PP for European Investors (once again)

[frugal]

Hello.

That's why PP has gold.
That's why PP is diversified.
It's performance is bad? Why try to find arguments to time the market and change the conception of EUPP?

I do not consider the possibility to be wiser than PP.

[ILoveMoney]

European long-term bonds - you get a very low yield in a depreciating currency. Unheard of in decades of financial history.

ECB QE is competetitive devaluation. Exporting deflation. Onshoring jobs. Driving up inflation, devaluing debts.
That's all fine by me - but I wouldn't put my savings into EUR bonds.

That's my PP by now - I had to take into account FX risk as well as duration risk.. I aimed to err on the low risk side, meaning I reduced bond duration. The makeshift solution I could come up with.

A) Stocks, 25% - MSCI World ETF
B) Gold 25% - Physical
C) Bonds 25% - 1/2 US 30yr, 1/2 US 2yr
D) Cash 25% - 1/2 EUR savings account 0.4% yield, 1/2 US 2yr

This might underperform the original PP because of lower bond yields, but I can live with that.

Thanks for starting this thread Pfanni.

As I am getting myself a bit more educated on the bond part of the portfolio I am starting to see why you made some changes to the bond part of the PP.

Questions:
1. If yields on Euro bonds rise again, are you going to remain 100% invested in US 30 year Treasuries? If so why?

2. Ray Dalio's All Weather Portfolio has 40% Long terms treasuries and 15% Intermediate treasuries. Approximately a 3:2 ratio. Do you think you could transplant this ratio to the PP as it operates on the same underlying principles? Divide the 25% bond part in 15% long term bonds (30 years) and 10% intermediate bonds (7-10 years)? One perhaps even could split the intermediate and long term bonds 2/3 domestic and 1/3 US? I would like to find a set up that works for years to come, something I don't have to tinker with every so often. Any thoughts? Thanks!


EDIT: Just checked point two on Portfolio Visualizer and the draw dawn remains the same, CAGR goes down with 0.10% - 0.30% per year but is nearly identical over 40 years. It ends up costing you a little bit. In return you may get better protection in environments like we are experiencing today... correct me if I am wrong.

[Lang]

The last few weeks prove my point that a high exposure to foreign currency is dangerous. Bonds plummeted all over Europe (and in other countries too), stocks fell 5-10% and gold also fell almost 10% (in EUR terms). On the other hand, the Euro has strengthened almost 10% (against the Dollar), so my suggestion to keep a portion of the portfolio long EUR worked pretty well.

[Lang]

By the way, the IMF is warning that low interest rates in the Eurozone threaten the solvency of European life insurance companies, particularly in Germany and Sweden:

http://blog-imfdirect.imf.org/2015/05/0 ... c73ac637e7