’s allocations.
Though then, why would you only do that for the US vs. rest of the world (and not for Emerging Markets, Europe, Japan or China)?
[Previous page](https://forum.mustachianpost.com/t/mustachian-portfolios/108.md?page=21)
[Next page](https://forum.mustachianpost.com/t/mustachian-portfolios/108.md?page=23)