Should I have VGK?

dor843088

Looking for a bit of feedback here please. I max out my tax advantages of my pension into the Irish life consensus fund (13k yr) overpay my mortgage (10 yrs left) and put 1k per month into etfs. I'm just starting with the etfs so I need a good plan to stick to. I have 9k in vti and 2k in vt. Just wondering what people here think what my percentages of these should be or if I should add vgk to weight europe since my spending will be in euro. Iv a 20 year time horizon on this where I plan to draw out maybe 4 percent a year to cover my expenses if it goes well. Any feedback appreciated.

jive

I've a similar portfolio. I am more heavily weighted in VGK than VTI. I think it's a good idea to have more exposure to the market in which you live (although Ireland is only represented as 0.4%, it is largely UK/Ger/Fra/Swiss).

Off the top of my head I think I try to keep the balance around VGK 45%, VTI 30%, VEA 25%. These figures were completely arbitrarily decided on, I wanted most exposure to European market as I live in Ireland and the remainder on ROW exposure.

dor843088

jive wrote: »

I've a similar portfolio. I am more heavily weighted in VGK than VTI. I think it's a good idea to have more exposure to the market in which you live (although Ireland is only represented as 0.4%, it is largely UK/Ger/Fra/Swiss).

Off the top of my head I think I try to keep the balance around VGK 45%, VTI 30%, VEA 25%. These figures were completely arbitrarily decided on, I wanted most exposure to European market as I live in Ireland and the remainder on ROW exposure.

Yea I'm realising that now myself as the falling dollar has hammered me even though the market has been good. I think more europe seems like a sensible idea. Thanks for the feedback.

wordofwarning

American firms over the long term have tended to outperform European firms. IMO American firms are more innovative and flexible than a lot of European firms eg look at the success of American firms in emerging markets versus European firms

I would personally go long on American firms versus European firms. John Bogle the founder of Vanguard, favours American firms versus European firms. It makes sense, European institutions are often weaker relative to the US

dor843088

wordofwarning wrote: »

American firms over the long term have tended to outperform European firms. IMO American firms are more innovative and flexible than a lot of European firms eg look at the success of American firms in emerging markets versus European firms

I would personally go long on American firms versus European firms. John Bogle the founder of Vanguard, favours American firms versus European firms. It makes sense, European institutions are often weaker relative to the US

I hear you and that was my original plan. 100% total us stock market and done at that. But the recent dollar fall has woke me up to the reality that if the us market falls and so does the dollar my portfolio will take an enormous hit possibly when I need it most. I'll still plan to have 40 to 50% US. It seems quite difficult to get good advice for eu investors and almost impossible for irish residents.

draiochtanois

This post has been deleted.

markjbloggs

Would any posters to this thread be willing to post their actual vs expected performance for their etf investments? I am working on an investment vehicle and would be curious to understand peoples expectations, particularly as regards etf's.

thanks in advance,
M

dor843088

draiochtanois wrote: »

Healthcare inflation is growing much faster than most other sectors.
It might be useful to have some exposure to that as a hedge.

Thanks for the suggestion but broad based etfs are as deep into the weeds as I want to go with this. Anything more than that and I would actually have to know what I was doing

jive

wordofwarning wrote: »

American firms over the long term have tended to outperform European firms. IMO American firms are more innovative and flexible than a lot of European firms eg look at the success of American firms in emerging markets versus European firms

I would personally go long on American firms versus European firms. John Bogle the founder of Vanguard, favours American firms versus European firms. It makes sense, European institutions are often weaker relative to the US

Previous performance won't be indicative of future performance. IMO, you should be most heavily weighted in the area in which you reside.

VTI is probably more likely to outperform VGK. However, given you reside in the 'VGK' area, VGK outperforming VTI will have a much bigger impact on your personal finances if you were more heavily weighted in VTI.

Your argument is valid and it's not an easy choice. Either way I think some exposure to VGK would be wise even if you have a larger holding in VTI.

wordofwarning

jive wrote: »

Previous performance won't be indicative of future performance.

I disagree. The mindset of European firms is very different to mindset of American firms. There is very little innovation in European IT, biomedical sciences, finance etc relative to American firms. The biggest brands in our homes are often American and that is here to stay

jive wrote: »

IMO, you should be most heavily weighted in the area in which you reside.

That is the mistake that most people make in finance. Instead of diversifying the risk, you choose to take on more of it. What if there is massive austerity in the EU, your pension etc gets hit. But your stocks will get hit too, as you heavily invested in the same region.

wordofwarning

dor843088 wrote: »

I hear you and that was my original plan. 100% total us stock market and done at that. But the recent dollar fall has woke me up to the reality that if the us market falls and so does the dollar my portfolio will take an enormous hit possibly when I need it most. I'll still plan to have 40 to 50% US. It seems quite difficult to get good advice for eu investors and almost impossible for irish residents.

But you are planning for the long haul. What dollar is today should be irrelevant if you are investing with the 20 year horizon. The market will continue to go up.

In the intelligent investors, he talks about people held money in cash hoping to avoid a market crash. But they also tended to miss the sweet moment for investing.

Sabre Man

Most of my portfolio is US shares. The falling dollar means you get more shares for your money but is obviously not so good if you intend or need to sell in the near future.

dor843088

wordofwarning wrote: »

I disagree. The mindset of European firms is very different to mindset of American firms. There is very little innovation in European IT, biomedical sciences, finance etc relative to American firms. The biggest brands in our homes are often American and that is here to stay



That is the mistake that most people make in finance. Instead of diversifying the risk, you choose to take on more of it. What if there is massive austerity in the EU, your pension etc gets hit. But your stocks will get hit too, as you heavily invested in the same region.

I don't disagree with you on what you say but it seems to go against the likes of buffet and Bogles advice just to plough everything into us stocks for us investors no ? Surely the same risk would then also apply.

dor843088

Sabre Man wrote: »

Most of my portfolio is US shares. The falling dollar means you get more shares for your money but is obviously not so good if you intend or need to sell in the near future.

Are you happy to just ride out the currency risk for the assumed better performance?

ixus

You should probably try and gave 6-12 months cash reserves on hand.

Very focussed on what companies are doing as opposed to central banks. Cheap credit is the only reason we are where we are.

Sabre Man

dor843088 wrote: »

Are you happy to just ride out the currency risk for the assumed better performance?

I am. I still have a long way to go before I retire. I have done well over the last 2 years even with the deteriorating dollar.

dor843088

Sabre Man wrote: »

I am. I still have a long way to go before I retire. I have done well over the last 2 years even with the deteriorating dollar.

Sounds like your plan to retire on investments may be similar to my own ?

jive

wordofwarning wrote: »

I disagree. The mindset of European firms is very different to mindset of American firms. There is very little innovation in European IT, biomedical sciences, finance etc relative to American firms. The biggest brands in our homes are often American and that is here to stay

Again this is a valid argument but just because VTI has outeprformed VGK previously does not mean it will continue to is my point. You think the outlook of VTI is better than VGK which is fair.

wordofwarning wrote: »

That is the mistake that most people make in finance. Instead of diversifying the risk, you choose to take on more of it. What if there is massive austerity in the EU, your pension etc gets hit. But your stocks will get hit too, as you heavily invested in the same region.

I disagree. If you live in the EU and there is a recession, the cost of living goes down; if you are invested in VGK then your fund value will also go down. If you live in the EU and there is economic growth, the cost of living goes up; if you are invested in VTI then your fund value will go down. This has a greater impact on your personal finances. You can diversify risk by having some investment in different funds (VGK, VTI, VEA, etc.) - having everything in VTI when you live in Europe doesn't make sense from a risk POV.

You should be investing where you intend on retiring for long-term investments, IMO.

speak_easy

ive come to the conclusion that its a waste of time for irish investors to own european based funds and for several reasons

1. europe has never once had an equity bull run while the usa was going the other way , as sure as night follows day , if the u.s market closes down the previous evening , europe will open down the following morning , europe is absolutely and totally a follower , it never leads when it comes to market movements

2. people often talk about dollar weakness being good for american companies , it is but that is no good to someone in ireland using euro , the s + p is down more in real terms for an irish person this past three months than the stoxx 600 due to the huge downward move of the dollar v euro , by the same token a rising euro hits european companies earnings so the marker at best remains flat even the real economies of europe are improving

americans on average invest far more in equities than europeans , germanys hardly own any stocks at all , its no wonder ,the americans have all the advantages , the overall european market has been awful since the year 2000 , the all time high of the french Cac was in the year 2000 , in spain and italy , their respective all time highs were around 1998 , only germany has come close to matching the usa

as most people are not smart enough to pick individual stocks and buying the american market can mean no gains in real terms for long periods of time due to a weak dollar , the risk reward of owning european funds is extremely poor , no wonder we buy property here in order to build wealth