dreamingjoeinjail
New member
Hello!
Recently I've been very excited about 5 factor investing, to capture the most returns over the long term. Since I am in my 30s and planning to hold my investments for 30+ years it makes sense to invest for the best and more reliable result possible over long term. Here are the 5 factors:
Value
Value aims to capture excess returns from stocks that have low prices relative to their fundamental value. This is commonly tracked by price to book, price to earnings, dividends, and free cash flow.
Size
Historically, portfolios consisting of small-cap stocks exhibit greater returns than portfolios with just large-cap stocks. Investors can capture size by looking at the market capitalization of a stock.
Momentum
Stocks that have outperformed in the past tend to exhibit strong returns going forward. A momentum strategy is grounded in relative returns from three months to a one-year time frame.
Quality
Quality is defined by low debt, stable earnings, consistent asset growth, and strong corporate governance. Investors can identify quality stocks by using common financial metrics like a return to equity, debt to equity and earnings variability.
Volatility
Empirical research suggests that stocks with low volatility earn greater risk-adjusted returns than highly volatile assets. Measuring standard deviation from a one- to three-year time frame is a common method of capturing beta.
In EU we have a very poor choice of ETFs to invest in and they are relatively expensive, but this is my go on creating best diversified portfolio possible:
Ticker
Title
TER
Factor exposure
% of portfolio
VWRP
Vanguard FTSE All-World UCITS ETF (USD) Accumulating
0.22%
Market weight
65%
WSML
iShares MSCI World Small Cap UCITS ETF
0.35%
Size
10%
USSC
SPDR MSCI USA Small Cap Value Weighted UCITS ETF
0.30%
Value
10%
A1103D
Xtrackers MSCI World Quality Factor UCITS ETF 1C
0.25%
Quality
8%
IWFM
iShares Edge MSCI World Momentum Factor UCITS ETF (Acc)
0.30%
Momentum
7%
Weighted average TER: 0.249%
This portfolio is mostly based on market weighted index, but gives an additional exposure to value, small, momentum and quality stocks. All ETFs are globally diversified, except for USA Small Cap Value Weighted, which has only US stocks, because other regions are not available.
Would greatly appreciate any thoughts and advice on how to make this portfolio better. Is it sensible to invest with expenses of 0.25% at all? What do you think?
Recently I've been very excited about 5 factor investing, to capture the most returns over the long term. Since I am in my 30s and planning to hold my investments for 30+ years it makes sense to invest for the best and more reliable result possible over long term. Here are the 5 factors:
Value
Value aims to capture excess returns from stocks that have low prices relative to their fundamental value. This is commonly tracked by price to book, price to earnings, dividends, and free cash flow.
Size
Historically, portfolios consisting of small-cap stocks exhibit greater returns than portfolios with just large-cap stocks. Investors can capture size by looking at the market capitalization of a stock.
Momentum
Stocks that have outperformed in the past tend to exhibit strong returns going forward. A momentum strategy is grounded in relative returns from three months to a one-year time frame.
Quality
Quality is defined by low debt, stable earnings, consistent asset growth, and strong corporate governance. Investors can identify quality stocks by using common financial metrics like a return to equity, debt to equity and earnings variability.
Volatility
Empirical research suggests that stocks with low volatility earn greater risk-adjusted returns than highly volatile assets. Measuring standard deviation from a one- to three-year time frame is a common method of capturing beta.
In EU we have a very poor choice of ETFs to invest in and they are relatively expensive, but this is my go on creating best diversified portfolio possible:
Ticker
Title
TER
Factor exposure
% of portfolio
VWRP
Vanguard FTSE All-World UCITS ETF (USD) Accumulating
0.22%
Market weight
65%
WSML
iShares MSCI World Small Cap UCITS ETF
0.35%
Size
10%
USSC
SPDR MSCI USA Small Cap Value Weighted UCITS ETF
0.30%
Value
10%
A1103D
Xtrackers MSCI World Quality Factor UCITS ETF 1C
0.25%
Quality
8%
IWFM
iShares Edge MSCI World Momentum Factor UCITS ETF (Acc)
0.30%
Momentum
7%
Weighted average TER: 0.249%
This portfolio is mostly based on market weighted index, but gives an additional exposure to value, small, momentum and quality stocks. All ETFs are globally diversified, except for USA Small Cap Value Weighted, which has only US stocks, because other regions are not available.
Would greatly appreciate any thoughts and advice on how to make this portfolio better. Is it sensible to invest with expenses of 0.25% at all? What do you think?