Gyroscopic Investing

I am a Eurozone resident in the process of setting up a Euro HB PP (http://gyroscopicinvesting.com/forum/ht ... ic.php?t=8). I am looking for the best way of investing the cash component. So far, apart from cash on deposit, the best way I have found is to use the ETFs IEGE (iShares 0-1y bonds) or MTA (Lyxor 1-3y bonds). I would be grateful for any suggestions.

I personally would go for the ones with the shortest maturities. In the event of high inflation, it will lessen the damage to your portfolio. Do those ETFs use German bonds?

Indices, thanks for your reply. I see why you recommend the shorter term bonds. These ETFs contain mostly German and French bonds, with some Italian and smaller countries.

tarentola wrote: Indices, thanks for your reply. I see why you recommend the shorter term bonds. These ETFs contain mostly German and French bonds, with some Italian and smaller countries.

That sounds good. The more French and German the less chance of default.

I think I will use iShares Barclays Capital Euro Treasury Bond 0-1 (IEGE) as my cash proxy in the Euro HB PP. It pays dividends every 6 months. The last two were 0.4046 and 0.4419 €, so a total of 0.84 € per year.

As the price of the ETF is about 100E, this makes 0.84%. The iShares site, however, gives a dividend to maturity of 1.57% and an annual coupon of 3.69%, so there is something I don't understand here - can anyone explain this difference?

The management charge is 0.2%, so even the 0.84% dividend would cover it. Dealing costs must be factored in as well of course, but on balance it does seem a little bit better than cash.

Another idea is the money market ETF Amundi ETF EuroMTS Cash 3 Months; +  0.85% in the last 12 months. Code C3M. It seems to be the best performer of the Euro MM ETFs, but of course if there is a better one I would be delighted to hear about it.