In part 4 of the Investing series, we have covered Exchange Traded Funds (ETF). In this post, I’ve mentioned that ETF used arbitrage to follow closely the price of the index. If the price of the stocks in the index go up, the price of the ETF should follow. And if the price of the stocks go down, the price of the ETF should follow as well. But if the price of the ETF goes up because of stock market trading, something should correct the price quickly. This is where arbitrage plays a big role.
In this post, we are going to see how Exchange Traded Funds are created. And also what is arbitrage ? How it makes sure the price of ETF stay in sync with the price of the index. It’s a bit of a complicated subject. But I think it’s important to know exactly how financial instrument are working before investing in them.
Continue reading “Investing 6. Exchange Traded Fund (ETF) Arbitrage”
In the previous post of the Investing series, we talked about Exchange Traded Funds (ETFs). Before that, we talked about mutual funds. In both these two cases, we focused especially on passive index funds. Index funds are replicating an existing index. For instance, the SP&500 index is replicated by many mutual funds and many ETFs. In this post, we are going to focus on index replication.
There are several different ways of replicating an index. There is physical index replication and synthetic index replication. It’s important to know how funds are replicating the index. If you want to make a good choice between the different ETFs and mutual funds that exist, it is important to know the different ways they are using for replicating the index.
Continue reading “Investing 5. Index Replication in details – ETFs and Mutual Funds”
In the previous post of the Investing series, we talked about mutual funds. They are a great tool for investment. And especially passive funds with very low fees, thanks to index investing.
This is all great, but the problem with mutual funds is their availability. If you are lucky, you have access to Vanguard. And you can directly invest in their low fees mutual funds. There are other like Vanguard, but they are the most famous 😉 If you are not lucky, for instance, if you live in Switzerland, you don’t have any easy access to good mutual funds. I can bet that your bank does not offer cheap passive funds. At least mine doesn’t! Here comes Exchange Traded Funds!
Continue reading “Investing 4. – Exchange Traded Funds – ETFs”
In the previous post of the series, we covered stocks and bonds. They are important financial investing instruments. They both have their advantages. Bonds are more stable but will return less. Stocks are more volatile but should return more. In a balanced portfolio, you need both. But picking stocks and bonds is a lot of work. And it’s a difficult one. It requires a lot of knowledge and time.
So why not let other people pick bonds and stocks for you ?
Investment funds are doing exactly that for you. In this post we are going to cover them!
Continue reading “Investing – 3. Mutual Funds and Index Investing”
In this post, we are going to see how to buy an Exchange Traded Fund (ETF) on DEGIRO. Vanguard Total World (VT) is the main part of my new portfolio. So I’m going to use VT as an example. The process is exactly the same with any ETF you buy.
I decided to use DEGIRO after comparing with several other brokers. The main advantage of DEGIRO is its very low fees. You can read my full review of DEGIRO if you want more information. This post assumes you already have an account with DEGIRO. If not, you can open one account very quickly.
Continue reading “How to buy an ETF (VT) on Degiro”
It’s been a long time now since I wanted to write my Investor Policy Statement (IPS). I just took some time over the last week to write it down completely.
So, what’s an IPS ? Basically, it’s a set of guidelines for your investing. It will state how you are going to invest and why. It should also state how you will react to some events.
Why would you need an IPS ? The reason is to keep you on the right path when a situation trigger. If you already though of the problem and the solution to it, you know how to react. You don’t need to be emotional about it. And emotions in investing are generally a bad thing.
I didn’t invent the concept! It’s an old thing. It was at first used between a portfolio manager and the client. This was helping the manager invest in the way the client wanted. Since I’m my portfolio manager, I’m doing this statement only between me and me. I was motivated to write my IPS after I read this post by Mr. Retire In Progress. He was himself motivated by another post by Physician On Fire. I would also recommend you read these two posts if you want more information on the subject.
If you want an example, you’ll find my Investor Policy Statement just below. Keep in mind that every IPS is different and should be made for your own situation and goals. So let’s delve into my own IPS.
Continue reading “My Investor Policy Statement – You need one too!”
A few months ago, I updated my portfolio to add more bonds and more dividend yielding stocks. Since then, I had a lot of discussions on this portfolio. I discussed it on the comments on this blog. I also discussed it on the bogleheads forum. Since these discussions, I’ve given a lot of thoughts on my portfolio. I realized there was several issues with the portfolio. I’m going to discuss these issues here and present the new portfolio on which I’ve settled on. The biggest issue was the complexity of the portfolio.
I’m going to start with the decisions that I made about my portfolio and the reasoning behind them. If you want to checkout the new portfolio, simply jump to it 😉
First a few acronyms:
- Exchange Traded Fund (ETF): A fund that is traded like a stock
- Total Expense Ratio (TER): The amount of yearly fees in a fund
Continue reading “New ETF Portfolio – Simplicity is key”
After a record-breaking March 2018, April 2018 is even better 🙂
Although I had some significant expenses this month, the savings were great. This is partly thanks to the gifts I received this month for my 30 years birthday! I also managed to keep my expenses quite low. And my net worth made a very nice jump. Overall, a great month 🙂
Continue reading “April 2018 – Birthday and new savings record”
(This post was first published on Mustachian Post. Thanks a lot to MP for the opportunity of guest posting.)
I’ve now been using Degiro for about four months. It’s now time for a review of the tool.
I would like to mention that I never tried any other broker. I decided to use Degiro four months ago based on costs. Moreover, I’m a computer scientist, so no issues with potential tech issues. Finally, my portfolio is very small, so my experience may not compare to yours.
Continue reading “My review of Degiro as a broker for Swiss investor”
In 2018, I wanted to add a few bonds to my portfolio. Since I’m in long-term investing, I don’t need a lot of bonds. But I wanted to add 5% of bonds into my portfolio to be safe and to allow for more re-balancing opportunities. Also, I do have bonds in my third pillar account. Moreover, I also wanted to get rid of my crypto-currencies. So, I updated a bit my previous portfolio to reflect this. Moreover, I also wanted to depend less on the dollar.
This is what I settled on:
Continue reading “Updated ETF portfolio for Switzerland – Bonds and Dividends”