Narcis Miclaus

7 min read

Personal finance, from zero Lesson 39 / 60

Sofia builds her first portfolio

Worked example: €12,000 starting, €500/mo PAC, age 28 → 65, in real EUR. Decisions, numbers, trade-offs, final expected outcome.

Sofia is 28. €12,000 in her conto corrente. €35,000 gross salary (~€1,946 net/month). She’s read the last 38 lessons and is ready to actually start. Today we build her portfolio step by step, with real decisions and real numbers.

Step 1: Emergency fund first

Sofia’s essential monthly expenses (from lesson 9): ~€1,385/month.

6-month emergency fund target: €8,310.

Action: open a conto deposito svincolabile at illimity or similar, at 3.0-3.5% gross. Transfer €8,310 from her conto corrente.

Remaining balance for investment: €12,000 − €8,310 = €3,690 to invest.

Plus her ongoing savings capacity: ~€500/month.

Step 2: Pick the brokerage

Options:

  • Fineco: €19 per trade, regime amministrato, good app, free conto corrente with salary.
  • Scalable Capital: €1 per trade on ETFs in their “prime” plan, regime dichiarativo.
  • Degiro: cheap fees, regime dichiarativo, requires some tax paperwork.

Sofia picks Fineco because:

  • She already has her conto corrente there.
  • Regime amministrato means Fineco handles tax automatically.
  • Simplicity more important than saving €50/year in fees.

Step 3: Decide asset allocation

Sofia is 28, stable employment, 37 years to traditional retirement. High risk tolerance on paper.

Target allocation:

  • 75% global equity.
  • 20% EU aggregate bonds.
  • 5% cash buffer in the brokerage.

Rationale: long horizon, global diversification, modest bond cushion for 2022-style shocks, small cash for opportunistic purchases.

Step 4: Pick the specific ETFs

For the 75% equity:

  • Vanguard FTSE All-World UCITS ETF (Acc) — ISIN IE00BK5BQT80, TER 0.22%.
  • Listed on Borsa Italiana in EUR.
  • ~3,800 stocks, global, accumulating.

One ETF. Simple. No redundant overlap.

For the 20% bond:

  • iShares Core € Govt Bond UCITS ETF (Acc) — ISIN IE00B3VTML14, TER 0.09%.
  • Listed on Borsa Italiana in EUR.
  • EUR investment-grade sovereign debt.
  • Accumulating.

For the 5% cash:

  • Just leave in Fineco’s money market. No ETF needed.

Step 5: Initial purchase

She has €3,690 to deploy immediately. Plus her €500/month going forward.

Option A: Lump-sum immediately

  • €3,690 × 75% = €2,767 into Vanguard FTSE All-World.
  • €3,690 × 20% = €738 into iShares Core EUR Govt Bond.
  • €3,690 × 5% = €185 left as cash.

Option B: 3-month PAC of the lump sum

  • €1,230/month for 3 months, split 75/20/5 ratio.

For €3,690 in a single transaction, lump-sum is fine. Fees are small relative to amount (2 trades × €19 = €38, 1% cost).

Sofia picks Option A: lump-sum immediately, 75/20/5 split.

Fineco confirmation:

  • Buy order: 22 units of Vanguard FTSE All-World at €124 → €2,728 + €19 fee.
  • Buy order: 11 units of iShares Core EUR Govt Bond at €67 → €737 + €19 fee.
  • Remaining: ~€225 cash.

Total invested Day 1: ~€3,465 in ETFs, €225 cash (will get invested with next month’s PAC).

Step 6: Set up monthly PAC

Fineco lets her set up a recurring purchase:

  • €400/month → Vanguard FTSE All-World.
  • €100/month → iShares Core EUR Govt Bond.

Automated execution on the 5th of each month. Transfers from conto corrente to brokerage and buys automatically.

Total monthly: €500.

Step 7: The next 37 years

Assumptions for projection:

  • Global equity real return: 5%/year (conservative vs historical 5.5-6%).
  • EUR bond real return: 1.5%/year (modern yield environment).
  • Blend at 75/20/5 cash: ~4.1% real/year.
  • She doesn’t panic-sell during bear markets.
  • Monthly contribution rises with inflation (roughly 2-3%/year).
  • No investing breaks for career gaps.

Projection table

Real terms (today’s EUR purchasing power):

AgeYearsCumulative contributionPortfolio value
280€3,690€3,690
357€45,690€54,000
4012€75,690€98,000
4517€105,690€158,000
5022€135,690€235,000
5527€165,690€336,000
6032€195,690€470,000
6537€225,690€650,000

Calculations assume 75/20/5 blended ~4% real return, starting €3,690 lump + €500/month contributions (increasing 2% annually).

Total lifetime contributions: €225,690. Total growth: €424,310. Final portfolio: ~€650,000 in today’s EUR.

Step 8: What does €650k buy at 65

Using 4% safe withdrawal rule: she could sustainably withdraw ~€26,000/year in real terms from the portfolio, in addition to whatever INPS public pension provides.

Her INPS contributivo projection (rough): €18,000-22,000/year at 65.

Total retirement income (rough): €44,000-48,000/year. Plus the €8,310 emergency fund still intact.

On current expenses of ~€1,400/month essential + ~€500/month discretionary = €22,800/year, she has ~2x cushion. Comfortable retirement.

The risks and caveats

  1. Bear markets will happen. The projection assumes she doesn’t panic-sell. Real-life volatility may include 2-3 bear markets of 30%+ drawdown during this 37-year window.

  2. Actual returns may differ. Could be lower (4% real instead of 4.5%) or higher (5.5%). The projection uses conservative numbers.

  3. Life events may require pauses. Job loss, parenting breaks, education, moving. She should keep investing through everything possible but realistic life plans allow pauses.

  4. INPS pension projections may change. Pension formulas can be reformed. Don’t assume a fixed number; update planning every 5-10 years.

  5. Inflation may deviate from assumptions. Projections in real terms assume ~2% long-run inflation. Regime changes can occur.

Step 9: Annual review

Every January, Sofia:

  1. Logs into Fineco. Checks portfolio allocation.
  2. Verifies target band. Is equity between 70-80%? Is bond between 15-25%?
  3. If within band: does nothing. Continues monthly PAC.
  4. If outside band: adjusts future contributions to rebalance. Sells only if extremely drifted (85%+ equity, for example).
  5. Reviews life changes. Salary up? Marriage? House plans? Update if needed.

Usually: 10 minutes of work per year. Automation does the rest.

Step 10: Long-term milestones

At key moments Sofia reassesses:

Age 35 (planning first house?)

Evaluates buying vs renting. If buying, some cash moves to short-term bonds for down payment. Possibly pause equity PAC while saving for mutuo deposit.

Age 40 (children?)

If she has children, maybe add 529-style education savings (Italy lacks a perfect equivalent, but PIR or a separate ETF for 18-year horizon works). Adjust allocation.

Age 50 (catching up)

Review pension projection. Maybe add fondo pensione contributions for tax benefit. Start shifting equity slightly toward bonds (65/30/5).

Age 60 (pre-retirement)

Shift further to bonds (50/45/5). Consider part-time work. Plan withdrawal strategy.

Age 65 (retirement)

Begin systematic withdrawal. Match to INPS + portfolio blend. Review annually.

The boring part — that’s the point

Sofia’s entire investment activity over 37 years:

  • 1 initial purchase decision.
  • 1 monthly automatic buy for 37 years.
  • Annual 10-minute review.
  • Periodic life-event adjustments.

Total active time: maybe 30 hours over 37 years. That’s how investing should feel.

Compared to day-trading or active stock picking: minimal time, minimal stress, better expected return because low costs and diversification.

Common mistakes she should avoid

  1. Panic-selling during crashes. Hold through. Add if possible.
  2. Chasing hot ETFs. EV-only? AI-only? Tempting but narrow. Stick with broad index.
  3. “Just a little crypto.” 5% “experimental” becomes 20% concentrated if prices rise, dangerous if they fall. Better: zero or near-zero.
  4. Overcomplicating. 1-3 ETFs is fine. Don’t add factor tilts or theme ETFs unless you understand them.
  5. Advisor-induced switches. Bank will pitch new products; polite “no thanks.”

What Luca (18) and Giorgio (52) would do differently

Luca

Starting fresh. Smaller amounts. 100% global equity (no bond allocation yet at his age and horizon).

  • Contribution: €50-100/month from part-time.
  • ETF: single global equity (Vanguard FTSE All-World).
  • When he gets first full-time job at 23, increase to €300-500/month.
  • By 35, he’s built a base. Then add bond allocation.

Giorgio

Less time, more money. 50/45/5 allocation (more conservative).

  • Starting balance: perhaps €80,000 accumulated over 30 years.
  • Monthly: €500 into fondo pensione (for tax deduction) + €500 into brokerage.
  • Portfolio: balanced, gradually shifting to bonds as he approaches 65.
  • Goal: preserve wealth, modest growth, ready for retirement in 15 years.

What to do with this lesson

Three steps, matching Sofia’s approach:

  1. Pick your emergency fund destination and fund it first. Only then invest the excess.
  2. Pick ONE broker, ONE equity ETF, ONE bond ETF (if you want bonds). Don’t overcomplicate.
  3. Set up monthly auto-PAC. Minimum €100/month is fine to start. Increase over time.

Sources

  • Vanguard FTSE All-World — https://www.it.vanguard/professional/product.
  • iShares Core EUR Govt Bond — https://www.ishares.com/it.
  • Fineco — https://www.fineco.it/ (broker reference, not endorsement).
  • Historical return data from UBS / Credit Suisse Global Investment Returns Yearbook.

Next lesson: How to actually start investing (rewrite of existing post) — practical walkthrough from absolute zero. Broker selection, ISIN hunting, first purchase step by step.

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