My way (Spain)

[Junior]

Following some other examples I have previously seen in this forum, I will write ocasionally some posts about where I am in my journey (started in Spain)

- June 2018:
Age = 25 years old
Cash ≈ 12k€
Debt = 0€
Home Costs = 0€

- May 2019:
Cash ≈ 19k€
Salary increment ≈ 20% (august 2018)
Debt = 0€
Evaluating options to rent an apartment close to where I work. And investment options.

 

[Junior]

Sources of income for both cases are the same: my current job. I am thinking about possible changes due to future increments in costs (home and others).

Current costs ≈ 30% of current wage.

 

[exnavynuke]

Good job keeping costs low relative to your income. What investments are you considering? I'm not very familiar with your options in Spain personally, but some here may have some suggestions.

 

[Junior]

Having in mind that I currently have a small amount to invest, I was thinking that probably going for low cost but diversified options could be more interesting. Some exemples: ETFs (maybe related to S&P 500, DAX and MSCI World). Then I am not sure about which is the best way to invest in sustainability driven companies (IIC?). What I have more doubts is: which fixed income instruments can be attractive (specially having in mind the current state of inflation in Europe).

What I have been told is to try to manage portfolio having in mind the expenses that might come. Which I read as the sooner I may need a certain amount, the less riskier should be the type of investment of that amount. I understand that in theory I should change it as well according to the market situation (but I am not quite sure on this last one).

Being honest with myself I don't have much knowledge a part from a couple of books, I have read. I tried talking with some financial advisors but the offers they displayed where not much attractive (specially high in costs and low in returns). Which in part makes me think that I will have to do it on my own, so any advice (reading resources or other) is welcomed. I understand that caution is important, so I'll try to be as much informed as I can.

Currently I am trying to search for platforms that could give me a generous exposure to diferent instruments and allow me to invest with low costs.

 

[exnavynuke]

Your asset allocation shouldn't be changed based on "market situation", but should be set such that your risk tolerance is acceptable with that allocation regardless of the market performance at any given time. If you're comfortable with wider swings as the market goes up and down and will weather those bad times, then a more aggressive allocation (higher equities, fewer fixed income instruments) is generally better. While if you are more skittish when bad days come around, then a less aggressive allocation is generally better (to minimize the downturn in value during negative market return periods, even though it also reduces potential upside during positive market return periods).

I'd recommend you read the boglehead "getting started" wiki as a nice resource to learn more about investing and allocation methods.

 

[Junior]

Your asset allocation shouldn't be changed based on "market situation", but should be set such that your risk tolerance is acceptable with that allocation regardless of the market performance at any given time. If you're comfortable with wider swings as the market goes up and down and will weather those bad times, then a more aggressive allocation (higher equities, fewer fixed income instruments) is generally better. While if you are more skittish when bad days come around, then a less aggressive allocation is generally better (to minimize the downturn in value during negative market return periods, even though it also reduces potential upside during positive market return periods).

Yes, I understand that. Thanks for the advice. Adding to the info you provided, if I follow part Ben Graham's notes, I guess it would be somewhere between 50% equities - 50% fixed income, and 75% equities - 25% fixed income (have to test it to see where I prefer to be). But maybe I am taking the book too literally.

I'd recommend you read the boglehead "getting started" wiki as a nice resource to learn more about investing and allocation methods.

I'll read it better, at first sight seems to provide a solid foundation on many topics. Thanks again.

 

[sengsational]

At your age, unless you're saving for something, every dime should be in equities. The lowest cost fund you can find. The idea to have some funds in an asset class that won't take a dive should be of little concern to a person with solid earning potential and drive, such as yourself. The picture changes when you're done earning, so all the reports here for allocations with higher fixed income components are because that prevents having to sell low from the equity bucket. You'll simply spend only what you earn, or less, and so avoid the sell low risk.


You have an impressive start. I'd go "all in" and test your mettle on the next equity plunge. Just keep reminding yourself that you have a huge asset: your multiple year earnings potential. You'll look back at the plunge and the recovery and thank yourself for hanging on, and buying when equities were "on sale". Those who study this stuff, as you are doing, won't sell low and miss the recovery. You're too smart for that!