NPC_TRDR (@NPC_TRDR) su getquin

Hello GQ community,

I'm currently looking at how I can structure the security module for my securities account soll🤷‍♂️

My security module currently earns good interest at 4% p.a. in my TR clearing account. In the near future, with the coming interest rate cuts, it will probably be difficult to get good interest rates on an overnight deposit account, so I have read up on the subject of money market ETFs and have the following thoughts and questions for you.

My security component should initially make up 30% of my portfolio, divided as follows:

15% money market ETF on the Deutsche Bank Euro Overnight Rate Index

$XEON (+0,03%) Xtrackers II EUR Overnight Rate Swap UCITS ETF 1C

15% Bond ETF based on short-dated German government bonds

$EXVM (+0,08%) - iShares eb.rexx® Government Germany 0-1yr UCITS ETF (DE) EUR (Dist)

I am aware that the following cases may occur:

📉 Interest rate cuts:

📉 Money market ETF $XEON (+0,03%) also falls, as it tracks the EURO Overnight Index and is therefore always based on the ECB deposit rate.

📈 Bond ETF $EXVM (+0,08%) rises in the opposite direction to the interest rate cut, as German government bonds are still tied to older, higher interest rates. This means they are still attractive for investors.

📈 Equities and equity ETFs rise as companies and end consumers benefit. More money is being invested in the economy.

📈 Interest rate hikes:

📈 Money market ETF $XEON (+0,03%)as described above is based on the ECB's deposit rate and therefore rises with it.

📉 Bond ETF $EXVM (+0,08%) falls, as the older German government bonds are still tied to the lower interest rate. They are unattractive for potential investors.

Equities and equity ETFs fall as companies and end consumers have less money freely available to invest in the economy.

If I take this combination of money market ETF and bond ETF, it will balance out depending on the market situation and I won't get any added value from it, will I?

I would be very happy to hear your thoughts and opinions on this, it would help me.

How do you handle this?

Do you buy accumulating or distributing?

Do you also have a hedging module in your portfolio?

Do you not use any safety components and prefer to buy cheap shares during the high-yield phase?

Kevin E.@KevinE

5Mes

I have a nest egg - it doesn't have to yield a return (of course, what you can safely take with you, you take with you...) and is intended for an emergency scenario. The amount is therefore based on my personal emergency scenario.

However, I also have a "safety component" in my portfolio. My less volatile stocks, such as a Coca-Cola, which definitely won't beat the market - that can go if "the shit hits the fan". I would then liquidate it. It's a rather theoretical case, because I've only used my nest egg once in the last 10 years (at 20%). But you never know.

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ZeroIncomeStrategy@ZeroIncomeStrategy

This is not quite true for the ETF on short-dated bonds.
In theory, the overnight behaves like an ETF on bonds that only run for one day. In $EXVM they run for less than a year. So the price doesn't behave that much differently.
The effect you describe applies above all to long-dated bonds, e.g. $IBGL