When we first tried to invest in ETFs in Belgium, we spent countless hours researching which ones to buy, which broker to use, and how to handle taxes. We wished there was a practical guide written specifically for Belgians.
That's exactly what Yoran Brondsema set out to create with "De hangmatbelegger" (The Hammock Investor). The book has helped thousands of Belgians start their investment journey.
We interviewed Yoran to dig deeper into the practical aspects of ETF investing in Belgium, from portfolio construction to maintaining your strategy during market volatility.
What inspired you to write "De hangmatbelegger"?
Hammock investing, or passive investing as it's more commonly known, is not new. The first index fund was created in 1971 and tracked the S&P 500 index. Passive investing has grown a lot since then, and as such many great books on the topic have been written.
However, most of these books are written for an American audience. They are great to learn the theory. But to bring the theory into practice and actually buy your first ETFs, the details are important. And these details are often local. For instance, in Europe, we have access to different ETFs than Americans due to different regulations. On top, the choice of brokers and taxes are specific to each country. An American book will never speak about the Belgian transaction tax (just like we don't talk about the American 401k system in "De hangmatbelegger"). So our goal was to write a comprehensive practical guide for Belgians to begin investing in ETFs.
Secondly, we want to make ETF investing more accessible. So we needed to write in our own native language and that of our readers: Dutch.
What does the hammock metaphor represent in your investment philosophy?
One of the core messages of "De hangmatbelegger" is that good investing shouldn't be complicated, nor take much of your time. We want to show that through passive investing and ETFs, it's possible to make your money grow for you while you lie in your hammock. Your banker might want to make you believe that complicated strategies are needed to achieve good investment results, hence to justify the 2.5% fee that the bank's active fund charges. He's wrong!
How does your approach differ from active trading or more complex investment strategies?
It turns out that active trading is a futile exercise, and will most likely lead to worse investment outcomes than a passive strategy.
First, the fee structure creates a significant handicap for active investing. While passive funds charge modest fees around 0.2%, active funds in Belgium typically charge around 2%. This means active funds must substantially outperform the market just to match passive returns after fees. This challenge is illustrated by the real-world example of a KBC active fund that returned 5.5% compared to 9.2% for a comparable ETF between 2005 and 2024:
There's also a mathematical reality at play: since the market return is simply the weighted average of all investors' returns, active investors as a group must underperform passive investors by the amount of their extra costs, creating a negative-sum game after fees.
Both professional and individual investors struggle with active investing. Over 75% of professional active funds underperform their benchmarks. Individual investors face additional challenges including behavioural biases like the disposition effect (holding losing stocks while selling winners), home bias (over-investing in familiar local stocks), and limited access to research combined with higher trading costs.
Given this evidence, passive investing through ETFs offers most investors better returns with lower costs and risks.
For beginners looking to start with ETF investing, what are the most important criteria when selecting their first ETF?
The most crucial first step is determining your ideal portfolio composition that matches your financial goals, risk appetite, and capacity for taking risk. This means deciding what percentage of your portfolio should be in stock market indexes (like MSCI World for global developed markets, or MSCI Emerging Markets for developing economies) versus bond indexes (like government or corporate bond indexes).
For example, if you're young and saving for retirement, you might choose 70% in global stock market indexes and 30% in bond indexes, while someone nearing retirement might prefer 30% stocks and 70% bonds to reduce risk. This fundamental decision about asset allocation will shape your long-term investment success. You can use Backtest to simulate the historical performance of different portfolios, and compare their returns and fluctuations. Only after you've determined these target allocations should you look for specific ETFs that effectively track your chosen indexes.
When selecting an ETF, opt for accumulating ETFs instead of distributing ones to avoid the 30% dividend tax in Belgium. For the domicile, Luxembourg or Ireland are preferred due to their favourable tax treaties with the US. This can be identified through the ISIN code (starting with "IE" or "LU"). Choose ETFs traded in euros to avoid currency conversion fees from your broker.
The fund size should be at least €100 million to ensure long-term viability and better liquidity. Regarding replication method, physical replication is safer than synthetic replication as it avoids counterparty risks. Look for a lower total expense ratio (TER) when comparing similar ETFs, though small differences shouldn't be overemphasized.
Finally, the transaction tax (TOB) is an important consideration. ETFs registered in the EU but not in Belgium have a preferable 0.12% tax rate, compared to 1.32% for Belgian-registered ETFs.
What are common mistakes you see Belgian investors make when choosing ETFs, and how can they avoid them?
Building the right portfolio that suits your goals and your appetite for risk is one of the trickiest tasks when starting to invest. I can see that in when investors show me their portfolio. For instance, I see a lot of portfolios where there are overlapping indexes, like an MSCI World ETF together with an S&P 500 ETF, even if almost 60% of the MSCI World ETF consists of American stocks. Or portfolios that are heavily tilted towards a specific country or industry. Nowadays, AI is all the rage. It was cannabis five years ago, and I'm sure it'll be something else five years from now. Investors also sometimes choose tax-inefficient ETFs, like a distributing ETF instead of an accumulating one (paying a 30% tax on dividends), or an ETF with a 1.32% TOB rate over an equivalent ETF with a 0.12% TOB rate.
One approach is to use a managed investment app like Curvo. When you sign up, you are asked some questions to get to know you and your goals. And based on your answers, the right portfolio is built for you. You don't have to worry about overlapping indexes, geographic concentration, or optimising for taxes, as these considerations were all taken care off. Otherwise, if you do choose to manage your portfolio of ETFs yourself, critically assess your choices and hold them against our ETF checklist.
Starting to invest is relatively easy. But staying the course over many years or decades is much harder. This is also where an automated investment app like Curvo can help. By setting up an automated monthly investment plan, you don't even have to think about it. Every month, an amount you choose is debited from your bank account and invested in your portfolio. An investor's worst enemy is himself, and by automating your investments you don't give yourself the opportunity to mess up. Contrast that with a broker. A broker's business model is based on commissions from trades. So every time you open the app, it will try to tempt you to buy the latest hot ETF, or worse, individual stock. But you shouldn't succumb to the temptation, because excessive trading leads to worse investment outcomes. That's why we recommend that if you use a broker, you uninstall the app from your phone and force yourself to make your investments on your computer. The additional friction will actually be beneficial for the success of your investments!
Lastly, how should investors maintain their ETF strategy during market volatility?
Market volatility is a natural part of investing, but the key is to avoid getting swept up in the daily news cycle. News outlets fundamentally need to generate engagement, and they've learned that negative emotions drive the strongest reactions. It's worth remembering that many of these outlets are still primarily funded by banks and brokers who have a vested interest in promoting active trading - after all, more trading means more fees for them.
Instead of reacting to headlines, you should reflect on your original strategy and motivations. Ask yourself: has anything fundamentally changed in your personal situation since you started investing? Your time horizon, your goals, your risk tolerance - these are the factors that should drive your decisions, not market movements.
Looking at history provides powerful perspective. Think about the major crises we've weathered: the 2008 financial crisis, the tensions of the Cold War, even the devastation of World War II. In each case, the global economy eventually recovered and moved forward. This resilience isn't just luck - it's driven by something fundamental to human nature: our constant drive for progress and improvement. When you're feeling uncertain about current market conditions, ask yourself: is this crisis truly different from all the others humanity has overcome?
The real risk isn't market volatility - it's our reaction to it. By maintaining conviction in your long-term strategy and understanding the historical context, you can avoid making emotional decisions that might harm your long-term financial success. Focus on what you can control: your strategy, your patience, and your perspective.
Thank you, Yoran! Where can we read and follow you?
My personal mission is to solve the pension crisis for my generation. I think that Curvo's Academy is a great starting point for those wanting to start investing in ETFs. As for me, I find LinkedIn a great platform to share my knowledge and perspectives, and connect with readers. So feel free to follow me on LinkedIn.