Feedback on a EU/US/SWE PP mix

[somawood]

Hi there! I'm a Swede living as a nomad (EU/US/Asia last ~5years, currently in UK, coming from Germany, and heading to SEA soon), and I don't yet know where I'll settle. As I've implemented a permanent portfolio I've tried to balance the following concerns:

1. Small Swedish economy
2. Majority of my money is tied up in Sweden (brokers, small business)
3. Uncertain future for the Eurozone
4. Not knowing where I'm going to settle
5. Avoiding significant currency risk
6. Simplicity with as few moving parts as possible

With that in mind, my current approach has been to split my PP into four parts (EUR/USD/SEK/gold), essentially adding a loose layer of a desired currency allocation on top of the normal desired asset allocation. That is, I want a 4x25 (15-35) asset allocation split but also, say, a 4x25 (10-40) currency allocation split between assets valued in EUR/USD/SEK and gold. If I could I would add a Yuan portion to it, but investment options for that seems to be limited.

My portfolio right now looks as follows. Each basket is roughly 25%, and each asset in it is 5-10% of the total portfolio. All assets are owned in one of two Swedish brokers and Perth Mint. The total value of the portfolio is on the order of 100k USD.

- US-PP: VTI / TLT / SHY
Standard US-PP allocation. My only concern might be on the value of SHY, since to liquidate it I'd have to convert it into SEK first, thus introducing transaction costs.

- EU-PP: iShares MSCI Europe UCITS ETF / db x-trackers II iBoxx Sovereigns Eurozone 25+ UCITS ETF / iShares eb.rexx Money Market UCITS ETF

Not sure about the money market fund, mainly for the same reason as with SHY.

- SWE-PP: Avanza Zero Index fund / AMF Räntefond Lång / SPP Obligationsfond
AMF and SPP are intermediate-term bond funds (~5 years). Unless you have significant capital, it's hard to find any funds with a longer duration than that. Currently I count both of them as 50% LTT and 50% cash.

- Gold: IAU / Perth Mint / GLD
Fairly standard. I use the online depository account at Perth Mint for allocated storage.

In addition to that I have a savings account in SEK, an emergency fund in SEK, and a savings account in GBP. I would like to incorporate these into the cash portion of PP, but that would make the average duration for my SWE-PP quite low.

Perhaps I could just try to keep the stocks/bonds portion in sync across EUR/USD/SEK, and then have ~10-15% of my cash portion in whatever local currency makes sense at the time for ~0% return?

Does my thinking and asset choices make sense? Am I overcomplicating things? Can I simplify things?

[koekebakker]

That's a complicated situation... Have you thought about talking to an advisor?

Your current plan seems really complicated to me. Have you seen the thread about a global PP?

Using global stocks/bonds might make sense and you'd only need two etf's for that. Ishares has a high quality global bond etf.

Or you could think about simplifying by reducing the amount of PP's to two: a Swedish and a global.

[LazyInvestor]

As an expat with no clear retirement location, I'd just go with a cheap US PP or a Bogleheads portfolio such as 60% total world etf 40% mix of intermediate treasuries of a selection of developed economies with good standing.

[somawood]

After reading the feedback in this thread and thinking about matters a bit more I now agree that it makes more sense to look at it as a global portfolio. Here's my current thinking:

Stocks: VT
Bonds: TLT, possibly some EU LTT
Gold: Perth Mint physical as a base, IAU for rebasing
Cash: Swedish T-Bills fund and cash/savings accounts in various currencies

My current portfolio is 2-5 years of expenses, and I want ~6m-1y year in my emergency fund, so it makes sense to keep the entire cash portion as liquid as possibly. At a later stage, I might add some form of global short-term debt ETF as deep cash.

Using any of the world bond ETFs would mean a significantly lower average duration, which wouldn't work with the constraint of having a very liquid cash portion. Additionally the AUM seems too low for most such assets.

[escafandro]

I tend to agree with this post.
http://www.gyroscopicinvesting.com/foru ... lar#p30825

So as a foreigner I prefer to have a PP in dollars, because usually when my currency appreciates relative to the dollar the PP is rising, and when the PP is declining the dollar against my currency appreciates, so overall I'm counterbalancing this way.

[koekebakker]

Seems like a good enough portfolio to me. Are you planning to use a 4x25 allocation?

Most important question is do you think you can stay the course with this 'custom' portfolio?

Also make sure you're aware of all the implications when using US domiciled etf's:
https://www.bogleheads.org/wiki/Nonresi ... Irish_ETFs

For most Europeans it's cheaper/safer to use Ireland-domiciled etf's.

[LazyInvestor]

You'll be exposed to various currencies and international trends through VT (or maybe better Ireland-based VWRD). Gold is also a form of currency diversification. Once you grasp the relation between these, as well as the relationship of USD to other currencies, you might end up with a conclusion that it's better that you just stick with USD for the cash/bond portion.