Mustachian portfolios

#261

[quote=“dps_kane, post:259, topic:108”]
Am I correct in the assumption that any ETF that I find on vanguard**.com** has the beneficial tax rules as they’re all US-based?[/quote]
While they might be US-based, that doesn’t necessarily imply their tax structure to be very beneficial.

When (the ETF is) investing in non-US securities, it can also depend on the taxation agreements between the US and the third-party country in which dividend income arises.

#262

The better indication as to the domicile country of an ETF is the country abbreviation in the ETF ISIN, first 2 letters, US, IE, CH etc.
As San Fran said beneficial depends on what the ETF contains.

#263

Hello Mustachians. I have been reading quite a bit to get a better understanding on proper long-term investment. For that, I have been reading these boards a lot as well as the nice blog portfoliocharts, which I found on this board.

From what I read here, a lot of Mustachians go 100% stocks. Sometimes a bit of bonds is added as suggested by the Bogleheads with e.g. the three-fund porfolio. From what I see/read, stocks is what give the highest long-term average returns so it would make sense to go full stock of almost full. However, after ready a lot portfoliocharts and the various graphs, it seems that while total stock has the highest long term average returns, it is not the case if CARGR is used instead, which is what one would get in the end (please correct me if I got that wrong).

So if I look at the following chart: https://portfoliocharts.com/portfolio/risk-and-return/

The portfolio with the highest long-term return would then be his Pinwheel one and the total stock one is the lowest one (although still highest for average return).

Therefore, what would be your reason to not go with another portfolio which would “historically” had more return and les risk:

-Those portfolios use historical data so you cannot really use them to invest today.
-Total stock (maybe mixed with bonds in a three-fund porfolio) will grow anyway in the long run and does not need much micromanagement so why bother?
-Other?

#264

I guess any strategy is good as long as it works.

Below is an example of a very simple active, market timing strategy.

Initial investment of 10000 USD, 1000 USD monthly contribution and an active “trigger” of 200 day MACD (10 months) to switch between VFINX (Vanguard SP500) and VFITX (Intermediate Term Treasury Bonds).

https://bit.ly/2IGnzvV

Returns are better and volatility significantly lower (-18% worst drawdown) with the Timing Portfolio and the criteria are very simple.

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#265

@glina Indeed simple and quite good results. I am sure you know GEM (https://www.dualmomentum.net/), which is a bit similar and also quite easy to execute.

Do you follow such a strategy? Why (not)?

#266

Given that most of the people on this forum are employed in CH, that is not always 100% true.
As 2nd pillar could be considered bond-like, and is probably a significant portion of one’s portfolio.
(in my case, working only 5 years here, there’s already above 40k inside)
Therefore, I decide to put “everything else” outside of it into stocks; next to some cash for emergency. :slight_smile: (for now, later on I would add something REIT-related probably)
My opinion only.

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#267

sounds interesting. If that’s so simple, shouldn’t there be ETFs that implement this strategy already? That would be much easier even.

#269

SP500 crossed the 200 day MACD many times in 2018 alone. Such an active strategy would be difficult to follow.

This strategy would have produced inferior results if used through the recent bull run (since 2009).
https://bit.ly/2UqRni2

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#270

Thanks for the answers and the remark concerning the 2nd pillar.

Regarding active market timing stategy, I am really not looking into that at all. I would more be a “buy and forget” king of person. Plan would be to invest about 2000 CHF per month after initial investment with all my cash and do some rebalancing when necessary.

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#271

Hi Nugget,

I had a look at your 100% stocks portfolio. Since it looks close to what I am having in mind in terms of allocations, I would have a few questions regarding some of your choices.

Based on your spreadsheet (Nuggets robo rebalancing sheet), I ran some numbers (see second tab there:modified spreadsheet) and see that in the end, 23% of your portfolio is in emerging markets. I usually read that in term of risk/reward, people emphasize more small cap values than emerging markets, I was curious to read your thoughts on that and about your choice of having a significant part (23%) in emerging markets.

Also, if I did not screwed up my calculations, you could get “similar” exposition in the different regions and cap with only 5 funds and “very close” one (although lower in emerging markets) with only 4 funds. Therefore, I was wondering about your reasoning behind your 6 funds. Is it to be more easily able to tilt towards one fund in the future, other reason?

Additionally, you split the US market in 3 funds (VTI, VXF and VBR) however, it seems that with only two funds (VOO and VBR), you can get similar exposition to all caps (except micro). So again, I was wondering about the reasoning behind that.

Thanks in advance for answering.

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#272

hey @ecthe,
first i am honored someone takes a closer loook & appreciates my portfolio :smiley:
tbh i did set up this portfolio almost 2 years ago, then set it to autopilot and havnt thought much about it, and some memories are fading…

since my trading costs of ~0.35 US per trade are so low, i dont regard it as advantage to reduce the number of my funds from 6.

however the point you make is not invalid. 23% is actually quite overweighted, but i also wrote in my post that this was on purpose.
i based my portfolio choice on my portfolio selector sheet

Maybe this is a good point to revise my portfolio, but i’ll have to put some time in it, on the order of a month or so if i find the motivation. If there are any news, you will read them here :slight_smile:

I also remember that i emphasized the number of companies in my portfolio foor diversification purpose and therefore rather split them up abit more than ultimately neccessary. prime example was to split VT (7800 stocks) into VTI (3600) and VXUS (6200), thereby optimizing TER back then. I think for EM i had similar thoughts.

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#273

Is there a reason almost no one here goes with SWDA - iShares Core MSCI World UCITS in their portfolio? It has a fee of 0.2% (vs 0.25% for e.g. VWRL).

Am I missing something? Is there a good reason I shouldn’t use SWDA as a core part of my portfolio?

#274

Most people here goes with US domiciled funds like VT for that (or a combination of VTI + VXUS or VTI + VEA + VWO).

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#275

If you trade with a Swiss broker and don’t want to have US domiciled funds, you will be better served by XDWL (0.19% and listed on SIX in CHF) for lowest overall cost.

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#276

If you trade with a Swiss broker and don’t want to have US domiciled funds, you will be better served by XDWL (0.19% and listed on SIX in CHF) for lowest overall cost.

Thanks! I didn’t know about XDWL. Bit new to ETF investing. What’s the main reason you would want to go with US domiciled funds? Dividend tax efficiency?

#277

…unless you compare actual returns on justetf, and note, that the (by a mere 0.1%) “more expensive” iShares ETF has so far slightly outperformed the “less expensive” Xtrackers ETF, since the latter’s inception.

I wouldn’t optimise to the last base point.

Yes, tax efficiency. Keep in mind that there are probably hardly any (inexpensive) brokers left that will let EU retail customers buy US ETFs. With the notable exception of Interactive Brokers - and possibly some of their resellers.

Also it seems tax matters could get a bit more complicated and/or nasty, whether in Switzerland or after a move abroad.

#278

For the 10th time: SWDA is not the same as VWRL. SWDA is VEVE (0.18%). SWDA is missing Emerging Markets.

A match for VWRL would be an ETF based on MSCI ACWI, but these are very expensive. Well, there is a cheaper one from UBS, but it’s fresh and has almost no AUM.

When in doubt, check this website:

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#279

This is a wrong approach. You don’t want to deviate from the index by investing in an ETF

XDWL has a tracking “error” of 0.18%, which breaks down to 0.19% fees and -0.01% for securities lending. In other words, it tracks MSCI World nearly perfectly.

The best european MSCI EM ETF is indeed from Ishares, the EIMI (0.18% TER, includes EM small caps).

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#280

Why not - if it works in my favour? But I‘m not saying to deviate significantly from the index - even though in fact the ETF will (optimised sampling, costs…)

0.18% is the (theoretically) expected tracking error - not necessarily the actual, due to various smaller factors.

In this case, for instance, the iShares SWDA seems to have smaller actual tracking errors than XWDL. Here, for example iShares listed a realised tracking error of only 0.09% for SWDA.

So even though the TER (which does not include all costs and deductions) might be a base point more, the ETF might have better replicated the index - and returned more. Thus my earlier question about the „obsession“ with TER.

In this case anyway, the X-Trackers XDWL is a distributing fund, whereas iShares SWDA is accumulating, which might (also) be a more important consideration than than 0.01% difference in TER (which, as we saw, doesn’t even necessarily mean a more „expensive“ fund had „worse“ returns).

#281

I have been thinking about this a lot lately. Do you think its best not to accumulate EM? I am considering it. I am also from a EM country (South Africa) and I know what’s going on back home and it seems things are just gonna get worse.