Do you live in Belgium and are you intrigued by the Bogleheads' investment philosophy? You're not alone. Many find the Boglehead investing principles appealing. Yet, they're challenging to apply outside the United States because most of the resources target Americans. This article demystifies the Boglehead philosophy and brings it home for Belgian investors. We take you through the tenets of Boglehead investing, which emphasizes simplicity, discipline, and long-term focus. We also explore practical ways to apply these principles in Belgium, and introduce Curvo, an app designed to make Boglehead investing accessible and straightforward for all Belgians.
Understanding Boglehead investing
Investing can seem daunting and complex, especially if you're not familiar with the financial markets. Fortunately, a group known as the Bogleheads have formulated a philosophy that simplifies this process, focusing on long-term, low-cost, and diversified investing. This approach is universal and is beneficial for investors in Belgium, just as it has been for those in the United States and elsewhere.
Who are the Bogleheads?
The Bogleheads are a group of individual investors who follow the advice of John Bogle, the founder of Vanguard and credited as the inventor of the index fund. This group started as an online forum in the late 1990s and has since grown into a large community that shares advice and support. Bogleheads are known for their commitment to a straightforward, low-cost investing philosophy.
The Boglehead philosophy
The Boglehead investing philosophy is a set of ten principles that guide you towards financial independence. These principles are designed to be simple, yet effective, and they promote a disciplined approach to managing personal finances and investments:
- Live below your means
- Invest early and often
- Never bear too much or too little risk
- Never try to time the market
- Use index funds
- Keep costs low
- Minimise taxes
- Invest with simplicity
- Stay the course
Live below your means
The Bogleheads emphasise the importance of saving a significant portion of your income and avoiding unnecessary expenses. By living frugally, you can allocate more money towards investments, which can potentially grow over time.
Invest early and often
The sooner you start investing, the more time your money has to compound and grow. Regular and consistent investments, regardless of market conditions, can help you amass a substantial corpus over time.
Never bear too much or too little risk
Your investment portfolio should reflect a balance of asset classes, such as stocks and bonds, which aligns with your risk tolerance and financial goals. Over-exposure to risky assets or excessive conservatism can both hinder your financial progress.
Diversification is a crucial strategy to control risk. By investing in a variety of asset classes and geographic regions, you can mitigate the risk of significant losses.
Never try to time the market
Bogleheads advocate for consistent, long-term investing rather than attempting to buy low and sell high, which is notoriously difficult to execute successfully.
Use index funds
Index funds, which aim to replicate the performance of a specific market index, generally outperform actively managed funds over the long term, primarily due to their lower costs. And they work! A globally diversified index such as the MSCI World index, which consists of over 1,600 stocks across more than 20 countries, has delivered an average return of 10.8% since 1979.
Keep costs low
Investment costs, including fund expenses and taxes, can eat into your returns. By choosing low-cost investment options and employing tax-efficient strategies, you can enhance your net returns.
Bogleheads recommend using strategies to reduce the tax burden on your investment returns. Every euro paid in taxes is a euro less in return!
Invest with simplicity
A simple investment portfolio is easier to understand, manage, and maintain.
Stay the course
The financial markets fluctuate, but Bogleheads recommend sticking to your investment plan unless your financial circumstances or goals change. Selling under panic during downturns or over-enthusiasm during bull markets, can harm long-term financial outcomes. When investing, gains are made over years rather than days.
The Boglehead philosophy is based on patience, discipline, and the power of compounding. As a Belgian investor, you can apply these principles to your own financial situation and goals. The key is to start early, invest regularly, diversify your portfolio, and remain disciplined in your approach. Despite market volatility, this philosophy can help you work towards financial independence over the long term.
Applying the Boglehead principles in Belgium
Most of the resources on investing like a Boglehead are focused on an American audience. So implementing the Boglehead investment philosophy in Belgium may seem daunting at first, particularly in terms of navigating the local financial landscape. We lay out some practical ways on how to invest like a Boglehead in Belgium.
Selecting low-cost index funds in Belgium
Index funds are a core component of the Boglehead philosophy. They offer a low-cost, diversified investment option that replicates the performance of a specific market index. Many of these funds are available to Belgians, most often in the form of ETFs (Exchange-Traded Fund). ETFs allow you to invest in a broad market index, providing diversification and low fees. In Belgium, you can invest in ETFs in two ways:
- With a broker
- Through an app like Curvo
When using a broker, the challenge lies in selecting the right funds. There are thousands of funds available. Furthermore, not all index funds are created equal. They can vary in terms of their expense ratios (the fees charged by the fund), the index they track, their overall performance, and their tax-efficiency. It is crucial to scrutinise these factors before making your choice.
Constructing the best portfolio of ETFs aligned to you and your goals is one of the most challenging parts! That's why we provide a guide to building your portfolio, as well as how to select an ETF. And further below, we explain how Curvo makes the selection process straightforward.
Implementing a buy-and-hold strategy in Belgium
The Boglehead approach recommends a buy-and-hold strategy, which involves purchasing investments and holding them for the long term, regardless of market fluctuations. This can be done by regularly investing in your selected index funds.
The challenge here lies in maintaining discipline and not reacting to market volatility. It can be tempting to sell when prices are falling or to try to time the market to maximise returns. However, the Boglehead philosophy argues that it's time in the market, not timing the market, that leads to success. Sticking to this strategy requires a level of patience and emotional control that some investors may find challenging.
When investing through a broker, you can set up a standing order to automatically send money to invest every month. Unfortunately, most brokers don't offer a way to automate the investment process. In that case, Curvo can help by fully automating the process of investing monthly, from debiting the amount from your account to making the investment according to your portfolio.
Managing taxes efficiently
Efficient tax management is crucial for maximizing investment returns. In Belgium, like in many other countries, taxes can take a significant bite out of your investment returns if not managed effectively.
There are four taxes relevant for Belgian investors:
- tax on transactions ("beurstaks" or "taxe boursière" or "TOB")
- tax on dividends
- tax on capital gains for bonds, also called the Reynders tax
- tax on investment accounts of more than €1,000,000
Each have their impact on the choice of ETFs in your portfolio.
Rebalancing your portfolio
The Boglehead philosophy also emphasises the importance of maintaining your target asset allocation through regular portfolio rebalancing. This involves adjusting your portfolio periodically to keep it aligned with your desired level of risk and return.
In practice, this means you may need to sell some assets that have performed well and buy others that have underperformed. This can be counter-intuitive and emotionally challenging, as it involves selling 'winners' and buying 'losers'. Moreover, it requires constant monitoring of your portfolio and an understanding of when and how to rebalance effectively.
Curvo, the easiest way to be like a Boglehead in Belgium
The challenges of investing through a broker
In the previous section, we saw how you can invest like a Boglehead in Belgium. However, managing your investments through a broker can be challenging. It starts with the task of building the right portfolio of ETFs. This requires you to understand your objectives, your tolerance for risk, select the right mix of indices in your portfolio, and then select the ETFs that best implement the portfolio. You then have to open an account with a broker, learn how you can buy the ETFs in your portfolio.
You then have to repeat this every month if you wish to follow the Boglehead principle of investing regularly. But implementing a buy-and-hold strategy with a traditional broker often requires regular manual investments. This can be time-consuming and may lead to missed investment opportunities if you forget to make a scheduled investment.
Efficient tax management is crucial for maximizing investment returns. However, understanding and taking advantage of tax-efficient investment options can be complex when dealing with a broker. It often requires a deep understanding of both investment options and tax law. For instance, the transaction tax for some ETFs is 0.12%, whereas it's 1.32% for others. Or if you happen to invest in a distributing ETF instead of an accumulating ETF, you'll pay a 30% tax on the dividends.
Lastly, rebalancing is essential to maintain your desired asset allocation and risk level. However, with a traditional broker, this often involves manually selling overrepresented assets and buying under-represented ones. This process can be time-consuming and may incur transaction costs.
In summary, the Boglehead investment principles offer a robust, disciplined approach to building wealth. While brokers may provide the tools necessary to implement these principles, the process may not be the easiest. You may not have the interest, time or motivation to go through the learning curve. Or you'd simply rather spend your time on things that are important to you, instead of on the management of your investments.
We built Curvo to make Boglehead investing accessible to all Belgians
Curvo was built to address these challenges. The idea of Curvo started when Yoran, one of the co-founders, was frustrated at the difficulties of investing the Boglehead way with a broker. He was convinced that index investing was such a powerful tool for Belgians to improve their financial well-being. Yet, all the complexities prevented his friends and family to benefit from it.
By providing access to a curated selection of portfolios consisting of low-cost, high-quality index funds, we make the task of building your portfolio straightforward. When you sign up, you are asked a few questions to learn about your objectives and risk profile. Then, the portfolio that best suits you is selected. All portfolios are managed by NNEK, a Dutch investment firm supervised by the Dutch regulator (AFM).
Through the Curvo app, you can also fully automate your investments with NNEK, from when your money is debited every start of the month until the investment is done. This way, it becomes effortless to stick to the Boglehead principle of investing early and often. Furthermore, fractional shares ensure that all your money is always invested. No cash is ever left on your account doing nothing.
Curvo helps you efficiently manage taxes. The funds in the portfolios were chosen such that they are not liable for the transaction tax. And we help you be compliant with all fiscal and administrative regulations, and offer detailed step-by-step guides when necessary.
Finally, portfolio rebalancing is done for you. If your portfolio drifts too much from its target allocation, NNEK will automatically adjust your investments to bring them back in line.
Feel free to learn more about how Curvo works.
The Boglehead investing philosophy simplifies the complex investing process with nine principles focused on long-term, low-cost, and diversified investing. The philosophy's universal application definitely extends to Belgian investors. We first saw how to bring the Bogleheads principles into practice by using a broker. But that comes with its difficulties and can be intimidating, especially if you're new to investing.
As Curvo founders, we wanted to make index investing à la Bogleheads accessible to all Belgians. We built Curvo to address the challenges of Boglehead investing through a broker, such as building the right portfolio for you, manual investing, tax management, and portfolio rebalancing. The platform aligns with the Boglehead philosophy of simplicity, discipline, and patience in investing, and makes it good investing straightforward for all Belgians.
Questions you may have
Can you use Vanguard in Belgium?
As a pioneer of index investing, Vanguard ETFs are among the most popular in Belgium. Fortunately, most of their funds are available to Belgian investors. However, you can't purchase them directly through the Vanguard website. Instead, you can buy their ETFs through a broker. Their funds are also represented in the portfolios offered through the Curvo app and managed by NNEK.