Hello, fellow financial independence seeker!
It is now my self imposed duty to go through my portfolio development for the month of April 2019. I am one ETF closer to have at least some exposure to each asset class that I intend shall be part of my portfolio – only Mid Term Government bonds missing yet. I will present my monthly update here below shortly, but I will also take a moment to elaborate of my choice of geographical exposure of my portfolio.
As you may notice in the list of ETFs further below, I have a great exposure towards American stocks and bonds. This is not because I have adopted the tips and hints you can find on the internet or in books, as most are written by American authors with a home bias, but there are reasons why I, an European investor, have chosen to fill my portfolio with American assets now early on.
Why I Invest in America
I am as European as it gets, and my personal finances are very much exposed to the European economy. I live here, get my salary paid here (all though in Swedish Krona), I spend my vacations here and most, if not all, the food I eat is from here. Regardless, so far, a huge chunk of my All Seasons Portfolio consists of American stocks and bonds. At a glance, I admit it makes no sense why I should have this market risk in my portfolio – I mean, if prices in the US plummet, while they soar in Europe, it could have disastrous effects on my personal finances.
But I have decided that I can live with that particular risk, because, as I see it, there are other aspects that weigh up for it.
To begin with, the US is a big and largely unified economy. They may have a somewhat flamboyant president, but the country as a whole is very friendly to investors, companies and startups. There is huge amounts of private equity and venture capital money to grow companies, much more so than Europe. Consider this: of the world’s 10 highest valued startup unicorns, 6 are American. The rest in the top are Chinese, and the first European unicorn (Swedish Klarna) only qualifies as number 95.
American companies have perfect conditions to grow in their own market before going abroad. Think about it: in the same region, you have almost 330 million inhabitants who all speak the same language and have similar culture. It is thus easier for companies to trade across the US and find new customers, and it is also easier to find capital in other parts of the US.
The greatest challenge for Europe as a single market is the differences in language and culture within the region. A Finnish company may find it difficult to adapt to conducting business in Spain, while a company from San Fransisco can easily set up shop in New York. This brings great investing conditions on the other side of the Atlantic.
These differences between Europe and the US were evident in the 2008 global financial crisis. Even though the crisis originated in the US and affected its economy the most, the Americans and its politicians were quick to handle the aftermath and recover. At the same time, European politics, debates and slow reactions, meant that it took more than five years for the to begin recovering, as the countries couldn’t agree on a way forward. And still, many European countries are still struggling as a result of the crisis more than a decade ago.
I will naturally have a global diversification in my portfolio with a big share of European investments, but I am starting with the American part to allow my government bonds to yield some interest.
In the mean time, I will also make sure to vote in the election to the European Parliament, to do my part in developing a more unified EU for investors and entrepreneurs. I urge you to do the same on 23-26 May.
Monthly Update April 2019
Let’s have a look at the monthly update. This month, I have kept adding funds according to plan. I am nearing to at least have the right asset types in my portfolio, and I now have something that at least remind of the All Seasons Portfolio allocation. In April, I purchased € 374 worth of Treasury Inflation Protected Securities (or “TIPS” for short) that are treasury bills that follow the inflation rate.
Here is what my portfolio looks like in terms of money allocated to each asset type. As I am now only missing intermediate term government bonds, that is what I will be adding during the month of May. Hopefully, I will be able to plow down around € 300 next month as well.
In terms of what actual ETFs I now hold, I have included the below table. When comparing the value as of end of April with end of March (excluding any new investments), the value has increased about € 11, or about 0.4%.
|iShares $ TIPS UCITS ETF USD (Acc) (EUR)||TIPS||– €||374.11 €|
|Vanguard EUR Corporate Bond UCITS ETF||Corporate Bonds||368.86 €||371.13 €|
|iShares J.P. Morgan EM Local Govt Bond UCITS ETF USD (Dist) (EUR)||Govt Bond Long||365.99 €||366.25 €|
|iShares $ Treasury Bond 7-10yr UCITS ETF USD (Dist) (EUR)||Govt Bond Long||351.15 €||350.16 €|
|Invesco Bloomberg Commodity UCITS ETF (EUR)||Commodities||341.20 €||338.21 €|
|Xtrackers Physical Gold ETC||Gold||425.05 €||421.02 €|
|SPDR® MSCI USA Small Cap Value Weighted UCITS ETF USD Acc||Equity||448.14 €||465.01 €|
|Total||2,300.38 €||2,695.90 €|
With that, I feel that I have summarized the past month quite well. I am, in parallel, working on enhancing my excel sheets, and will try to include a total return number based on average purchase price for each asset compared to current value. I believe this should give you a better picture of the benefits of the All Seasons Portfolio. Stay tuned.
In the meantime, let me know in the comment field if there is any other data that would interest you in my efforts to share my progress?
Let’s catch up again next month!
Looking to start your own All Seasons Portfolio? Check out the ETF Portfolio Suggestions page for inspiration of what ETFs to begin with to create your own portfolio.