ETF investment strategy change

[captivatedbygod]

Amazing community, I am thinking of making things easier in my investment portfolio, but without giving up the higher potential return that a simple ETF strategy can provide (10% or higher potential annual return). At the moment this is my allocation:

38.86% ISHARES CORE S&P 500 (SXR8)

3.78% ISHARES GLOBAL CLEAN ENERGY (INRG)

6.47% ISHARES MSCI EUROPE SRI (IUSK)

3.97% MONTANARO EUROPEAN SMALLER COMPANIES INVESTMENT TRUST (MTE)

14.84% ISHARES S&P 500 IT SECTOR (QDVE)

7.92% SPDR EM SMALL CAP (SPYX)

2.98% BLACKROCK THROGMORTON TRUST (THRG)

6.97% VANECK GLB REAL ESTATE ETF (TRET)

9.35% SPDR USA S/C VALUE (ZPRV)

1.03% UNILEVER PLC (ULVR)

I would like to sell everything except TRET, and QDVE, respectively because I like to have "Real Estate" as an asset class and, reg. QDVE, because I want a more growth-oriented fund. Maybe I would also keep THRG because I want to invest in GBP, and ZPRV for small-cap.

Would you agree to sell everything else and buy VWCE instead? If so, should I do it all at once? In other words, I sell everything, and regardless of how the market is going, invest the full liquidated amount as a one-off lump sum.

The idea is, after the first big lump sum purchase, to invest monthly the majority of my monthly investment contribution in VWCE, a little part of it into the QDVE, and another little part of it in P2P lending. (FYI, the plan is for P2P to slowly build up to form 10% of my investment portfolio)

 

[gcook]

@captivatedbygod Keep it simple. RE is already in your portfolio. Just buy 100% VWCE or if you want to pick from your list 80/20

ISHARES CORE S&P 500 (SXR8) 80

ISHARES MSCI EUROPE SRI (IUSK) 20

 

[captivatedbygod]

@gcook And no emerging markets? No small-cup? May I ask why the second option? I am 33 years old and ready to take up more risks.. Regarding Real Estate, I understand that it is already in my portfolio. However, how much would that be? Do you have any idea of the percentage of RE included in VWCE? What I thought is that by having TRET I can increase my exposure to a quite uncorrelated asset, which might outperform broad equities and meanwhile, give me some dividends. Not interested in dividends right now (I would not withdraw and keep investing, but in the future it would look like a nice safe stream of income and a pot I could take from even in unfortunate times). Also, regarding the dividends, I am in a privileged tax position since my jurisdiction does neither tax dividends nor capital gains.

 

[gcook]

@captivatedbygod Reason for the second option. You already own these ETFs. You only have to sell the others.

For RE check the factsheet of VWCE

VWCE contains RE + EM. I am not a fan of EM. But that’s personal. Dividend is not in (a / my) strategy. That’s why I pick 2 of the biggest markets US/EU. With a broad based ETF for a long period of time you will do fine.

If you want an good/easy all world option: VWCE 90%

If you want to add small caps: IUSN 10%

 

[captivatedbygod]

@gcook Excellent, crystal clear, thanks! It just does not address what I was saying about the separation between asset classes: stocks and real estate. Do you think it doesn’t make sense? Why? It is pretty clear that VWCE include a bit of RE, however it is very insignificant if someone wants to have a decent exposure to it, plus uncorrelated diversification. Also, I understand that you are not into dividends, neither am I, but we can both agree that it is reassuring thinking that we might have some income producing vehicle when future times are tough and we will therefore not need to crystallise any loss by selling portions of our VWCE?

 

[gcook]

@captivatedbygod Some of the reasoning to not include extra RE in a portfolio you can find here

https://jlcollinsnh.com/2014/05/27/stocks-part-xxii-stepping-away-from-reits/

Besides that I like it simple, that’s why I stick with a simple 2 etf portfolio (which pay a dividend).

I don’t like to overthink/complicate things. Just stick with it.

I am a little older than you are and started a little earlier. Been doing this for the last 10+ years. And it works fine. I check my portfolio twice a year. 1. To reinvest dividends. 2. To rebalance

If you want 99% hands-off go with VWCE

Investing is a long game, play it simple.

 

[captivatedbygod]

@gcook

https://jlcollinsnh.com/2014/05/27/stocks-part-xxii-stepping-away-from-reits/

This is insanely good feedback Bosmuis, thanks! May I ask, in addition to VWCE, what your second fund is please?

 

[gcook]

@captivatedbygod VWCE does not pay a dividend. So 1. SP500 ETF + 2. EU ETF.

80/20 or 70/30. Just what you like.

VWRL is also an option if you want to include EM

 

[resjudicata]

@captivatedbygod 100% VWCE is my recommendation as well. If you really want to tinker around add 15% ZPRV. That’s it. No need for even more US large cap. You already have 60% of those with VWCE.

 

[captivatedbygod]

@resjudicata Thanks for your advice, Wilson. It is true that I already have 60% of US large-cap. The reason of keeping and slowly continuing to build the QDVE is to tilt a bit towards a promising sector (US Tech) - the 60% include companies from all sectors and though there might be a slight majority of tech, it is still very diversified, and you should see the difference in returns when you see the performance of the QDVE. I understand that there is no guarantee of future returns, but since I am 33 years old and the industry has shown to be quite stable even in terms of volatility, I thought to give it a chance. What do you think?

 

[resjudicata]

@captivatedbygod I think you’re performance chasing. You expect QDVE to perform beyond expectations. Tech is at its all-time high, it’s valued super high right now and future developments are also priced in. Prices now are always future prices. The market right now always reflects expected future developments. Why would you think QDVE could outperform the whole market for decades? AI is already here. You’re betting beyond AI right now.

 

[captivatedbygod]

@resjudicata You give me food for thoughts with your words, Wilson, and I m grateful for it. Just to reply to your question, it is not because I am certain, but only based on the overall better performance of the Nasdaq and tech in general, since they are more oriented towards innovation and growth, and I would like to have a more growth-oriented fund. I really like your feedback.. I am just very confused as I would like to have something more aggressive in addition to a vanilla fund like VWCE, just for a limited part of the portfolio, and if it does not produce outsized returns, amen.. but again, I am not being stubborn here and I keep thinking about your advice

 

[tobiahjude99]

@captivatedbygod Sell everything, go all in VWCE and you can add some small cap value in the form of ZPRV and ZPRX for a bit more risk/as diversifier + more potential return.

Id do 75/15/10; VWCE/ZPRV/ZPRX

 

[captivatedbygod]

@tobiahjude99 Good point president, I would just use SPYX instead of ZPRX in your recommended portfolio. This would be based on the fact that SPYX is focused on emerging market small-cap, which would work better as a diversifier. It has performed better than ZPRX, and although it is slightly more expensive, it is a bigger fund and, in addition to emerging markets being less correlated with developed markets, small-cap companies in the emerging markets are even less so, as their business is most likely linked to the jurisdiction where they are based and less influenced by macroeconomic factors.

 

[tobiahjude99]

@captivatedbygod Sure sounds like a solid idea.

For my own personal taste, I would just not be that comfortable in overweighting emerging markets.

You could also do VWCE/ZPRV/ZPRX/SPYX; 70/15/7.5/7.5

Now it‘s just starting to get "complicated" again. But it still follows a sound strategy with clear goals, diversified across the globe following roughly market cap weight