Starting in Europe, questions

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europeanwizard
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Starting in Europe, questions

Post by europeanwizard » Sun Jun 04, 2017 6:14 am

I'm a 40-something living in The Netherlands and need to start taking care of my pension.

So I've read the book and with about 25k, I'd like to make further steps towards implementing PP. For starters, I've opened an account with a broker. After reading the book, I feel the principles are simple and easy to understand, but it's the practicalities that are dazzling to me.

For instance, I'm looking at the chapter Implementing the Permanent Portfolio internationally. On page 219, it says:
Stocks:
1. Vanguard MSCI Europe Index: Vanguard offers a stock index fund that is registered in multiple countries and tracks the MSCI European Index (...)
2. STOXX 600 Index: Comprised of the largest 600 companies in Europe, similar to S&P 500 (...)
3. db X-Trackers: Deutsche Bank offers a range of products under the db X-Trackers name (...) the STOXX 50 ETF which tracks the largest 50 companies in Europe
So I log into my broker account:

Related to 1) So, I immediately hit some problems. I can't find the first one "Vanguard MSCI Europe Index" at my broker (DEGIRO). It seems to be renamed to Vanguard FTSE Europe ETF, and more so, it's in US dollars instead of euros. Huh? Why would the book advise that?

Related to 2) STOXX 600 index is just that, an index. There are 6 ETFs available with my broker. Do I have to compare them all, and figure out the differences?

Related to 3): my broker has a list of ETFs which can be bought once a month without transaction costs. Among those, there are about 8 of the db X-Trackers. Amongst those, the "DB X-TRACKERS EURO STOXX 50 SHORT DAILY UCITS ETF". So what is this? STOXX 50 is clear: a selection of the biggest European companies. But what does SHORT DAILY mean?

Getting a bit overwhelmed here...
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Re: Starting in Europe, questions

Post by eufo » Sun Jun 04, 2017 9:23 am

"SHORT DAILY" implies this is an inverse ETF. If the STOXX 50 goes up 1% in a day, that ETF will go down 1% that day, and vice versa.

You will not want to invest in any inverse or leveraged ETFs for long term.

If you could provide a list of the ETFs they provide commission free, I'm sure we could help guide you.
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Re: Starting in Europe, questions

Post by europeanwizard » Sun Jun 04, 2017 9:47 am

The list for ETFs is here: https://www.degiro.nl/data/pdf/DEGIRO_T ... lectie.pdf
The list for funds is here: https://www.degiro.nl/data/pdf/DEGIRO_B ... lectie.pdf

Any pointers or help is much appreciated!
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Re: Starting in Europe, questions

Post by frugal » Sun Jun 04, 2017 11:05 am

hi

sometimes brokers don't have

You have to ask to add.

Which tickers are you thinking to buy?

Degiro is good for the longterm? Solid one?

Regards
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Re: Starting in Europe, questions

Post by Tyler » Sun Jun 04, 2017 11:28 am

Hi Europeanwizard.

Picking an index fund can be admittedly be a little confusing. There are three main things you need to look for.

1) The fund provider. This will be a company such as Vanguard, iShares, ETFS, etc.
2) The index provider. This is the company that the fund provider pays to calculate the index percentages. Common index providers include MSCI, FTSE, CRSP, S&P, and STOXX.
3) The actual index that the index provider tracks. This is usually a combination of the index provider name and another qualifier. Example: STOXX 600, MSCI World, or S&P 500.

Think of #1 as the brand name of the product, #2 as the factory name, and #3 as the ingredient list.

So in your case, you need to look for a fund that tracks Europe. While their methodologies are all a little different, you can consider the index funds and providers to be interchangeable. So a FTSE Europe fund is basically the same as a MSCI Europe fund. Don't worry about the name, and focus on the ingredients. It's also a good idea to look for one in your local currency.

From a brief search of your list, these stand out to me:

AMUNDI ETF STOX600
DEKA EURO STOXX 50 UCITS ETF
ISHARES EUROPE
ISHARES MSCI EUR A
ISHARES STOXX 50

You still need to research them individually to make sure they really do track what you want and have low fees, but that's where I'd start.
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Re: Starting in Europe, questions

Post by europeanwizard » Sun Jun 04, 2017 12:39 pm

Good answers so far. I'm going to take some time tomorrow and study a couple.
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Re: Starting in Europe, questions

Post by LazyInvestor » Mon Jun 05, 2017 12:16 am

edit reason: misunderstood the question; it was an irrelevant comment
Last edited by LazyInvestor on Mon Jun 05, 2017 4:16 am, edited 1 time in total.
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Re: Starting in Europe, questions

Post by koekebakker » Mon Jun 05, 2017 3:27 am

Hi Europeanwizard!

Picking a stock etf can indeed be highly confusing when you're just starting out.
People on this board who are running a eurozone PP tend to use the following ETF's:

For eurozone stocks:
iShares Core EURO STOXX 50 UCITS ETF EUR - TER 0.10% - Ticker CSX5
iShares MSCI EMU UCITS ETF - TER 0.33% - Ticker CEMU

The EMU ETF is more diversified as it has 200+ stocks instead of 50. It's slightly more expensive though.

For global stocks:
iShares Core MSCI World UCITS ETF - TER 0.20% - Ticker IWDA
Vanguard FTSE All-world UCITS ETF - TER 0.25% - Ticker VWRL

The ishares ETF's above are all accumulating which means that dividends are automatically reinvested.
The Vanguard ETF is distributing it's dividends so you have to reinvest them yourself.
These ETF's all trade on Euronext and can be found in DeGiro by searching for their ticker.

I used to run a eurozone PP with iShares MSCI EMU UCITS ETF and iShares Core MSCI World UCITS ETF making up the stock part.
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Re: Starting in Europe, questions

Post by tarentola » Mon Jun 05, 2017 5:25 am

Europeanwizard
You might find the information in the following thread useful:
viewtopic.php?f=1&t=2858

See also jusetf.com for comparison tables of Euro ETFs for European investors: http://www.justetf.com/en/find-etf.html ... ci++europe for example.

Amundi and Lyxor offer ETFs that track the MSCI Europe index. Amundi charges 0.15% for CEU.
Lyxor now has a 25+ year Euro bond ETF with ticker MTH (others are mentioned in the above thread).
For gold, you can use GBS, an ETC from ETFS Securities.

You can see details on http://www.amundi.nl and http://www.lyxoretf.nl.

I ended up with CEU, MTH and GBS, but my PP was set up a few years ago and there may be ETFs with lower charges now. From memory , Amundi, Lyxor and iShares respectively had lowest to highest charges.
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Re: Starting in Europe, questions

Post by europeanwizard » Mon Jun 05, 2017 6:14 am

OK, so I used justetf.com, which allows you to search and compare funds. I've selected the funds that you guys pointed me to, and when comparing those, I found a couple of differences.

Couple of questions;
Fund size ranges from 358 to 5651m. Does this matter?
Some give dividends, some return it. Important? I know the book says to use something that distributes the dividends, but Dutch tax law only cares about the total amount invested.
Replication is almost always physical. When physical, method is sometimes optimized sampling, sometimes full replication. Important?
Inception ranges from 2000 to 2010. Funny thing is, the young (2010) iShares Core EURO STOXX 50 has a size of 3705m. Interesting?
TER ranges from an incredible 0.10% for the above iShares Core EURO STOXX 50 to 0.35%
One of them, Deka EURO STOXX 50 UCITS ETF, has as its index type "price index" instead of "total return index". What does this mean?
Almost all have securities lending, except for the Amundi ETF STOXX Europe 600 UCITS ETF. It also happens to be the smallest fund size, @ 358m. Plus its replication is synthetic (method "unfunded swap"). Its risk category is one lower than the others. Important?

Also, I can remember from old times that when you're in The Netherlands, buying stocks from other exchanges than Euronext is more expensive. Is that still the case?
Last edited by europeanwizard on Mon Jun 05, 2017 6:55 am, edited 1 time in total.
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Re: Starting in Europe, questions

Post by europeanwizard » Mon Jun 05, 2017 6:53 am

tarentola wrote: (...)
Good info, still reading through it! Thanks!
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Re: Starting in Europe, questions

Post by koekebakker » Mon Jun 05, 2017 7:09 am

I'll try to answer your questions.
Fund size ranges from 358 to 5651m. Does this matter?
ETF's with more assets under management tend to have a lower spread (difference between bid and ask price of the ETF) en tend to track their index more closely.
As long as the ETF isn't too small it won't make much of a difference.
Some give dividends, some return it. Important?
For some European investors, yes. For Dutch investors it doesn't matter. The taxation is the same.
Replication is almost always physical. When physical, method is sometimes optimized sampling, sometimes full replication. Important?
Doesn't matter much, as long as the ETF tracks it's index and as long as it's physical. Synthetic is riskier.
Inception ranges from 2000 to 2010. Funny thing is, the young (2010) iShares Core EURO STOXX 50 has a size of 3705m. Interesting?
Not really I guess...
TER ranges from an incredible 0.10% for the above iShares Core EURO STOXX 50 to 0.35%
One of them, Deka EURO STOXX 50 UCITS ETF, has as its index type "price index" instead of "total return index". What does this mean?
Price index is a way of showing returns without the dividends reinvested. Total return includes the reinvested dividends.
Almost all have securities lending, except for the Amundi ETF STOXX Europe 600 UCITS ETF. It also happens to be the smallest fund size, @ 358m. Plus its replication is synthetic (method "unfunded swap"). Its risk category is one lower than the others. Important?
Securities lending usually happens with a small part of the ETF's assets. It is viewed as slightly higher risk. Most investors don't worry too much about it though.
Also, I can remember from old times that when you're in The Netherlands, buying stocks from other exchanges than Euronext is more expensive. Is that still the case?
You can check with DeGiro but in general yes, Euronext is the cheapest for Dutch investors.


Do you already know what index to invest in: Eurozone stocks? European stocks? Global stocks? A mix?

One thing you need to check is how ETF's which are domiciled in different countries handle dividend withholding taxes.
I know that Irish domiciled ETF's (iShares, Vanguard)are relatively tax-efficient. I don't know from the top of my head if France or Luxembourg domiciled ETF's are just as efficient. Maybe Tarentola knows.

One more thing as you are a Dutch investor: Think ETF's is a Dutch ETF provider with Dutch domiciled ETF's, which claims that their ETF's offer a tax-advantage compared to non-Dutch domiciled ETF's. Maybe something to check out!
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Re: Starting in Europe, questions

Post by europeanwizard » Wed Jun 07, 2017 4:12 am

koekebakker wrote:I'll try to answer your questions.
Excellent answers, thanks!

As for stocks, based on TER I'm looking at iShares Core Euro STOXX 50. It's decently sized, has full physical replication, and crazy low TER. I'd like to compare that to something like Think European Equity. This is by far the smallest fund, but its domicile is in the Netherlands. I'm still reading up on the possible tax advantages.

For now, I'd like to focus to European stocks, based on the recommendations of the book.

As for the gold and bonds part, still looking into that.
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Re: Starting in Europe, questions

Post by frugal » Thu Jun 08, 2017 4:11 pm

europeanwizard wrote:
koekebakker wrote:I'll try to answer your questions.
Excellent answers, thanks!

As for stocks, based on TER I'm looking at iShares Core Euro STOXX 50. It's decently sized, has full physical replication, and crazy low TER. I'd like to compare that to something like Think European Equity. This is by far the smallest fund, but its domicile is in the Netherlands. I'm still reading up on the possible tax advantages.

For now, I'd like to focus to European stocks, based on the recommendations of the book.

As for the gold and bonds part, still looking into that.
hi

try to mix different ETFs to each catergory


more diversification!
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Re: Starting in Europe, questions

Post by europeanwizard » Thu Jun 08, 2017 4:17 pm

frugal wrote:try to mix different ETFs to each catergory
Almost would've forgotten that, I will. Still have to do the calculations on the Dutch dividend taxes.

Sidenote; I was complaining to my SO over dinner, and she asked why I didn't simply pass it on to a financial advisor and be done with it. Told her that there's a trade off, and I'd rather do it myself. When I explained, I thought: why was I bitching again?!
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Re: Starting in Europe, questions

Post by frugal » Sat Jun 10, 2017 2:36 am

europeanwizard wrote:
frugal wrote:try to mix different ETFs to each catergory
Almost would've forgotten that, I will. Still have to do the calculations on the Dutch dividend taxes.

Sidenote; I was complaining to my SO over dinner, and she asked why I didn't simply pass it on to a financial advisor and be done with it. Told her that there's a trade off, and I'd rather do it myself. When I explained, I thought: why was I bitching again?!
Hi

which ETF's are you selecting for each asset?

Regards
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Re: Starting in Europe, questions

Post by koekebakker » Sat Jun 10, 2017 2:39 am

Everything is a trade-off :)

I believe that keeping it simple is very important for being able to stay the course long-term.
You can spend many, many hours thinking/worrying about which ETF's to choose, where to keep them etc etc. In the end it probably won't matter much, if at all. It's better to spend your energy on earning/saving as much as you can because that WILL make a huge difference.

The eurostoxx 50 etf is a fine ETF. Some will say that 50 eurozone stocks is not enough, some will say it is. The Permanent Portfolio books suggests European stocks but I don't think they gave the Eurozone situation that much thought to be honest.
A european stock etf will work fine as well, as will a mix between eurozone and global stocks.
Pick the one that makes you feel most comfortable, and understand that no-one knows which stock markets will perform best in the future. I wouldn't worry about holding multiple ETF's in multiple regions etc, that just makes things more complicated imo.

Regarding the Dutch dividend situation. If Think ETF's manages to give you 100% of dividends, this saves you about 0.3% a year for a global stock etf and 0.15% for eurozone stock etf. Calculation: dividend yield * witholding percentage. The witholding percentage is lower for eurozone stocks, higher for US/emerging markets stocks.
This is not the full story though. Think ETF's are mostly equal weighted instead of cap weighted which means the ETF's will have internal transaction costs when the ETF rebalances. Another thing to consider: Ishares/Vanguard try to lower the TER by doing some securities lending.
So in the end I don't think the difference will be huge.

Deciding which bonds to use is usually the hardest part in a Eurozone PP. There is a huge difference between bonds from Northern countries and Southern countries. For a Dutch/German person it's a bit easier as you can just buy long-term treasuries of your own government. No need to hold any foreign bonds. The yield is absolutely horrible though... Last time I checked it was something like 1% which is lower than inflation and only slightly higher that a one-year CD (spaardeposito). Can't really recommend anyone to buy these bonds at these rates.

For me this was one of the main reasons to abandon the Permanent Portfolio and switch to just global stocks and high-quality short-term fixed income with only a little bit of gold. To me this felt safer and simpler, to others it might feel riskier.
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Re: Starting in Europe, questions

Post by frugal » Sat Jun 10, 2017 1:14 pm

koekebakker wrote:Everything is a trade-off :)

I believe that keeping it simple is very important for being able to stay the course long-term.
You can spend many, many hours thinking/worrying about which ETF's to choose, where to keep them etc etc. In the end it probably won't matter much, if at all. It's better to spend your energy on earning/saving as much as you can because that WILL make a huge difference.

The eurostoxx 50 etf is a fine ETF. Some will say that 50 eurozone stocks is not enough, some will say it is. The Permanent Portfolio books suggests European stocks but I don't think they gave the Eurozone situation that much thought to be honest.
A european stock etf will work fine as well, as will a mix between eurozone and global stocks.
Pick the one that makes you feel most comfortable, and understand that no-one knows which stock markets will perform best in the future. I wouldn't worry about holding multiple ETF's in multiple regions etc, that just makes things more complicated imo.

Regarding the Dutch dividend situation. If Think ETF's manages to give you 100% of dividends, this saves you about 0.3% a year for a global stock etf and 0.15% for eurozone stock etf. Calculation: dividend yield * witholding percentage. The witholding percentage is lower for eurozone stocks, higher for US/emerging markets stocks.
This is not the full story though. Think ETF's are mostly equal weighted instead of cap weighted which means the ETF's will have internal transaction costs when the ETF rebalances. Another thing to consider: Ishares/Vanguard try to lower the TER by doing some securities lending.
So in the end I don't think the difference will be huge.

Deciding which bonds to use is usually the hardest part in a Eurozone PP. There is a huge difference between bonds from Northern countries and Southern countries. For a Dutch/German person it's a bit easier as you can just buy long-term treasuries of your own government. No need to hold any foreign bonds. The yield is absolutely horrible though... Last time I checked it was something like 1% which is lower than inflation and only slightly higher that a one-year CD (spaardeposito). Can't really recommend anyone to buy these bonds at these rates.

For me this was one of the main reasons to abandon the Permanent Portfolio and switch to just global stocks and high-quality short-term fixed income with only a little bit of gold. To me this felt safer and simpler, to others it might feel riskier.
nice!

Can you update us with your actual portfolio ?

Thank you
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Re: Starting in Europe, questions

Post by europeanwizard » Sun Jun 11, 2017 1:23 pm

Got the stocks and gold part decided.

For now, I'll put 6k in each 25%. For stocks, I'll put 3k in iShares Core EURO STOXX 50 (ticker CSX5), which is accumulating. The other 3k, I'll put in Think European Equity (ticker TEET which I'm going to proncounce exactly the way I like it). That last one is a very small fund but its domicile is here in NL. I'll just try and see how that works with taxes and stuff.

The gold part, for now I'll just pick ETFS Physical Gold (symbol PHAU). It's simply the most easy way. When I rebalance in a couple of months, I may look into the tips from the book around holding gold.

The only thing I haven't decided, is bonds. Will probably open a separate topic for that.
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Re: Starting in Europe, questions

Post by Bjorgen » Fri Jun 30, 2017 5:31 am

I started my PP on June 14th and I used the same ETF allocation as described here:
http://www.carterapermanente.es/cartera ... -con-etfs/

Tickers:
- ZPRE
- EL4V
- EXVM
- 4GLD
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