Early Retirement Extreme Forums

Thanks! What platform do you use to invest? How does it work in Germany tax-wise?

Why do you want dividend paying stocks/funds? If it's a taxable account you will just lose money from it, since you need to pay tax everytime dividend is paid instead of delaying until you want to spend the money.

I'm still learning how to invest, I don't have a clear plan yet so I'm not saying I want that, I am only inclined towards it. The reason is that I could get the money without selling the underlying assets, i.e. it would be like a salary. I think this makes running out of money in the long term less likely. Feel free to educate me if you think otherwise

I will try to not make it complicated, so let's keep taxes and transaction costs outside for now:

The chance of running out of money is exactly the same whether the funds/stock pay dividends or not If a company earns $3 per share, they can choose to pay it out to their shareholders or keep it in the company. If they pay it out, the value of the stock (which is just a share of the company) decreases with $3.

By owning a non-dividend paying stock (or fund), you decide your own "dividend yield" by selling the portion you need every year. If you need 2% yield, sell 2% etc. The only disadvantage with this method is that you might need to pay transaction fee to your broker.

Current status:

• 21.620€ in 4%/y savings account
• 1.000€ in new broker account ready to be invested

= 9.05% of goal

+ 1.500€ in joint account with GF.

During the past few weeks I've been quite anxious about starting to invest in stocks. I think that 1) it's time I learned how to do it (starting from the basics like how to buy a stock through my broker) and 2) I may be losing money by having everything in the savings account instead of potentially earning more in the stock market.

So I've been trying to come up with a simple investment plan, that I can easily implement and maintain. My currently envisioned portfolio is looking like this:



Where cash/bonds refer to my current cash savings (which I will turn into bonds once my bank stops paying me 4%/y).

The percentages will likely change over time, but I consider using this chart as a starting point to start buying ETFs for each slice.

For Europe I have listed the following, but not yet decided:

• iShares STOXX Europe 600 UCITS ETF
• iShares MSCI Europe UCITS ETF (Acc)
• iShares Core EURO STOXX 50 UCITS ETF (Acc)

Possibly I will decide based on the TER.

For US, I only have:

• iShares Core S&P 500 UCITS ETF (Acc)

And finally for emerging markets:

• iShares Core MSCI Emerging Markets IMI UCITS ETF

At some point I was convinced that I wanted to buy iShares Core MSCI World UCITS ETF but currently I think that I'll benefit from having control over my exposure to each region of the world and buy ETFs accordingly.

Hi Josué. Do you intend to invest also in SmallCaps, in order to diversify even more? Over the long run (history) SmallCaps have done fine, higher return, but also with higher volatility.

For the sake of simplicity, I wasn't thinking about adding small cap ETFs to the mix... Don't large indices, like SP500 and Stoxx600, already include some small cap?

I understand. It is easier to manage less portfolio positions than more. Large indices, like SP500, cover only Big and Mid Cap. You can research that very easily on morningstar when you look at "Holdings Style", e.g. SP500 Out of diversification reasons/benefits I mixed Big/Mid/Small-cap with about 1/3 each. Each capitalization has its own positive and negative aspects of course.

I see, did you use ETFs for the Big/Medium/Small cap allocation? If so, which ones did you buy for each capitalization?

Thanks for the Morningstar tip!

Here you can read more about the general principles of my Asset Allocation viewtopic.php?f=3&t=9309#p151915

Yes I use 12 ETFs. Of these 12 ETFs "only" 7 ETFs are for equities (if you don't count gold producers). Please consider that I am based in Germany and therefore try to use German listed ETFs only. With 12 ETFs I can apply my favoured Asset Allocation very good.

% ETF
5 ETFS Physical PM Basket ETC EUR
10 iShares Diversified Commodity Swap (DE)
2,5 iShares DJ Asia Pacific Sel Divi 30 (DE)
10 iShares Global Govt Bond ETF USD Dist...
5 iShares Gold Producers ETF USD Acc EUR
10 iShares JP Morgan $ EM Bond ETF USD D...
15 iShares MSCI EM Small Cap ETF USD Dis...
2,5 iShares MSCI Japan Small Cap ETF USD ...
15 UBS ETF MSCI Emerging Mkts USD A dis EUR
15 UBS ETF MSCI World USD A dis EUR
5 WisdomTree Europe SmallCap Div ETF EUR
5 WisdomTree US SmallCap Dividend ETF EUR

The huge benefit with morningstar is, that you can create your own portfolio and then you can do a "X-Ray". It shows you how many percentage of your portfolio is invested in Big/Mid/Small and Value/Blend/Growth.

Thanks! What's your opinion about justETF.com ?

What do you mean by 'German-listed ETFs'? You mean traded in the German markets? I am not paying much attention to where the ETFs that I plan to buy are traded (mainly Netherlands and Germany, I don't live in any of those countries though).

An important question that I have for you: how often do you buy your ETFs? I suppose you don't buy all of them every month (in the proportions you defined), as you would be placing 12 buy orders, and would pay brokerage fees on all of them, no? Also, are you doing euro cost averaging? i.e., are you regularly investing the same amount in each ETF? I'm finding it hard to clearly define a strategy in this point.

This is my current idea for how to buy:
1) Accumulate 1.500€

2) If last ETF buy order was

• more than 1 month ago:
  - invest 1.500€ in ETF according to the proportions
• less than 1 month ago:
  - wait until time since last transaction is more than 1 month
  - invest 1.500€ in ETF according to the proportions

3) if portfolio value is

• >= than retirement portfolio goal:
  - retire
• < than retirement goal:
  - back to 1)

The idea of accumulating 1.500€ is that it allows me to buy at least 2x AMS:CSPX (S&P500 tracker) and it's high enough to make my transactions infrequent enough to minimize brokerage fees (3 orders per 1.500€ accumulation).

Also, it will be hard to accumulate 1.500€ every month, so my investing intervals will surely be larger than monthly, which is usually the recommended in most dollar cost averaging articles I've read. I don't think that's a big problem though, since my investing horizon is long.

BTW, my current plan for stock-ETF allocation is:

• 45% iShares Core EURO STOXX 50 UCITS ETF (Acc)
• 40% iShares Core S&P 500 UCITS ETF (Acc)
• 15% iShares Core MSCI Emerging Markets IMI UCITS ETF

January 2018 update

Portfolio:

• 21.630€ in savings account (4% interest)
• 1.312,30€ in stock ETFs
• 2.774,19€ cash

= 25.716,49€ (10,29% of portfolio goal)

Two main things to highlight this month:

• I crossed the 10% threshold of my goal
• I invested in the stock market for the first time in my life, buying a few ETFs

This is my current stock allocation (all in ETFs):

• 655€ (49%) 6x iShares Core EURO STOXX 50 UCITS ETF (Acc)
• 437€ (33%) 2x iShares Core S&P 500 UCITS ETF (Acc)
• 235€ (18%) 9x iShares Core MSCI Emerging Markets IMI UCITS ETF

Current concern:

• I spent 15€ in fees buying the ETFs last month, a bit more than 1% of the total amount I invested, which seems high. I'm wondering if I should aim for decreasing this number, through:
  • Accumulating more before buying or
  • Buying an ETF that tracks the MSCI World index with roughly the same amount of money (around 1500€ each time I buy)

Here go some pie charts I've wanted to do for a while but couldn't because I only had cash:

A few points from my european perspective since you requested

- 4% interest in savings is great. No point buying bonds if you can get that. I would keep adding a bit each month to this
- I would not add USA stocks. By any valuation measure they are the most expensive area in the planet, by a wide margin. Personally, I'm only buying european and emerging these days.
- I would wait and accumulate sufficient money to buy in a way that commissions are 0.5% or below

Thank you @Seppia !

1) your point about USA, what do you mean by the most expensive area? I'm confused, I don't understand if you are referring to the value of the index/ETF. My choice for USA and Europe is because I think both economies will grow in the medium-long term. Do you not think this will happen to USA?

2) I have decided to aim for investing in chunks of 3.000€, this way the 15€ commissions are 0.5% of the total amount.

Mmmh
Based on question 1, I recommend you start reading about valuations and stock markets in general.
Start researching what P/E means, what P/B means, and what CAPE means, and reading a lot.
Then, once you've learnt the basics, maybe this is a bit too advanced but it's a great short read: https://www.starcapital.de/fileadmin/us ... imling.pdf

I would just keep saving and stashing in your awesome 3.75% interest savings (that's a lot in Europe today!) while you learn a bit more.

Please don't take this badly, I don't mean to sound arrogant but you seem a bit "green"

Hehe thanks for the advice. Can you recommend me some starting material on those topics?