Newbie here, looking for some constructive critique/feedback on my portfolio plan. Basically i have €10k to invest and my plan is to dump a lump sum of €9800 into these pie allocations which I hope is diversified but simple enough so that I dont have too hard of a time with deemed disposal in 8 years:
Im then going to put the remaining €200 into something like this and top up around €300 every quarter or so:
I realize as time passes this will become very equity heavy, so I can look at increasing the fixed income allocations in my initial lump sum investment to compensate. Im in my mid 20s so i dont mind exposing myself to higher volatility in exchange for some extra long term growth, hence the 90:10 split of the initial investment,
Just my personal opinion and no financial advice, I am a noob and learning something new everyday, quite literally:
I would personally spread out that 9800€ investment across time, lets say 6-12 months. In the grand scheme of things probably irrelevant because you have a large time horizon but I would have tried to reduce my risk that way.
Market kinda funny right now…
Agree with @JustLookingThx on the investing in tranches approach. Some indices are at all time highs or near to, so it’s reasonable to think there might be a bit of chop on the way.
Long run, probably won’t matter, but would be a good way of influencing a positive start to the portfolio.
Thanks for your response, I can look at drip feeding €1100 or so over the next few months into the first pie alongside my other deposits to reduce risk associated with the current market.
Just on your second comment would you recommend further breaking down the equity indexes suppose say by region and then weighting my portfolio by regional market cap to reduce ER?
I’d trim the number of ETFs and concentrate on the top four to avoid duplication and keep costs down. Anything below say 5-10% is unlikely to make much difference in the long run.
But the iShares funds are huge which means good liquidity and tight bid/offer spreads. I say this partly because I own Blackrock shares, which are up 55% for the year, which easily recompenses me for the fees I pay them because of owning iShares ETFs. I am keen for people to invest in my company’s products. Maybe you would also like to buy some BLK shares alongside iShares ETFs.
iShares have an interesting range of ESG and SRI funds that have been out-preforming their regular counterparts. E.g. 2B7K (iShares MSCI World SRI EUR) vs EUNL (iShares Core MSCI World EUR), up 42.11% and 40.27% for the past year respectively.
Personally, I would not bother with any bond fund, especially at your young age.
Make sure you understand what you have to do in your tax jurisdiction about reporting on dividends in both accumulating and distributing. ETFs.
I think the way to think about lump sum investing vs DCA is this. Ask yourself, how disappointed will you feel if immediately after investing you lose 5%? Alternatively, how do you feel if after investing you realise a month later that you could have bought shares a month previous for 5% cheaper than you can today? Comparing (a) regret at loss vs (b) regret at missed gains, many people find (a) feels worse than (b) and that is why DCA appeals. But in a rising market, — which occurs more than half of the time —, (b) is actually more likely than (a).
I’d personally rather be in the market opposed to sitting on the side lines. If you were intent on a DCA method, then perhaps invest a large portion as an initial investment and smaller amounts thereafter?
I tend to agree with others regarding the amount of ETFs. So much so that I did a similar thing initially and I now currently hold just 2 in total, with the intention being that I invest a set amount each month (as I currently do not have a large lump to invest)
Credit to you as I believe you’re going the right way for starting out and I wish I done the same thing initially.
Also consider at present it’s deemed as a “stock pickers market”, but that depends on your time frame in the market, research time and risk tolerances. But with that being said, I believe ETFs over a significantly long period of time should out perform individual stock picks in most cases.
Yeah I came here to say this. Personally, I have always ended up paying more doing a DCA approach. I know I could think of that as a cost of mitigating risk, and also it could have went the opposite way for me. However, with a long view timeframe, I’d now get my money in the market rather than drip-feed it in.
And I’d say the same were it not for the current state of the US indices in particular.
To be clear I’m not suggesting a correction is imminent. the last major dip on the SPY was only 6%, but currently that, the Dow and the NASDAQ are all at all time highs, with SPY and NASDAQ both in overbought territory.
I’d at least keep some on the sidelines for the next dip.
Just a thought but have you considered keeping it simply, and only having one all world holding - you have a small amount to the Vanguard FTSE All World ETF EUR Acc, or are you trying to go a bit overweight in some markets?
You also have a bond fund in there, so you could consider the LifeStrategy ETFs instead. The OCF is 0.25% and just think of it as not having to rebalance your pie for an extra 0.05%.
Myself, I have most in this, with smaller satellite investments in Long Term Global Growth, Scottish Mortgage, Keystone Positive Change, Chrysalis Investment Trust and Schiehallion, and a scattering of stocks on 212.
Thanks everyone for getting back to me, really appreciate all the feedback!
After taking a bit of everything on board and reevaluating my strategy Im thinking of going with the following.
For the first pie Im going to put my lump sum into the following more simplified allocations:
I have removed the real estate etf and have upped the allocations towards bonds to 10%. I know that there were some suggestions to remove the bond fund entirely but my thinking (I could be way off) is that if we have a market crash similar to last year due to more lockdowns or such, I will dump that entire bond fund into equities whilst they are cheap.
After some thought I think I am going to stick with the initial plan to dump the lump sum in 1 (maybe 2) goes into those 4 ETFs as I would rather have time in the market even if it dips, and as I have said the bond fund should offset this if I buy use it to buy the dip. It would also simplify that returns, I dont want to deal with having deemed disposal on 4 ETFs 9 times spread over 2 tax periods.
I will still be saving into a deposit account so will have also have some spare funds on the side in that regards too.
For my second pie i have reduced it to just consist of the the Vanguard S&P 500 ETF (VUAA).
My thinking here is that i can deposit monthly to this fund and it can serve as a placeholder until I have more free time available to build a more active portfolio with stocks and the such.
I think overall here I have managed to reduce cost by eliminating some of those unnecessary expensive ETFs, and my portfolio plan is much simpler.
All the feedback has forced me to think more about my strategy long-term, so thanks to everyone who has taken the time to reply,
Cathal
