“All Weather” Portfolio on XTB

[anton0003]

Hey everyone, I’d like to build a portfolio based on Ray Dalio’s “All Weather portfolio” (40% Long-term bonds | 30% Global Stocks | 15% Intermediate-Term bonds | 7.5% Gold | 7.5% Commodities). I want to use XTB as the platform for investing due to its low or even non-existent fees, and I prefer products that can be purchased in euros to avoid conversion fees.

Now, I find it challenging to find products that fit all these parameters. Can you help me out? Maybe by giving an example or suggesting possible products for each category available on XTB for my research.

I have €400 per month to invest. If you think XTB is not the best platform, what other suggestions do you have?

I’m new to investing, so I welcome any suggestion. I’m choosing this “All Weather” approach as it seems to be better at withstanding major market downturns while still offering solid profit, not the highest but enough for my profile.

From what i could find can u tell me if makes sense?
Ishares Core Global Aggregate Bond UCITS ETF - Long-term bond

Vanguard FTSE All-World UCITs ETF - Stocks

Ishares Euro Corporate Bond Large Cap UCITS ETF - Intermediate-term Bond

Xetra-Gold ETC - Gold

Ishares Diversified Commodity Swap UCITS ETF - Commodity

That commodity isn’t great since it’s not in euros. I welcome all kinds of suggestions to improve this. Thanks!

 

[janetmal]

@anton0003 The all weather portfolio uses only government bonds. Also, the bond ETFs you have selected don't have the correct durations.

For long-term bonds you want something like the Xtrackers Eurozone Government Bond 15-30 UCITS ETF. For intermediate bonds you want something like the iShares Euro Government Bond 3-7yr UCITS ETF. These are only indicative of course and are EU-focused. The commodities ETF you mention is traded in EUR on various exchanges (e.g., Xetra) even though the fund currency is USD, so you won't have to pay any conversion fees. I don't know if these are available on your platform.

Most of the components of this portfolio are very volatile. For example, long-term bonds had a more than 50% drawdown in the last years due to increasing interest rates. Stocks, gold, and commodities also have high volatilities. The portfolio as a whole can work quite well in terms of volatility because the components are not very correlated, but this only helps psychologically if you look at it as a whole and don't focus on the individual components (which is easier said than done).

 

[anton0003]

@janetmal Thanks for the answer mate do you have any suggestion on a platform that might be better then xtb to start this portfolio i want?

 

[shanji]

@anton0003 Something about the ETFs traded in EUR: People always assume that they are better because you are not paying for conversion fees. However this is wrong - the ETF itself does the conversion and it is not doing it for free and it's near impossible to find exactly what it costs. And usually the spread of ETFs traded in EUR are much higher than ETFs traded in their native USD.

Other than that, you post reminded me of a YouTube video I watched recently made by Ramin (PensionCraft). It's either on his channel or the Trading 212 YouTube channel. Pretty balanced selection for all weather portfolio.

 

[anton0003]

@shanji That was insightful thanks for the answer, mate!

 

[sismissy]

@anton0003 My two cents is that putting 55% of your money in bonds is likely to hurt you in the long term. You'll maybe beat inflation, but not see much growth. If you're close to retirement and just want to preserve your wealth, sure. But if you're in your accumulation phase, you can stick to 80-90% stocks and let your money grow. The caveat here is to be prepared to ignore the inevitable drops. If you're looking at at least 10-15 years till retirement, your portfolio has time to recover from drops.

Whatever you decide, I recommend using www.justetf.com to look for the products that are right for you.

 

[anton0003]

@sismissy although i don't disagree with you and although i still have a quite big timeframe. but based on what i read this seems to be the strategy that has less losses than other strategies and when it loses money its like 4% max if we check the 2008 crisis for example and sometimes you even win money when others are loosing, ofc the gains will also not be huge but i think this is the perfect balance for my profile

anyway thx for the tips

 

[sismissy]

@anton0003

if we check the 2008 crisis for example and sometimes you even win money when others are loosing

With stocks you only truly lose when you sell. This is something most people don't consider when making up their portfolio. The ones who lost big during the 2008 crisis are the ones who panicked and sold, or those who had 100% stocks and were already retired so they needed the money for living costs. Those who held through came out ahead.

Since you mentioned VWCE as one of the ETFs you were considering, have a look at its performance before and after 2008: https://curvo.eu/backtest/en/market-index/ftse-all-world?currency=eur (this is a good site for backtesting various portfolio allocations, btw). It peaked in October 2007 at 17189, then fell to 8879 by February 2009. Someone who bought at the peak would have had every reason to wish they'd gone with bonds instead. It took until January 2013 to get back to Oct 2007 levels.

By Oct 2017 (10 years after that peak) it was at 31010. This means that someone who invested in 2007 with a timeframe of 10 years saw a compound annual growth of about 6%, and this includes the crisis years.

By Oct 2022 (15 years after the 2007 peak) it was 46834. So someone who held on to that ETF was rewarded with a compound annual growth of about 6.5% (including the crisis years).

As of December 2023 it stood at 53197. We may see another downturn this year, or we may not. The point is, it doesn't matter if your investment timeframe is long. You do need to be prepared to hold on when the market crashes because, again: you only truly lose when you sell.

Edited to add: I am in no way advocating for a 100% stock portfolio. I'm quite risk-averse myself, so I hold some bonds (about 7% at the moment and will be increasing to 10% over the next months), gold (8% and decreasing because I am not planning to buy more) and real estate (which I will partially divest over the next 5-10 years and move more to stocks). I'm 40 and looking to reduce my working time over the next few years and then retire at some point in my 50s.

 

[anton0003]

@sismissy thanks for the answer amazing explanation! i will see another strategy then since i have 25 years or a bit more ahead of me

 

[scottcuster]

@anton0003 I don't know XTB and am not sure what's available on the platform.

For your approach, the autoinvest pie function from Trading212 sounds like a good fit. You set up your investment distribution as you desire (in %), transfer some amount regularly, and each month (you can choose the frequency) it will automatically be invested in the products you have chosen in the selected %. Since Trading212 has fractional shares, no cent will be lost/leftover, 100% of your monthly contributions will be invested.

Justetf.com is a good page to find ETFs available in Europe. Trading212 has a broad selection.