Advice needed how to invest 80k

[empie0750]

Hi Guys,

just came to some money (~ EUR 80k) and now I'm considering what to do with it. I don't want to keep an eye on my investments so I just want a "invest and forget" kinda option.

My current plan (quite simple) is to invest the total amount into:

• 65% in iShares Core MSCI World UCITS ETF USD;
• 35% in iShares Core MSCI Emerging Markets IMI UCITS ETF.

Do you think this makes sense? I would also like to invest into clean energy (personal opinion that it's the right thing to do), but I cant find accumulative ETF's that are available in EU.

I'm still not sure what broker to use:

• I could use my current bank (Swedbank). The pluses would be (a) I trust the bank and (b) all my money would be easily available. The minuses would be (a) the fees (0.25% transaction fee and a 0.008% monthly fee that is never waived), (b) weird requirements from the bank (e.g. spouse approval to trade even though the money is mine), and (c) the funds would be easily accessible to the authorities (not that I'm currently afraid of this);
• The alternative would be Interactive Brokers. The pluses would be (a) more ETF options (in case I would like to switch in the future), (b) smaller fees (especially in case I would like to make additional contributions), and (c) funds would not easily accessible to the authorities. The minuses would be (a) I'm unfamiliar with the broker and not sure how trustworthy they are, and (b) the whole platform does seem quite old school, (c) it would be very hard to sue them if anything bad happens.

What broker would you suggest? I'm from Lithuania, so I don't have a lot of broker options available (e.g. degiro and vanguard are unavailable). Trading212 is available but is it more trustful than IB?

EDIT:

Thanks for the advice re re-balancing. Will split my portfolio 85/15. Might consider adding some EU. But still not sure as most EU public companies are not that interesting...

 

[batmanspiderman]

@empie0750 Just go with Vanguard All World and you will be good.

 

[empie0750]

@batmanspiderman Thanks for the suggestion.

Was considering Vanguard All World but didn't like their returns. Both ETF's mentioned in my post outperformed Vanguard All World. It also more expensive than iShares. I'm not sure what's the selling point of Vanguard All World.

 

[triloquism]

@empie0750 I haven't done the calculations for a 35% in EIMI (which is huuuge considering that EM consist of only 12% by market cap), but the difference between FTSE All-World only and a split between MSCI World / MSCI EIMI 88%-12% would be a TER of 0.22% vs. a TER of 0.1976%.

That means - a lump sum of 50.000 EUR invested once and hold for 40 years at 8% p.a. would amount to 1,001,145 EUR at 0.22% or 1,009,502 at 0.1976%. So, nearly 8.4K in favor of the latter. (MSCI World + MSCI EIMI).

I think their selling point is "Just go with VWCE only and let it ride, no need for rebalancing or adding another ETF". Also, Vanguard may lower the TER in the future, as they've done it many times before if one of their ETFs is successful.

 

[batmanspiderman]

@empie0750 Please provide chart where I can see how they outperformed VWRL ?

 

[empie0750]

@batmanspiderman

https://imgur.com/sbz0Ocw

If you bought 88% MSCI World/12% MSCI EIMI in the beginning of 2020, you would have earned 6.4%. If you bought VWRL you would have earned 6.18%

 

[batmanspiderman]

@empie0750 You cant look that short time frame. You need to look 10+ year. Unless you dont want to invest for only 6 months?

 

[empie0750]

@batmanspiderman But we don't have data for the previous 10 years, so there is no way to compare

 

[jayjaynp]

@empie0750 I am on mobile now, but have you checked https://backtest.curvo.eu/ ?

 

[disciple701]

@empie0750 Maybe replace iShares Core MSCI World UCITS ETF with SPDR® MSCI World UCITS ETF as the iShares expense ratio is 0.20% and the spdr one is 0.12% which might make a difference in the long term for you.

They're basically the same but the spdr one is just less expensive but has a lower AUM as well (it was even created to compete with the iShares one I believe).

For the broker, I would just go with the lowest cost one.

Interactive is one of the largest in the world so I would definitely say they're trustworthy, but you're absolutely right that the platform is ancient (although it definitely has everything you need).

Personally, I use T212 as the fees from IB are just way too much for me (I have used IB through Lynx as well, also have experience with Flatex if you have any questions about them). I would say T212 is just as trustworthy as IB (both are regulated by FCA and fscs), but T212 is newer and way smaller (IB also is a public company so you can look through their financials more easily while T212 is private) so if size and oldness is a measure of trustworthiness then IB definitely wins. T212 is more innovative and is constantly adding new features (fractional shares, pies among other things) but IB has wider availability of stocks. T212 also has had more problems recently with orders getting stuck etc. Also funny to note is that T212 does everything through IB so even if you go with them you're still related to IB.

So in short:

IB: older more established broker, largest broker, large fees (you do get half of the securities lending income though), more products and markets available.

T212: smaller new broker, no fees (you don't get your securities lending income, you only get half of it at IB), more innovative, fewer products and markets available.

Both regulated and IMO trustworthy brokers.

Personally would say that your account size isn't large enough that the securities lending income would be large enough to have IB as a cheaper alternative (with your account size you could see it as paying a yearly €32 fee at T212 while just €16 at IB only for securities lending while still paying other fees at IB, percentage of income for securities lending is set at 0.04% as that's what I received at IB before they took half).

 

[disciple701]

@empie0750 That's indeed true see section waiver under Single Accounts, Individuals and Small Businesseshttps://www.interactivebrokers.com/en/index.php?f=4969

But depending on how you're going to execute your strategy the other fees might eat away at you: e.g. if you DCA monthly and have distributing funds your commissions could be very high, on the other side if you just invest once and only have accumulating funds and don't add/sell then you should be fine (https://www.interactivebrokers.com/en/index.php?f=1590&p=stocks2)

Edit: I don't know how taxes work in Lithuania so check if you have to pay taxes in the mean time and that kind of stuff as that could really impact your strategy

 

[empie0750]

@disciple701 The taxes are quite straight forward: 15% on the difference between the price you paid and the price you sold. No difference how long you held, invested or earned.

 

[jr001]

@empie0750 All-in to šakotis industry!

Do put the investment horizon into your consideration, i.e. 100% stocks might be a good idea if you're young and intend to hold your investment for 10 years, but your strategy might be different if you plan to buy an apartment in the next few years or something like that.

As a fellow Lithuanian I went for TradeStation Global which is basically IBKR with an introducing broker on top, but for your amount (~$100k) vanilla IBKR would make more sense. You're right about the downsides of IBKR though, there's a bit of a learning curve here too (tip: don't bother with a desktop version of their trading platform, go with their mobile app instead which is way more sane).

 

[empie0750]

@jr001 I'll open a cepelinas kiosk!

I'm 29. Already sold my soul to Swedbank for a house so I'm not planning to buy anything expensive in the short term.

 

[empie0750]

@jr001 Also, have you considered any of the Lithuanian banks as a broker? It would be nice to keep money in a local entity, but all our banks seem terribly expensive

 

[jr001]

@empie0750 I found them to be too expensive as well. As you might know, one can buy & hold Baltic stocks on Swedbank for free (up to 30k€ IIRC) but that's about it. There are other brokers established / with a presence in Lithuania, e.g. Admiral Markets, but their advertising seemed too shady to me.

 

[saracr]

@empie0750 Bet everything in call options on GameStop