Euro HB Permanent Portfolio using ETFs

[kw]

Hi Tarentola,

Looking at the performance of EXX6, X25E, X509 and IBGL today (at 4:35 PM) :

[align=left]EXX6 : +1.88%
X24E : +0.30%
X509 : +0.03%
IBGL : +0.21%[/align]

Regards,K

[kw]

IMEU MSCI Europe        Div%: 3,5%                ER: 0,35%        (europe based)
IEV    S&P Europe 350  Div%: 3%                  ER: 0,60%        (US based)

VGK  MSCI Europe        Div%: 5,3%                ER: 0,14%        (US based)


Why is the dividend of VGK so much higher than the dividends of the Ishares funds?

[tarentola]

kw
Thanks for the info on the bond funds. I must admit I don't understand them very well, mainly because I was reluctant to spend more time researching them. In the end I went for Db X Trackers Ii Iboxx Euro Sovereigns Euro Zone 25+ (DE:DBXG, same as X25E), as it meets the HB PP criteria best.

My final choices for the Euro HB PP were IMEU (MSCI European Index), DBXG (25+bonds) and PHAU (physical gold). So far the PP is up 1.33% in two weeks: insignificant in the longer term I know, but encouraging for a PP beginner. I am still trying to find a home for Euro cash that is secure and pays even a small interest or dividend (http://gyroscopicinvesting.com/forum/ht ... ic.php?t=7). Any ideas? So far I have left it as pure cash.

Good question about the VGK dividend, but I have no idea why its dividend is better than the Euro version IMEU.
Regards
T

[kw]

Hi Tarentola,

1 - I think the difference between IMEU and VGK's dividend yield has to do with stock lending.

Ishares keeps some of the profit of stock lending while Vanguard returns the profits to the ETF.

That means that a  Vanguard ETF returns 2% per year more than an Ishares ETF using this example!

Another reason not to use Ishares and to use Vanguard if possible.

Do you know how Lyxor behaves in this respect?

2 - Looking at IEGE, the interest rate calculations are not correct. In the german space you could use an eb.rexx money market fund or a short term bond fund. Also keeping it at a bank is an option, but the amount should be below the government guaranteed limit.

Regards,K

[kw]

Hi T,

My European PP is moving nicely the last few weeks. It was 4% down from late 2010, but lately it is moving upwards to its trendline:

EU PP


Best Regards,K

[kw]

Hi T,

Comparing the US PP with the EU PP, you find that the US PP is a bit expensive now, while the EU PP represents reasonable value at this moment.

I like to add money to the PP after a downward move below the trendline, like March 2011 for the EU-PP.
For an US investor it seems to be a 'good' time to take some money off the table, that is if you need some cash.


US PP


Regards,K

[wenomeno]

Hi kw, I have a doubt about EXX6 and maybe you can help me

I´ve seen here http://de.ishares.com/en/rc/products/EXX6 an uncommon thing about fees. At the bottom of key facts page there is a box entitled fee breakdown, and there are a couple of fees that you can´t see in other ETFs. These ones are Acquisition issue premium and redemption fee upon sale, 2% and 1% respectively. I´m not sure what they mean, but i think that they charge you a 2% when you buy this ETF and if I´m correct this ETF lose a lot of interest.

So, as you have this ETF in your portfolio, could you confirm the actual expenses.

By the way, I think that Interactive brokers charges a minimum fee  of 10€/month, Is that correct?

Regards

[CA PP]

Hi wenemo,

If I can suggest: do not bother with ishares for long term bond if you can acquire directly German bond 3.25% 2042 (isin: DE0001135432).  Much superior in my opinion.

[wenomeno]

Hi wenemo,

If I can suggest: do not bother with ishares for long term bond if you can acquire directly German bond 3.25% 2042 (isin: DE0001135432).  Much superior in my opinion.

I thought to buy directly Government bonds, but there are two problems.

How to buy and to sell in a cheap way. I mean, if you use a broker they charge you fees.

Then, the minimums are a bit high and there is a problem with diversification and with further acquisitions. I have some savings and I can buy some German bonds now, but I think I´ll need to save more than 5 years to buy one more bond. I read the minimum is 9000€, although it sounds too high, maybe I´m mistaken.

[CA PP]

Make sure with your broker that the minimum is 9,000EUR, it seems a bit high to me.  One could expect the minimum to be 1,000EUR.  You can then top it off with Ishares until you reach the minimum for a new purchase.

[wenomeno]

I think that 1000€ minimums makes more sense, I´ll check it out.

On purpose, I agree with you in the case of 3-month bills. I mean they´re better than SHY or another ETF. It just an opinion, of course. 

[kw]

Hi kw, I have a doubt about EXX6 and maybe you can help me

I´ve seen here http://de.ishares.com/en/rc/products/EXX6 an uncommon thing about fees. At the bottom of key facts page there is a box entitled fee breakdown, and there are a couple of fees that you can´t see in other ETFs. These ones are Acquisition issue premium and redemption fee upon sale, 2% and 1% respectively. I´m not sure what they mean, but i think that they charge you a 2% when you buy this ETF and if I´m correct this ETF lose a lot of interest.

So, as you have this ETF in your portfolio, could you confirm the actual expenses.

By the way, I think that Interactive brokers charges a minimum fee  of 10€/month, Is that correct?

Regards

Hi wenomeno,

The uncommon fees at the bottom box are not important, if you trade via the stock exchange they are zero as specified in the same box. They are premiums if you buy from KAG.(Kapitalanlagegesellschaft)
At least i did not pay them, buying via the stock exchange.

Interactive Brokers charging 10 euro/month, I am not sure what kind of fee this is. Maybe to pay for a German datastream? You only need to have the datastream active when you do a trade. I pay no fees at Interactive Brokers, except for active datastreams. You van use limit orders without an active datastream.

Buying a German bond trough Interactive Brokers is impossible for me. Only US bonds are available. They told me that Dutch bonds would become available soon, that would be nice, I hope.
You can buy from the German Central Bank directly, Marc du Mesel explained it on his blog.

I think it is important to get EXX6 and not use IBGL. Last year EXX6 reacted in the way that is needed by the PP. IBGL did not react properly.

Hope this will help you,

K

[wenomeno]

Thanks kw, you have been very helpful, EXX6 was in my watchlist long time ago.

I didn´t know what means KAG. It´s very good to know those fees don´t apply to us.

The 10$/month commission is the minimum per month. http://individuals.interactivebrokers.c ... umDeposits

If you don´t trade actively that commission could be a bit expensive.

Regarding to buy German bonds directly from government you refer to this http://www.deutsche-finanzagentur.de/en ... investors/ isn´t it?
By the way, good brokers to buy bonds seems to be Flatex/Vitrade, DAB-Bank

Regards

[kw]

Hi wenomeno,

I don't pay the monthly activity fee. I use Interactive Brokers through an Amsterdam intermediary(Lynx), guess it would be hard to compete on the Dutch market which such a fee. Saxo bank is also not charging it here. I don't know where you are located, but you can always ask for no fees.

Yes the finanzagentur. For ShortTermBonds it is straightforward, according to MdM's Blog, you need to do some paperwork, some of it in German. Long TermBonds are a bit more complicated again according to MdM's blog.

Thanks for mentioning Flatex/Vitrade,Dab bank, I will google them.
(see now that Dab bank https://boerse.dab-bank.de/maerkte-kurs ... torie.html
has a nice overview and the bond mentioned by CA PP is priced around 117 euro)

Regards,K

[wenomeno]

I´m from Spain. Here, the tax system works in this way. Capital gains, dividens and interest are taxed in a range from 19% to 27%. Stock dividends enjoy an exemption on the first 1500€. Then you can transfer funds among mutual funds tax free. This applies only for mutual funds, not for ETFs.

So, looking for tax efficiency, bonds are the worst asset because the most of their return come from interest paid. I think that kw´s PP is great. I´d add a bit of Emerging Markets, VWO or IEMM (acc).

Of course the best option is a PP with mutual funds, but find a good one for bonds or gold is tough. I´m going to start a thread asking about.

Finally, I´ve checked Lynx website and it´s available in Dutch, French, Belgium and German, but I don´t speak that languages. Anyway  I´ve always wanted to learn German.

Bye

[murphy_p_t]

i'm looking for historical performance of a German/eurozone PP....performance in US$

any suggestions where I can find this?

[CA PP]

EU PP returns:

http://www.marcdemesel.be/

[frugal]

Hi T,

Comparing the US PP with the EU PP, you find that the US PP is a bit expensive now, while the EU PP represents reasonable value at this moment.

I like to add money to the PP after a downward move below the trendline, like March 2011 for the EU-PP.
For an US investor it seems to be a 'good' time to take some money off the table, that is if you need some cash.


US PP


Regards,K

hi,

what % of your savings you have in each US PP and EU PP?

Tks!

[kw]

Hi Frugal,

My PPs run for a bit more than 3 years now. They still show linear behavior.
The EU PP has a XIRR now of close to 8% after tax, that is a bit more than 9% before tax(we have a capital tax of 1.2% here).
The US PP has a XIRR of approximately 10% after tax, that is a bit more than 11% before tax.
You could say that the EU PP is behaving as 'planned', while the US PP is behaving better than 'planned'.

The EU PP components:
- VGK and EXSI(SXD)
- EXX6 and IBGL
- IAU and PHAUP
- cash in government guaranteed accounts at 'big'/'system' banks.

I am waiting for Vanguard to set up shop in the Eurozone before changing the ETF's mentioned. I guess that I favor EXSI, but VGK has low costs and a nice dividend. EXX6 doesn't show much upside lately while IBGL could surprise us, especially when things get 'normal' again. Lately I am thinking IBGL is not that bad. I use IAU because it is cheaper and it doesn't matter where the gold is. Lately I am also watching ZGLDEU, the Swiss Kantonal Bank ETF with 0.40% fee.

My US PP components: VTI,TLT,IAU,SHY.

EU PP


US PP


The percentage in the US PP and the EU PP are of the same order of magnitude. My move into the US was at a higher Euro exchange rate than now. I had visions of rebalancing the US PP and the EU PP going forward and still could do when for example the Euro is 80 US cents, if ever. At this moment I could not guess which one will be the stronger currency in the future. 

Adding to these PP's I will do when it seems appropriate, typically when seeing some weakness versus the trendline. Although adding to the US PP is not something I want to do now, because of the outperformance of the US PP versus the historical trendline.

I am very happy with the PP behavior, because it worked as 'advertised'. There are times especially when the PP stalls a bit, that you can have some worries, but then typically you get a piece of quick PP growth, and happiness is back

Kind Regards, K
 

[frugal]

K,

why you mix USD ETF's in your EU PP?

Do you make hedge ?

Regards.

[kw]

Hi Frugal,

IAU - fee is 0.25% while PHAUP is 0.39% and ZGLDEU is 0.40%.
I prefer the lowest fees.

VGK fee is 0.14%, EXSI is 0.20%.
VGK returns lending gains to the investor while Blackrock returns the lending gains to unspecified targets.

I am waiting for Vanguard to start business in the EU. At that moment I will switch VGK to a European equivalent.

There is no reason to start with VGK. Using EXSI is excellent, because you will cover the euro stocks from the euro600 index. It is probably the best diversified Eurozone stock ETF currently.

I am not hedging anything, the reasons mentioned above is all.

Kind Regards,K

[frugal]

Hi,

Isnt it risky to have those ETFs in USD??

Imagine that USD becomes even more weak...


Rgds

[kw]

Hi Frugal,

IAU is gold, in dollar prices.  You sell IAU and convert the dollars to euros. I only use IAU because the fee is 0.25%.

VGK is European shares priced in dollars.
So if the dollar gets weak, then the price of IAU and VGK will go up in dollars and when you exchange to euros you would not see the difference.

Only a bit more transaction costs. But better dividends for VGK and lending profits for you.

Kind Regards,K

[frugal]

Hi Frugal,

IAU is gold, in dollar prices.  You sell IAU and convert the dollars to euros. I only use IAU because the fee is 0.25%.

VGK is European shares priced in dollars.
So if the dollar gets weak, then the price of IAU and VGK will go up in dollars and when you exchange to euros you would not see the difference.

Only a bit more transaction costs. But better dividends for VGK and lending profits for you.

Kind Regards,K

Hi!

Even though you risk to lose 30% or more in Gold  if you need to finish the portfolio and convert all to EURos.

Right.?

[kw]

Hi Frugal,

If the dollar goes down 30% vs the euro then when you sell Gold you get more dollars so you still get the right amount in euros.

I am not sure if this is the solution to the risk you mentioned?

Kind Regards,K