I'm a European resident (non U.S. Citizen), I receive my salary in USD. I have opened a USD account at my local bank to avoid exchange fees.
I'm having difficulties in finding a decent way to invest these USD. I would like to follow Graham's advice (25/75 to 75/25 between safe bonds and stocks). Especially, I find it difficult to make any money on safe bonds when the amounts invested are small and the commissions are (relatively speaking) high.
I have to pay minimum 14.95 USD (up to 0.15%) in commission when buying US stocks or ETFs. I do not have access to bonds in USD apart from via ETF.
It seems commission and spreads makes it impossible for me to invest in safe bonds.
For example, say I would invest 1000 USD in: iShares 1-3 Year Treasury Bond ETF
Broker gives me: spread 0.02%, commission: 14.95 USD. The management fees for the ETF is: 0.15%
Say I would hold it for 3 years, the last 3 years, the ETF increased by 0.65%:
That would give me less than 2 dollars! Given the commission of $14.95, I am actually loosing money on this.
(calculated as: 1000(1-0.0002)(1-0.0002)(1-0.0015)^(3)(1+0.0065), 0.0002 is the spread - buy and sell, 0.0015 is the management fee)
What would be some options that would be safe and yet give some protection for inflation?
- Is my ETF calculation correct? or have I misunderstood it?
- Is there any online broker for European citizens (non U.S. citizen) which would offer better options? (I have $20k USD to invest)
- Should I exchange my USD to local currency (fee 0.15%) and buy national bonds instead? (I prefer not to, perhaps that is passive speculation, the USD is very low and I suppose that will change once the QE stops)