ah you Americans, I envy you. As to investing you are the lucky ones. Got the world's biggest financial markets, the longest investment tradition and people who are willing to take risks. For Germans things are quite different. Born in a country of savers, insurance buyers and risk avoiders it isn't as easy as in the U.S. to compose a nice HBPP.
Well, German bonds aren't the problem. Okay, interest rates are well below those in America, but the LT-Bonds react as they are supposed to do: When inflation rates sink, deflation seems to be looming around the corner or the economy is sluggish bonds perform fine. This year German Longs are up over 20 %.
For the cash portion you must be kind of masochist as even the nominal interest rates for short term German bonds are negative! I divided the cash portion between those bonds and bank accounts.
Now let's talk about the interesting stuff. I wondered if Gold which is priced in US-Dollar would do its job to prevent an European portfolio from a currency devaluation or inflation in Europe. It does as this year showed: While gold in Dollar hasn't barely moved in ten months it ist up 11 % in Euro - thanks to Mario Draghi bashing the Euro down.
What a central bank!The thing that causes me some headache is the stock portion. If I would concentrate solely on my home country I would only own 80 stocks using Dax-ETF and MDA-ETF (Midcap).That's why I also bought an index fund on the Stoxx600 which gives me exposure to other EU-countries as well as to Great Britain and Switzerland.
Now I'm thinking about investing a quarter of my stock portion in an index fund for the MSCI World which is invested in the U.S. with 55%. I'm not sure whether that would make sense and I hope that you can give me some advice or thoughtful insights. The pros IMHO are: I get exposure to the world strongest economy and companies that lead change all over of the world. I would profit if the Dollar ist strong. Nonetheless I'm still invested in my home region with 75 % of the stock money. The cons: If the U.S. stock market lags the EU (beware but there have been such odd times) then the performance of the stock portion will suffer. Furthermore I could lose money or not make as much as I would have if the Dollar softens.
What do you think? Is a partial exposure to the U.S. for an European investor sensible or does it more damage than it would help? Would it make sense to buy an MSCI World-index fund that hedges currency risk?
Thank you very much for reading until here. I thought it would be good to talk about my background to avoid misunderstanding. I believe too that we have quite a number of European fellows following this forum who could be interested in this question. Appreciate every comment. Great work here going on.
