Portfolio Charts

[Tyler9000]

You're welcome! It's always great to hear that the site helped someone choose an asset allocation. Writing is fun and all, but inspiring action is the ultimate goal.

[Scott 2]

In Tyler's journal I wrote:

My top suggestion would be to let users pick the year back testing starts in.

One criticism that has stuck with me, is the US switching from the gold standard in the early 70's, coupled with high inflation during that time period, skews performance for gold heavy portfolios, especially the golden butterfly. This MMM thread touches on it:

https://forum.mrmoneymustache.com/inves ... butterfly/

He responded with:

I hear ya. Without devolving the journal into a technical discussion, I'll just point out that I specifically address this critique here: https://portfoliocharts.com/2019/07/23/ ... f-bubbles/

Tyler - that is a good reason not to allow selection of the back testing time period, thank you. I missed it reviewing the site. It is a more sophisticated perspective than I had in my mental model.

Another idea, would be structuring a curriculum off the content you have already created. The site is already richer than 99% of other resources, but it requires a lot of choose your own path thinking. That is very intimidating when you know nothing. Even knowing something, I missed an important concept.

It isn't fun to dumb something down or support the resulting audience. I get it if that's not something you are interested in doing.

[Tyler9000]

It's true that the site is structured around the idea of self-exploration. I've watched how people interpret the content over the years and honed things a bit to address common questions or misconceptions (FAQs, front-page key concepts, anticipating critiques, etc), but there's always room for improvement.

I think the idea of building some sort of curriculum, book, or other system to walk people through the thought process certainly has merit. I also understand that different people may respond to different things. For example, some may really want a book that they can read cover-to-cover, while others may prefer short videos/podcasts where I discuss concepts more conversationally. If anyone has suggestions or examples that they think are particularly effective, I'm open to ideas.

[jennypenny]

@Tyler -- May I ask a remedial question?

Would you explain your start date sensitivity chart? Maybe just explain using the 'luckiest' and 'unluckiest' points you give?

Sorry to bug you.

[Tyler9000]

Would you explain your start date sensitivity chart? Maybe just explain using the 'luckiest' and 'unluckiest' points you give?

Always happy to talk data.

Put yourself in the shoes of someone evaluating a fund using the typical trailing 10-year average you find online. Many people just pick the highest returning fund, only to experience a very different 10-year average after they buy. The SDS chart tracks the delta in this situation over any starting point.

For every date on the chart, the red line shows the backward looking 10-year return and the blue line shows the forward-looking 10-year return. The luckiest investor experienced the largest positive delta between the red and blue lines, while the unluckiest investor experienced the largest negative delta. The SDS stat is the total range between those two extremes, and is a measure of portfolio consistency over time.

You can also read a longer explanation here: https://portfoliocharts.com/2016/05/15/ ... an-others/

[jennypenny]

Thank you!

[classical_Liberal]

...

[Tyler9000]

Yeah, January is always a busy time for data updates. Enjoy!

[Tyler9000]

For the European investors out there, I have a question about how normal buying and selling of ETFs works outside of the US.

Here in the states, people normally look up funds by the ticker name. So if you want the iShares long term treasury fund in the US, you buy TLT. Easy enough.

In Europe, it's obviously a lot more complicated with the variety of countries and exchanges for the same fund. As I understand it, a single fund will always have one ISIN code but could go by multiple tickers depending on what country you're in. For example, the iShares fund for intermediate European government bonds has the ISIN IE00B3VTML14. But the same fund goes by the CSBGE7 ticker in Italy, and either SXRP or A0X8SL in Germany depending on if you're using the given ticker name or the native WKN standard. That gets... confusing.

So here's my situation and question. I'm working on an idea for a tool that helps people identify specific index funds that they can buy to build out a portfolio. What is the most useful fund information that the majority of everyday European investors will understand? Do people looking to buy a fund at their chosen brokerage use the longer ISIN codes, the local ticker names, or something else entirely?

[wolf]

I always used the ISIN. But first I searched for different funds. If I identified one I save the ISIN locally on my computer e.g. in a spreadsheet, etc. And my broker/bank uses only the ISIN as the master identifier in my portfolio. Buy and sell orders start by submitting the ISIN.

[Seppia]

Agreed with wolf, but most times the tickers are easily understandable, I’ve never experienced anything dramatically different like in the examples above.
For example Vanguard Europe stock index fund ticker is
VEUR.AS for the amasterdam one
VEUR.L for London
Etc.

But yes the ISIN is the way to go if you want to be sure

[Quadalupe]

+1 for using the ISIN number! I just paste it into my brokers search box and the locally available ticker names pop up.

[Tyler9000]

It helps to know that ISIN is the right foundation to build on. I'll start there and work my way up. Thanks!

[simplex]

On the topic of Vanguard and ISIN codes:

I find it quite hard to translate (in my mind) the Vanguard ticker names / ISIN into what the fund actually is.

For example are these actually the same?

Code: Select all

VEUR.AS for the amasterdam one
VEUR.L for London

Or are there differences when buying one vs the other.

And then there's the issue with e.g. a Vanguard total stock market fund, either in USD or EUR. For me it's not clear if the difference is only the currency, or if there is more relating to e.g. how dividends are reinvested/taxed/handled.

Any recommendation for a NL based investor?

[Tyler9000]

@simplex -- Yes, those are the same fund on two different exchanges.

When dealing with ETFs in Europe, any one fund can have a variety of different permutations based on the exchange, currency, and distribution method. For example, here are all the various listings for the accumulating and distributing versions of VEUR. But the underlying index is identical in each case and can be easily found using the ISIN. There's one code for the accumulating version and one for the distributing. (I don't know why Europe does it like that, as in the US it's just a brokerage setting for any fund that you can switch at-will. But it's just how they built the system.)

As for the currency of the fund, it should have no effect on the underlying performance in terms of return percentages. So as far as I can tell that just affects the steps you may have to take to buy/sell with your brokerage. Although if that's not true, please let me know!

For your specific needs in the Netherlands, I highly recommend JustETF.com. Click the links above, and switch the country to the Netherlands. You can then search for any fund you like.

[Seppia]

Accumulating ETFs are more tax efficient, becase for reasons unknown the accumulated dividend is not taxed immediately.
The reinvested amounts will count as an acqusition with zero cost base.
So basically you're deferring taxes and gaining a bit with the compounding.

So let's say
You buy 100 worth of VEUR distributing. It pays a dividend of 4. In italy you get around 3 net. So if you reinvest you'll have 103 worth of veur and a cost basis of 103.
You buy 100 worth of VEUR accumulating. it pays a dividend of 4. You get 104 worth of VEUR with a cost basis of 100.

Most people in italy (and in general in europe) get overly excited for the accumulating version because they see the difference between 104 and 103, but they fail to account for the fact that should you sell* you'll pay taxes on zero capital gain on the distributing version and on 4 for the accumulating.

Of course time is on the accumulating side, but if you do the math it comes out at around an advantage of one dividend every 10 years**, so it's not the end of the world and I don't sweath it that much (I usually go with distributing as I prefer the optionality of cash).

*sooner or later if you only have accumulating you MUST sell
**for italy at least, but it's not dissimilar in F, DE, etc

[simplex]

@Tyler9000 Thank you, your explanation helps a lot. And JustETF looks quite interesting.

What I still do not understand 100% is how Vanguard funds domiciled in Ireland vs. the US work regarding their tax obligations. I did read https://en.swissquote.lu/international- ... -al-capone, and it seems easier for met to just choose the Irish ETF's.

@Seppia Thank you for your advice. However in NL we don't have capital gains tax. Each year we are taxed on the amount of money we have (wealth tax). So for the the tax it does not matter if an investment gained 100% or lost 50%, you are taxed on the amount of money you have on Jan, 1st.

[Tyler9000]

I'm working on an idea for a tool that helps people identify specific index funds that they can buy to build out a portfolio.

This one took a while, but I finally finished the first pass: https://portfoliocharts.com/2021/05/22/ ... portfolio/

As always, please let me know if there's anything I can do to improve the utility of the tool in your country. It's an ongoing project, but I feel like this is a pretty good foundation to build on.

[Quadalupe]

It looks great Tyler, thanks! I have two suggestions:

1. Add the Fund Finder to the existing portfolio as the sheet. That way it's easy for people to quickly look at how they can actually implement a specific portfolio. E.g. at https://portfoliocharts.com/portfolio/p ... portfolio/ add the Fund Finder below the Stocks/Bonds/Other sheet
2. Maybe add a European option (next to the NLD/SWE/GER options) as well to make those portfolios more robust. For example, the Dutch stock tracker AEX is quite small and not something I'd put a lot of money in. A broader index fund based on the EU/Europe as a whole might be more relevant for people from smaller countries like Netherlands and Belgium.

[Tyler9000]

Good ideas!

I added a "Find ETFs" link to the portfolio pages, but I agree that adding the fund info directly to the page would make a lot of sense. I'll definitely look into it. And while my approach for now is to suggest funds that match the data rather than point people towards alternatives, I see where you're coming from. I'll have to think about that.