Asset Allocation

I finally made an overview of our asset allocation in stocks and bonds. I threw the husband’s and my investments together and calculated how much each part weighed. That was a rather easy calculation so I don’t understand why I didn’t do this earlier. Mind you, our home equity and cash are not included. It’s just our investments. Here’s what we owned as per 1 December:

Global stocks: 65% (consists of 55% U.S. 9% U.K. 9% Japan and some other developed countries, no emerging)
European stocks: 12%
Emerging market stocks: 13%
Eurobonds: 10%

We’re probably overweighed in European stocks…

On 4 December our monthly investment budget was extracted from our bank accounts, so it probably changed a bit. I won’t look at it until 1 January 2014. Ah, index investing is rather peaceful indeed!

I found out a lot yesterday about investing with Vanguard for Europeans. I think I now have all the pieces of the puzzle. However, the husband and I are going to make an analysis. We’ll probably do this over the weekend. Unfortunately that means that readers who are interested in this topic will have to wait for a couple of days. Sorry, guys. I’m doing my utmost best here.

Love,

Mrs EconoWiser

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13 thoughts on “Asset Allocation

  1. turboseize

    You are overweighed in European stocks? I’d rather think the opposite. With 73% of your assets in US, UK and JPN stock, you are running a very strong currency risk, especially if you take into account that the ECB does not print nearly as much money as the FED and the Japanese do.

    Reply
      1. turboseize

        Maybe I was confusing some numbers. Reading it again, it seems to bes just 65% of total assets, of which 73% are from US, UK and JPN, right?
        Thats obviously is a little bit less, but a lot nonetheless.

        I’d (and with my own money, I actually do) put more weight on European stocks. You might loose some performance, but reduce currency risk (and you might get better value for your money, as European stocks are much cheaper than US, considering P/E).

      2. econowiser Post author

        Hmmm…it is confusing indeed. I’ll do an extended asset allocation analysis next time around and “cut up” the global bit into European, Japanese etc as well!

        Could you explain the advantages of European stocks concerning P/E?

  2. turboseize

    Well, on average, they are lower. 😉

    Concerning P/E, american stocks trade above their historical averages, the DAX slightly below. In my personal opinion, the amerian stock market is decoupling from fundamentals and seems to be driven only by monetary policy. That is clearly becoming a bubble. But nobody knows how long it can be sustained – it might pop next spring, when the FED tapers, it might pop tomorrow, but it might as well last 5 years. So fearfully staying out ist no option, either.
    I, personally, feel more comfortable with the risk more widely distributed. I’m also exposed to US stocks, but to a much lower fraction. I’m invested in mutual funds worldwide (except Japan) and single european stocks (looking for stable dividend payers here). This is hedged against by a bond portion, consisting of some EU gov bonds, but also emerging markets bonds and corporate bonds. Although each asset class is fluctuating wildly, total asset value is remarcably stable. But that also means my return comes mostly from dividend and interest streams, not appreciation gains.

    Reply
    1. rationaldutch

      Hi Turboseize,

      Your comments on the P/E-rations for American vs European stocks interested me, so I looked them up on the Dutch Vanguard site. There, I actually found that the P/E-ratio for Vanguards European Stock Index Fund is actually higher (19.7x) then the one for Vanguard U.S. 500 Stock Index Fund (18.4x).

      So, I am puzzled by your comment that the European P/E’s are lower.

      Can you explain what you mean?

      Reply
  3. a Mustachian

    “I think I now have all the pieces of the puzzle. However, the husband and I are going to make an analysis. […] Unfortunately that means that readers who are interested in this topic will have to wait for a couple of days.”

    Now you’re just being a tease! I’m very curious what you come up with together.

    Reply
    1. econowiser Post author

      I was really busy, actually. But…it so happened that it was great for anticipation purposes. Gotta get my readers to come back, now don’t I? 😉

      Reply
  4. Anonymous

    How much do you guys earn on your bond portion? The lowest I am getting from any of my EUR bank deposits is 1.05% which is higher than the YTM of any of the bonds out there after taking the TER into account.

    Reply

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