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How I ended up with an overly complex portfolio

If I exclude employee pension contributions, as of October 2021 I’ve been investing for a little over three years.

I didn’t know where to start and it seemed risky and complicated. Funnily enough I think I was much more anxious about paying taxes correctly than losing money. I had this unjustified confidence in myself that I will make good, rational decisions regarding the investments, but filling the tax forms correctly… oh my!

In this post I will describe my investing journey and how I ended up with an overly complex portfolio. I hope you'll enjoy it!

Early beginnings

I started with a clean slate. Or, almost. I had stocks of the company that I work for. They give employees stocks as part of the compensation - it's called Restricted Stock Units (RSUs). But apart from that, the best experience with investing I had was having a savings account with a tiny interest.

I knew very little about real estate investing at first. No one in my close family did it, none of my friends did it. My parents never even had a mortgage. They built a house brick by brick over many years.

But I decide to learn more about, I surrounded myself with lots of real estate investing materials and I pulled the plug. You can read about my first real estate investment in this article.

It was not an easy project. I bought the property in a different country that the one I was living at the time. I did it all remotely and the renovation took forever. Then I rented it in a complicated way. Just asking for headaches really. But it was a success in the end.

The same year I got into stocks for the first time. I read books about value investing. I listened to podcasts for hedgefund managers, I got deep!

I ended up implementing a complex strategy to get index investing strategy without etfs. I also made some additional bets to make some use of my recently acquired stock market knowledge. You can read about the ideas behind it in this article that talks about emulating ETFs with individual stocks.

Doubling on

Through 2019 I did more of the same. I got another cheap property that needed renovation I also got a property to live in Ireland. I got more stocks. In 2020 I started getting tired of buying individual stocks and a bit worried about my diversification. I added some investment trusts. Buying the investment trusts I was interested in was easy at first, but later Degiro (the broker I used at the time) stopped selling them.

With my partner we decided to jointly buy an investment property in Ireland. The process took about half a year, the pandemic probably didn’t help.

Simplify, but complicate more really?

I decided that maybe avoiding ETFs due to taxation in Ireland was a little silly and I that advantages might outweigh the disadvantages. Many ETFs are low cost, accumulating and provide fantastic diversification. I decided to add them to my portfolio.

If I was starting with a clean slate, the best choice of the ETF would likely be total stock market fund, one like VWCE for example.

But I had other holdings already that I wanted to diversify from. And I also listened to way too many opinions of what to invest into apart from the default.

So I don’t hold one ETF, I hold 5 different one, because I have a bet on Asia-Pacific and Small Cap stocks. Which also diversified me from big US tech stocks which I like, but was too overweight in.

Having 5 different ETFs is not simple at all. I made my portfolio more complex again!

I guess to compensate I sold a bunch of my individual stock holdings I didn’t have high conviction in. Less decision fatigue and companies to follow.

Changing my mind about crypto

I used to avoid crypto, especially bitcoin. I was exposed to it early on, 2013 or maybe even earlier and I have seen many surges and busts. Too much speculation and craze, pure price speculation wasn’t something that I thought I should be engaging in and I didn’t see much real value in crypto. I was put off by the hype.

However I’ve been hearing smart people talking about it and after doing some research I can see that some crypto assets have value beyond just the speculation. Since 2021, I have a very small part of my networth in crypto and I will gradually buy more over time. The prices are very volatile, so not buying in one lump sum makes quite a lot of sense.

Next steps for my portfolio

In short, I want to double on on the stock market investments through diversified instruments (investment trusts or ETFs) and on the real estate in Ireland. I am not planning to expand my portfolio in Poland unless there are some incredible opportunities.

I will steer away from checking out new asset classes, e.g. art, wine, precious metals. I will keep selling the RSUs I receive from my employer to avoid concentrated risk. I might sell off some more individual stocks over time to simplify my stock portfolio a bit.

I will try to keep it simple. There isn't one only way for investing, mixing uncorrelated assets can increase risk adjusted returns, for sure. But often adding more and more different types of assets just complicates things and that complexity is not always worth it.

I will probably never simplify down just to holding VWCE. Some assets are hard to sell, some have significant gains and would cause me to pay a lot of tax. 

However if I was starting over, I would probably just go with VWCE. I pretty much do it with my retirement account, it is 100% allocated to indexed fund of global equities


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