Mustachian portfolios


#21

This is my portfolio right now, interested to hear any questions or comments.

80% Vanguard all-world FTSE & Northern European index fund
10% Euro bonds ETF
5% Precious metals in safety deposit box
5% Property

  • 3 months expenses Cash buffer
    ?% Pillar 2 & 3

I’m +30 years old


#22

imoh looks like a totally reasonlable mustashian portfolio for a long term investor :slight_smile:

depending on the absolute size of your stash and your “beliefs”, you could add diversification by adding small, mid & value indices as well as emerging markets. but yeah, only fiddling with somethign that is really good just as it is right now!


#23

I am using a pretty simple 2 stock portfolio with a relatively(>1 jear) big cash cussion instead of bonds.

80% Vanguard FTSE All World
20% UBS SPI Mid

It seems to be working fine for the moment.

What are the arguments for “Emerging Markets”? Does that have higher returns or something?


#24

The arguments for EM are added diversification and a rather high risk & return. however the latter is also the biggest con :slight_smile:
same argumentation holds for small cap and value stocks. Check out the books from Ferry or Kommer listed in this thread for more on that topic


#25

I don’t believe EM brings much diversification. Global markets are highly correlated these days.
When the big correction comes, everything will go down together.

I’m personally happy holding US stocks as the largest part of my portfolio - the biggest, most diverse, liquid and policed market in the world. US companies make significant earnings from abroad, so it’s not all that concentrated in US.


#26

As for risk/return: well, EM still hasn’t recovered from 2008 crash. Despite almost 10 years of bull market by now… That’s high risk no return to me.

One argument “for” EM is that that’s where all the people live. But EM companies suck.


#27

I can personally vouch for that. My Portuguese index fund pre-2007 is still just above the post-crash levels :weary:[quote=“hedgehog, post:26, topic:108, full:true”]

As for risk/return: well, EM still hasn’t recovered from 2008 crash. Despite almost 10 years of bull market by now… That’s high risk no return to me.

One argument “for” EM is that that’s where all the people live. But EM companies suck.
[/quote]


#28

I guess I will leave EM alone for now. Tanks for the info.


#29

80% Vanguard FTSE All World -> EM are weighted around 10%in this index


#30

I hadn’t done this yet, but I just compared the dividend yields between VWRL and VT, 1.99% and 1.56% respectively. That’s more than enough to justify the difference in TER (0.25% vs 0.11%). Something more to take into account when selecting an ETF.


#31

I am not sure what the explicit meaning of this is - VWRL resulting in higher dividends even after substracting TER, compared to VT?
But the two funds only approximately track the same index?


#32

The meaning is that the total benefit (excluding actual index performance) of owning VWRL seems higher than with VT, when you factor in TER and dividend yield.
That said, you’re right, they don’t track exactly the same thing. VT doesn’t include emerging markets and VWRL doesn’t include small-cap companies (probably the biggest reason why VWRL has a higher dividend yield).


#33

They track different enough indexes which explains different dividend yields. What good is the extra dividend (of which you’ll give roughly third in taxes to the state, btw) when your principal dropped by same amount or even more?

Just look at different yields for US vs non-US ETFs tracking the exact same index:


i do strongly believe that best is to own a US ETF on US stocks:

  1. it eliminates US dividend taxes at the fund level, which, assuming the lower 15% tax and typical 2% dividend yield is basically equivalent to a 30bp increase in expense ratio
  2. they have hands down lowest expenses ratio, as low as 0.03-0.05%, but in practice actually even lower thanks to e.g. securities lending. Whereas european equivalents charge several times more
  3. very cheap to trade: broker and exchange commissions are a tiny fraction of what it’d cost you on european exchanges, and it’s the highest liquidity market in the world, so lowest bid-ask spreads.

#34

That looks interesting, since I am redoing my investment strategy anyway since I am going to switch broker (saxo costs a fortune in the long run) I might as well change the portfolio.

Should I change to IB, I am considering going VT. The Swiss stocks stay the same(SPI MID). If I go with CT I will probably just leave it as it is right now.

If I understand it right I can reduce the withholding tax of VT to 15% with a w8ben and then reclaim those with the DA-1, witch would mean I only pay income tax on the dividends. Can somebody confirm this?

VT also does not seem to list in the ESTV wich is kind of concerning.


#35

At simplewealth.ch, we design and automatically rebalance portfolios for our clients.

For the objective of getting financially free, we like indexing, low fees ETF with CHF hedging (as CHF structurally appreciates vs. USD and EUR) and a 5-10 years horizon.

We designed 5 portfolios with different risk appetite in mind. In case this helps, here are 2 of them, our balanced and our most risky.

  • For the balanced portfolio, “Comfortable taking a chance” we have:

  • 37% Global Government Bond (CHF hedged)

  • 20% Global High Yield Corp Bond (CHF hedged)

  • 15% MSCI European Economic and Monetary Union (CHF hedged)

  • 10% MSCI Japan Index (CHF hedged)

  • 8% S&P 500 (CHF hedged)

  • 5% CH Corporate Bond

  • 5% Barclays Global Aggregate Bond (CHF hedged)

  • For the more risky portfolio, “No omelette without breaking eggs”, we have:

  • 35% MSCI European Economic and Monetary Union (CHF hedged)

  • 20% S&P 500 (CHF hedged)

  • 20% MSCI Japan (CHF hedged)

  • 10% MSCI Emerging Markets (USD)

  • 10% Global Government Bond (CHF hedged)

  • 5% High Yield Corp Bond (CHF Hedged)

Most of the ETFs we use are domiciled in Luxembourg and in Ireland to ease the tax treatment.

You can check more out on simplewealth.ch Disclaimer: those portfolios are as-is and can change over time!

Hope this helps!


#36

To be honest, 1% per year is way too high for a Mustachian portfolio. My 2 cents.


#37

+1,

At 1% this is almost hedge fund territory. And for what? Opening an IB account and a few moments of your time every now and then to do a trade on schedule? Which anyone can do for free in their own free time, inspired by tons on great financial advice on the net, including this site.

Wrong forum dude, here we’re all focused on extreme savings and frugality.

[quote=“jrmycohen, post:35, topic:108”]
We designed 5 portfolios with different risk appetite in mind. In case this helps, here are 2 of them, our balanced and our most risky.[/quote]
What do you mean designed? Slapped a bunch of random ETFs together to make it look impressive to unsophisticated victims? Where’s the reasoning, research and backtests?

I hold the opinion that the more a portfolio deviates from classic time-tested 60/40-like schemes and market cap weighting, the stronger must be the justification for it. 8% and 20% weights for S&P don’t correspond in any way to the market realities.

I don’t see much point in CHF hedging, at least for equities and a long term buy and hold investor.

First, it’s expensive and has arbitrary timing - most funds rehedge monthly, so if you don’t give your portfolio a complete makeover at least similarly often it makes little sense to do it. Long term, ok, CHF as a safe heaven and low inflation currency does have a tendency to appreciate, but in a single month it can really go either way, it’s rather speculative to bet that it’ll go up every month.

Second, for equities (unlike fixed income), what you ultimately own are pieces of companies, rather than, say, $$$'s with which you bought them. In the long run, companies are valued on the basis of their earnings, which often come from all over the world. S&P companies derive over half of their earnings from abroad in all sorts of currencies, it’s not that extremely concentrated in the US and USD as one might think at first sight. Hedge that!

Ah, junk bonds. I trust my fixed income guy that they’ll blow up any time after last year’s massive spreads erosion and pulled out safely already early this year.

Besides, as a private investor in Switzerland, you don’t normally really want high dividends outside pillar 3a system here. They constitute a rather expensive taxable income, unlike tax free capital gains. You should pay attention to local tax system specifics when investing.

That costs investors real money with higher TERs, much higher transaction costs and a lot of lost unreclaimable withholding dividend taxes as I already mentioned above. (Of course, you don’t have to give a shit about any of that, it’s not your money, you get paid either way and only have to care about maximizing AUM…)

And exactly what’s so hard with filling a DA-1? It’s almost exactly like filling the main part of the tax form, Wertschriftenverzeichnis, except you send it to a different tax office’s department for processing.


#38

How much are the full investment costs for your portfolio? As a consequence, what would be a fair price to you?

As of today, the current CAPE ratio for S&P is much higher than it’s historical median. When that occurs, history shows that there is a high probability for low/negative return over the following 10 years. However, history may not repeat itself and we are no fortune tellers so our approach is not to exclude but to significantly underweight S&P.

Investing without hedging is equivalent to taking long currency exposures and totally over-shadows the performance of the actual underlying targeted. These long positions would suppose knowledge about the FX market that we (well everybody) don’t have a clue about.
So indeed it may bear a cost (it does as of now because of the current rate environment) but removes fundamental purchasing power risk for Swiss residents.
Underlying companies may do business in several currencies but pay dividends and are priced in USD (SP 500 case), accordingly managing their cash (hedging or taking on the risk on the company level i.e. not to generalize at the index level)

Fair point but taxes are not the only reason why you invest in high yield. However if you believe equities are over priced, better to get higher taxes on dividends or coupon than risk a capital loss on equities.

On the Lux and Irish domiciles, we do CHF hedged and very few are traded in the US market. But we will have a look at apple-to-apple ETF (e.g., emerging markets in USD) factoring in the bid/ask spread and the low trading fees you mentioned (which broker are you using for US ETFs?)


#39

@jrmycohen
I appreciate you not just copy pasting an ad but handcrafting one, however this my not be your target audience. From my perspective it looks like a more expensive and less flexible version of truewealth to me. That is just my initial opinion and I am happy about more players in the “Fire and forget”- investing market. Good luck with your business.

Also do your 1% include the TER or is that separate?

@hedgehog
How does the taxes with VT work? Since it does not do ESTV reporting (at least not that I can find it) go I have to get all the numbers for the Tax-declaration myself? Also how do you get the info for the DA-1? Other than that I am pretty sold on VT.


#40

@ETSV reporting
in terms of a distributing VT i read somewhere that people succeeded in declaring their dividends by using the annual report of the fund. Since you get black on white the dividend payments, this seems not a problem. however, i dont know for sure :slight_smile:
and it could become messy for accumulating funds