# Does my portfolio look ok?



## Yam_Naem (13 Apr 2017)

I'm 26 and trying to start saving for the future this year. Currently, my rather small pot of savings is in a credit union account. I read a book recently that suggested a very good return could be achieved with a long-term portfolio of index funds and bonds, buying more stock indexes when the market lowers and selling more/buying more bonds when it rises.

I've come up with the following portfolio and I'm just looking for advice. I know nobody can predict future returns but I think just a bit of confirmation that this looks like a decent strategy might be helpful, or any advice to change the portfolio would also be nice:

20% invested in euro-denominated bonds (perhaps using a bond index?)
20% in Vanguard S&P500 ETF
20% in Vanguard Total International Stock
40% in a German index fund

This will be a DIY thing using a service called Degiro. Does it look ok or is there any glaring problems?


----------



## aristotle (13 Apr 2017)

Probably worth asking about your pension plans and if you are maxing out your AVC's there. Some, including myself, would suggest maxing your AVC before investing into equities yourself.

Only thing that pops out is why such a high concentration on one stock index, Germany?


----------



## Yam_Naem (13 Apr 2017)

aristotle said:


> Probably worth asking about your pension plans and if you are maxing out your AVC's there. Some, including myself, would suggest maxing your AVC before investing into equities yourself.
> 
> Only thing that pops out is why such a high concentration on one stock index, Germany?



Thanks for your comment. I work as a freelance writer so I'm not quite sure if AVCs apply to me (don't really know what they are in truth). The reason for the possible investing into this portfolio is to save for the future, which includes retirement. I could maybe invest in a pension fund, but I'm interested enough in investing to want to try it myself. 

I picked 40% in a German index because it doesn't have any currency risk and it's the strongest european economy. But perhaps my reasoning for that is flawed.


----------



## PGF2016 (13 Apr 2017)

Taxes and fees are the biggest drain on investments. AVCs can be contributed to a pension from your gross salary. You are investing with Degiro from your net (after tax) salary. It's a much less efficient (i.e. more expensive) way to invest. 

I am investing with Degiro for expenditure that will be due before retirement but not in the short or medium term. 

http://www.consumerhelp.ie/avcs


----------



## Yam_Naem (13 Apr 2017)

PGF2016 said:


> Taxes and fees are the biggest drain on investments. AVCs can be contributed to a pension from your gross salary. You are investing with Degiro from your net (after tax) salary. It's a much less efficient (i.e. more expensive) way to invest.
> 
> I am investing with Degiro for expenditure that will be due before retirement but not in the short or medium term.



There's no guarantee I'll be living in Ireland beyond next year, so I'm not sure how taxes work in this case. I plan to go live abroad in Asia, so after the current tax year, I will be paying tax abroad not in Ireland.


----------



## Sarenco (13 Apr 2017)

RonanM1990 said:


> There's no guarantee I'll be living in Ireland beyond next year, so I'm not sure how taxes work in this case. I plan to go live abroad in Asia, so after the current tax year, I will be paying tax abroad not in Ireland.



Given your small pot of savings and the fluid nature of your immediate plans, I would suggest that you leave your savings in cash for the time being.


----------



## PMU (13 Apr 2017)

The Vanguard Total International Stock Index Fund (VGTSX) at present is 30% Emerging Markets, 42% Europe, 30% Pacific, 7% North America and others the rest. So why add 20% to a German only index fund?  42% to Europe seems about right so why not drop the DE only fund and just  load up on VGTSX and increase the S&P ETF to give yourself a significant allocation to US equities? Also why are you investing 20% in bonds?  You don't need income and bond values will drop when interest rates increase. If you want lower volatility why not consider asset classes that have low correlations with equities, e.g. property, timber, commodities, absolute return funds?


----------



## ExcellentBanana (15 Apr 2017)

PMU is completely somewhat correct. Staying away from income related instruments (bonds) for the time being is a on balance a good idea as the probability of interest rate risk in Europe is increasing. However, leaving out fixed income securities in the long-run in your portfolio is a complete no-no. But you also need to diversify (overweight corporate vs. sovereign).

As PMU pointed out, your allocations are overweight in European securities which doesn't make for optimal portfolio diversification. DIVERSIFICATION IS KEY if you are going to invest passively. Why not just buy exposure to VGTSX and the VanguardS&P500 ETF for your equity allocation?

What is Degiro like? I have heard mostly negative reviews so be careful in reading the terms and conditions.

If you are a writer and you are starting out on this exciting path, I can't recommend the following book enough: A Random Walk Down Wall Street by Burt Malkiel. It is a seminal piece of work in finance for retail investors. It is the reason why passive investing is becoming the biggest game in town today. It's really easy to read and It will give you a good understanding of the biases and heuristics retail investors fall victim to when choosing what investment strategy to use, what asset classes to invest in, etc. 

Finally, you should talk to a qualified financial advisor depending on the amount you have to invest. And also choose your QFA wisely. Ireland is still the wild west when it comes to high street brokers since investment management firms pay some brokers a feeder fee if you invest through them.


----------

