Portfolio Setup Summary

Why I’m documenting this

I’m writing this series so others building an income portfolio for retirement can follow the whole process end to end and use it as a starting point for setting up their own portfolio. Not to copy it outright. Your objectives, your tax situation, your risk tolerance and your currency needs are not mine. Read this series critically. Where I made a choice, ask yourself whether the same reasoning holds for your situation.

Obviously, this is not a perfect portfolio, and I fully realise that. I don’t think a perfect portfolio exists, and spending ages searching for one is a risk in itself: the classic analysis-paralysis trap. My approach is instead to start somewhere sensible, get the money invested, and improve the setup as I learn more and as circumstances change. A few of the posts in this series already point at things I’d like to revisit. That’s the process working as intended, not a flaw.

The most important point: this is not a spreadsheet exercise. It’s my own money, and the consequences of errors are real. In the summer of 2026 I started converting a large part of my assets into this portfolio setup, planning my first rebalance moment for 31st of December. Placing everything into a structured framework makes it significantly more manageable.

The Eight-Part Core Series

Part 1: Portfolio Objectives

Sets the main objective—a 6% nominal return with a 4% income stream (dropping to 3% if returns come in at 5% or lower)—and the target asset allocation (75% stocks, 10% bonds, 10% cash, 5% gold). Introduces a 10% volatility ceiling and five core conditions: 40% EUR target, underweight US, overweight Asia/EM, ≥2% distributions, and a 10-product limit.

Part 2: Product Criteria

Establishes five screening criteria for selecting ETFs: fund size and liquidity (>€500M AUM), low TER/tracking difference, physical replication, tier-one asset managers tracking recognized indices, and active provider disclosure.

Part 3: Product Choices – Stocks

Applies the screening criteria to select six ETFs across Market Stocks (35%) and Dividend & Value Stocks (40%), balancing fund quality against regional and currency targets.

Part 4: Product Choices – Bonds

Examines why fixed income still earns a 10% allocation (>1 year maturity) post-2022, selecting an investment-grade EUR corporate bond fund and a EUR-hedged emerging market bond fund.

Part 5: Product Choices – Cash & Gold

Details the defensive bucket: a core EUR ultra-short bond ETF for dry powder (10%) and an unhedged physically-backed gold ETC (5%).

Part 6: The Complete Portfolio

Assembles all 10 funds into a unified blueprint. Audits the result against Part 1 targets: total weighted TER (~0.20%), trailing income yield (2.38%), and real EUR exposure (~27.5% direct / ~34% look-through). Not as much as I wanted but I had to avoid high interest-rate differential hedging costs.

Part 7: Portfolio Performance

Backtests the assembled portfolio across multiple market regimes, evaluating volatility against the 10% ceiling, Sharpe ratios, and regional allocation drift, alongside the practical limits of historical modeling.

Part 8: Portfolio Management

Outlines operational rules for execution: separating emergency cash from portfolio dry powder, managing a three-tier drawdown waterfall, and executing semi-annual rebalancing.

Deep Dives & Supplementary Reading

• Macro & Strategy:

  • Why Underweight the US? – Concentration risk in mega-cap tech, USD valuation swings, and fiscal debt dynamics.
  • Expected Returns: Stocks & Bonds – Historical Context, CAPE ratios, and long-term asset class return expectations.
  • Sequence of Returns Risk – Mitigating “cost ravaging” during the fragile decade around retirement.

• Asset Class & Tactical Deep Dives:

  • The Real Cost of Currency Hedging – How interest rate differentials impact EUR-hedged foreign assets.
  • Dry Powder in Practice – Managing cash reserves, rebalancing rules, and institutional takeaways.
  • Evaluating Money Market ETFs – Comparing €STR swap ETFs against bank deposit yields.
  • A Painful 2022 – Analyzing stock/bond correlations during high-inflation rate hikes.

• Execution & Next Steps:

  • Loose Ends & Tax Considerations – Tax architecture, emergency funds, estate planning, and professional advice.