ETF Buy & Hold Strategy for 10k on Degiro - ideas

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SClarke

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Hi,

I'm looking to invest €10k in ETF's on Degiro and trying to decide on the best option/options for a buy and hold strategy of 10+ years. Looking for well diversified accumulating ETF's. I'm new to investing in ETF's so i'd be interested in getting people's opinion on best ETFs/ combination of ETF's for the buy & hold strategy - I'm looking at the following ones at present: SXR8 / IE00B5BMR087 on XET, CSPX / IE00B5BMR087 on EAM & IUSQ | IE00B6R52259 on XET.

Should I only be considering ETF's on EU stock exchanges/ euro currency? On degiro, beyond the share price and TER, what else should I be taking into account - volume - the higher the better? I'd appreciate any advice. By the way, I'm aware of the tax implications - deemed disposal - associated with this. Thanks in advance.
 
I've no idea whether investing in an ETF us suitable for you or not, or if you understand the implications from tax perspective. But assuming you do:

SClarke said:
interested in getting people's opinion on best ETFs/ combination of ETF's for the buy & hold strategy
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What exactly do you want to invest in? Set your objectives first, then look at the ETFs that meet that objective.

It's not clear if you're looking at choosing 1, 2 or more ETFs?

One of the ETFs you've listed is an S&P500 tracker. The other is an all world index. That all world index is 57% invested in US, the majority will be S&P500 so there'll be a lot of cross over.

What's your pension invested in? Do you want to double down by investing in the same assets outside your pension?

If for example you work for a large tech company, and have massive exposure to shares via with, you might want a non tech ETF. Or maybe you want to invest exclusively in technology stocks.

Decide on what you want to invest in first, and then choosing an ETF will be easier.

As well as fees and size, make sure you look at tracking errors. There's no point investing in what's supposed to track the S&P500 if it's not actually replicating it.

SClarke said:
Should I only be considering ETF's on EU stock exchanges/ euro currency?
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Re currency. Your FX exposure is the underlying assets. It doesn't matter if an S&P500 ETF is quoted in EUR or USD - the FX exposure is back to the same USD quoted shares that make it up. (There are some FX hedged ETFs). It's not really a risk at all, since the large companies have income in all currencies, so over a long time period it's not something you should worry about.
 
Berkshire Hathaway IMO is effectively an S&P ETF proxy without the the tax headache for Irish investors, it doesnt pay dividends, what ever capital returns occur they will be via opportunistic buy backs. Very tax efficient for Irish investors. I expect the 5yr/10yr performance of BRKB vs SPY to be about the same and I'd actually wager a small bet that BRKB will slightly outperform SPY from todays prices - let Uncle Warren & Charlie sweat the details
 
Thanks all for the feedback. @RedDevil is there any breakdown/ single choice you'd recommend with the etf's you listed for a 10k investment? - hopefully the below gives more info on my objectives and answers your questions @RedOnion too, appreciate the advice.

RedOnion said:
I've no idea whether investing in an ETF us suitable for you or not, or if you understand the implications from tax perspective. But assuming you do:

What exactly do you want to invest in? Set your objectives first, then look at the ETFs that meet that objective.

It's not clear if you're looking at choosing 1, 2 or more ETFs?

One of the ETFs you've listed is an S&P500 tracker. The other is an all world index. That all world index is 57% invested in US, the majority will be S&P500 so there'll be a lot of cross over.
Click to expand...

I'm basically looking for an average return of 12-15% p/y on the investment long-term - 10-12 yrs, making that 10k lumpsum grow to 25k - aware I have to invest in a 'higher risk' etf to achieve that but not sure what is the smartest selection. I don't think investing in VCWE alone is sufficient for my return needs, it looks like I may need a combination of acc ETF's? e.g. more focus on VUAA which has better returns, then on the other hand obviously hedging all bets on the US is risky for a long-term investment too. I'm considering the breakdowns below, but open to hearing advice/other ideas from more knowledgable investors, thanks.

VUAA or IUSQ - 80%
EIMI / IE00BKM4GZ66/ MIl - 20%

or
VCWE - 80%
EIMI / IE00BKM4GZ66/ MIl - 20%

or
VUAA or IUSQ - 70%
VCWE - 20%
EIMI / IE00BKM4GZ66/ MIl - 10%
 
letitroll said:
Berkshire Hathaway IMO is effectively an S&P ETF proxy without the the tax headache for Irish investors, it doesnt pay dividends, what ever capital returns occur they will be via opportunistic buy backs. Very tax efficient for Irish investors. I expect the 5yr/10yr performance of BRKB vs SPY to be about the same and I'd actually wager a small bet that BRKB will slightly outperform SPY from todays prices - let Uncle Warren & Charlie sweat the details
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Thanks for the feedback, how does tax work for this - cgt when you sell-out and declare with your tax return each year is it? Is there a withholding tax too?
 
12-15% CAGR for the next 10 years?!?

Drop me a note when you figure out the portfolio thats going to deliver that...........better still start a hedge fund and I'll give you some capital to manage. Have a look at GMO's asset class return forecast - https://www.gmo.com/americas/research-library/gmo-7-year-asset-class-forecast-4q-2020/

Not the gospel but we are living in a low return world with the risk free rate at zero.......historical equity risk premium of maybe max 6%..........I'd suggest any investor investing in an index like the S&P should be very happy with a 6% CAGR from today. Pension funds are desprately handing money over to alternative managers as they, as professionals, struggle to get to their target returns of 7%

GMO above suggest emerging markets with a value bent as the place most likely to lead to outsized returns..........but those returns will be at the cost of your nervous system.........EM is very volatile........ask yourself if you could stomach waking up one Monday morning and seeing your 10k not magically turned into 20k but rather all the way down at 4k
 
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SClarke said:
Thanks for the feedback, how does tax work for this - cgt when you sell-out and declare with your tax return each year is it? Is there a withholding tax too?
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Its a company - no CGT until you sell the shares and book a profit........and as mentioned it doesnt pay dividends, capital return is via stock buybacks........its a hugely tax efficient vehicle for Irish investors that want to skip US ETF headaches and get S&P 500 like exposure
 
I would be slow to recommend what you ought to do.
10k is not a large amount but an amount that could be put away and forgotten about for at least the eight year tax review.
Whilst you might get the return you are seeking 12% to 15% is quite high.
We all now think globally and be aware the S&P is a partial global index and balance your other choices accordingly.
I concur with the view expressed on Berkshire Hathaway from a diversification and tax view,
Three or Four is more than enough to be buying.
So a larger US/Global exposure and a little Asia Pacific and/or Emerging Markets.
That is my contribution.
 
letitroll said:
Its a company - no CGT until you sell the shares and book a profit........and as mentioned it doesnt pay dividends, capital return is via stock buybacks........its a hugely tax efficient vehicle for Irish investors that want to skip US ETF headaches and get S&P 500 like exposure
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Is Berkshire Hathaway available on degiro?

I am planning to invest around 20K and can hold 8-10 years. Important factor is tax simplification and would be happy with 7-8% return.
 
letitroll said:
GMO above suggest emerging markets with a value bent as the place most likely to lead to outsized returns..........but those returns will be at the cost of your nervous system.........EM is very volatile........ask yourself if you could stomach waking up one Monday morning and seeing your 10k not magically turned into 20k but rather all the way down at 4k
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exactly and GMO were probably recommending something like that this time last year as the US and tech were overvalued then. look what happened in 2020 with the corona, EM and value just got a whole lot cheaper and Tech and US got a whole lot more expensive. The corona exaggerated the pre existing trends rather than changing them. But maybe now the ending of corona and the Biden presidency could finally be the thing that jumps the markets onto a new track
 
letitroll said:
Berkshire Hathaway IMO is effectively an S&P ETF proxy without the the tax headache for Irish investors, it doesnt pay dividends, what ever capital returns occur they will be via opportunistic buy backs. Very tax efficient for Irish investors. I expect the 5yr/10yr performance of BRKB vs SPY to be about the same and I'd actually wager a small bet that BRKB will slightly outperform SPY from todays prices - let Uncle Warren & Charlie sweat the details
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I realise BRKB looks to be a good s&p etf equivalent for Ireland's painful taxing of etf's, but I wonder when Buffet passes, if it could change track and start paying out dividends? There's nothing to say that it couldn't is there?
 
SClarke said:
On degiro, is it better to purchase on XET/ BYRN or NSY/ BRKB for UDS with currency fees?
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Personally I just stick with the euro accounts now to make it easier. I’d some $$ ETFs that were just a little harder to deal with because the $/€ had changed a fair bit between purchase and sale.
 
TheBig40 said:
Personally I just stick with the euro accounts now to make it easier. I’d some $$ ETFs that were just a little harder to deal with because the $/€ had changed a fair bit between purchase and sale.
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Makes sense, thanks for the advice. In this scenario, do you reckon the volume would be an issue to consider at all when selling down the road, 4k in XET vs 5M on NSY?
 
SClarke said:
Makes sense, thanks for the advice. In this scenario, do you reckon the volume would be an issue to consider at all when selling down the road, 4k in XET vs 5M on NSY?
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You want to hope that there is enough volume that there is a market for them when you go to sell. 4K does seem small for the volume. Is that current trade with markets closed or overall?
 
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