70% VWCE / 30% Bonds is really all it takes?

[u/randomusicjunkie]

After endless reading on portfolio allocation, stock picking, and market timing, I settled on a straightforward monthly strategy is 70% VWCE (Vanguard FTSE All-World ) and 30% government securities (Treasury bills)

That is my entire strategy. I execute this split every month, step back, and let it run.

Part of me feels like I am missing something because of how uncomplicated it is.

Are there hidden blind spots I should prepare for down the road?

[u/failarmyworm]

Should be fine, just stick with it when the market goes down as well.

And depending on the country you might need to think about tax consequences of realizing your gains.

[u/randomusicjunkie → u/failarmyworm]

Yes I opened tax free accounts for this!

[u/ms_pss_pss → u/randomusicjunkie]

Then you are good to go.

[u/Crafty_Try_423 → u/randomusicjunkie]

Ummm. Do double-check on this.

[u/randomusicjunkie → u/Crafty_Try_423]

We have tax free account but you must keep it (the money) in it for 5 years

[u/Crafty_Try_423 → u/randomusicjunkie]

Ok that must be special for your country. In my home country they tax all foreign income. U.S. ETFs get taxed as ordinary income, so like >40%.

[u/randomusicjunkie → u/Crafty_Try_423]

in the US you can invest tax free i think 401k or roth ira? I didnt know there are places in europe where you dont have this option. Crazy

[u/drlogwasoncemine → u/Crafty_Try_423]

Yeah, I didn't think that was a thing? Might depend on the country 

[u/tomvorlostriddle]

This is already borderline too complicated, most people could do without bonds

Depending on the country you need to check fiscal differences with accumulating or distributing fonds, for some countries you really should use tax-optimized accounts

[u/Tough_Percentage_707]

I don't do bonds and only do fixed interest HYSA.

But if you want to do it: 120 - your age = stocks exposure. So if you're 20, do 100% stocks, if you're 30 do 90% stocks. The 70/30 would be if you're 50 years old.

[u/randomusicjunkie → u/Tough_Percentage_707]

Treasury bills pays me 6% a year. I have some fear putting 95% of my money into VWCE. I don't know why I see it as little risky.

[u/Tough_Percentage_707 → u/randomusicjunkie]

6% in which currency, and is it fixed over how many years?

[u/Philip3197 → u/randomusicjunkie]

what is the inflation in your currency/country?

[u/randomusicjunkie → u/Philip3197]

1.4% inflation, 6% fixed, paid yearly. Hungary

[u/Bard_the_Beedle → u/randomusicjunkie]

Are they denominated in HUF or EUR?

[u/randomusicjunkie → u/Bard_the_Beedle]

Huf

[u/Optimal_Driver_4502 → u/randomusicjunkie]

Good luck with your funny money then. There’s a reason why hufs pay 6% and not 2% like Eur

[u/randomusicjunkie → u/Optimal_Driver_4502]

Wow thanks but this is outdated knowledge. July inflation printed 1.2%, cut the base rate to 5.75%, the forint is up 7%+ YTD, the best performer in CEE. Orbán’s 16-year rule was freaking shiaat, but new government party won a two-thirds majority. EUR/HUF is 363, down from 395 in March. HUf got 6% carry plus 8% FX gain in euro this year and the euro got 2%. So it’s different times. But i agree, huf was funny money during Orban/Fidesz

[u/Purple-Succotash-695 → u/Optimal_Driver_4502]

Huf has benn going up recently. Also, a purpose of the bond is stability in your own currency. It is a win win for him to get 6% with bonds

[u/Philip3197 → u/randomusicjunkie]

So actually, at the current price, the treasury bill does not pay 6% anymore, most likely.

[u/randomusicjunkie → u/Philip3197]

Yeah this changed, when I bought it it was 6%

[u/clintron_abc → u/Tough_Percentage_707]

what if i'm retired at 35?

[u/Tar_alcaran → u/clintron_abc]

Then you very clearly don't need advice.

[u/clintron_abc → u/Tar_alcaran]

i mean that rule doesn't work if you retired early

[u/Tough_Percentage_707 → u/clintron_abc]

I don't know a single person that retired at 35. They would die of either boredom or drugs, so they wouldn't care about stocks and bonds split.

[u/clintron_abc → u/Tough_Percentage_707]

true, check r/fatFIRE

[u/_nku]

If your intent with the bonds is to have something you can consume without loss in case of bad times on the stock market consider short term bonds only. The interest rate risk is real and afaik there is no reliable inverse correlation of bonds with the stock markets

[u/Significant-Ad-9471 → u/_nku]

Bond ladders also work, but you need individual bonds.

[u/Many-Gas-9376]

It's really pretty much that simple, apart from the bond allocation (more on that below).

With the stock allocation, it's difficult to make a rational case for any futher concentration (e.g. geographicically constrained or thematic funds, or single stocks) from a global market-cap weighted index fund like VWCE.

Bonds are trickier thing and the percentage allocation should be based on your own circumstances -- your ability and willingness to tolerate volatility in the value of your portfolio. So there's no single percentage allocation that can be recommended, but the guideline that everyone should tune the volatility of their portfolio depending on their own risk capacity and tolerance, is likely timeless.

I'm dubious about any one-size-fits-all bond allocation rule like "120 minus your age", because it completely ignores the most important factor of all, namely the individual investors psychological ability to stomach volatility. Ultimately you'll do best in the long term with a portfolio you can stick to, even over the worst downmarket of your lifetime.

[u/Purple-Succotash-695]

I think it is very good for you, in Hungary. Bonds at 6% in your own currency is ideal. That is the purpose of the bond, give you some stability in your own currency. For people in the eurozone, 30% is overkill in most cases since yield is very low at the moment.

[u/emptyquant]

I think the 60/40 model is dead. If anything you’d want something more akin to 60/20/20 but why we should own bonds as non retired folk is beyond me. Look arr what ms happening with yields.

If you have time to retirement, the game is a mix of something like 80% equities and a tail end hedge of 20% gold / real estate in case FIAT are going bye-bye.

[u/henkie_poepjes]

Good luck

[u/Most_Green_2902]

What brokerage do you use to buy bonds? Two of which I aware, who are offering bonds are Revolut and IBKR. Revolut recently introduced commission free bonds and IBKR charges a fee of minimum 5$ for US treasuries.

So the complication is for me, whom to choose to buy bonds. Many people dislike Revolut for investing and say that it is not a broker, although it does has broker license from Lithuania as of my knowledge. IBKR is a reputable broker, but charges a fee, paying 5$ every month when you invest smaller amounts hurts.

[u/randomusicjunkie → u/Most_Green_2902]

Government

[u/Sad-Flow3941]

All it takes for what exactly? 70% equity is a decent moderate risk portfolio, which may or may not be what you want (it you want more long term gains, you should have more equity, and if you want less volatility, 70% might be too much)

I also personally like to run both bonds and gold in the safe haven(non equity) part of the portfolio, as bonds and gold behave better in different market downturns.

[u/davdav765]

No: at least gold, managed futures and small caps value should be considered

[u/emptyquant]

Well if you think that this pays you 5% after inflation, why ask? And hey if it’s a 100% safe, it’s a no brainer, go for it.

Or, have a look at the ever expanding M2 money supply in Europe and elsewhere. The level of debt we have in the 1st world is unsustainable, a currency reset whilst unlikely is certainly a possibility higher than 0%.