Feedback New ETF Portfolio

[johnstead]

Hi Everyone,

As end of the year break is in full swing, I took the chance to reorganize and consolidate my investments, which I felt were a bit too scattered. I have come up with the below portfolio of ETFs.

I wanted to pass it through the community for a sanity check and any feedback or suggestions.

Just for context:

• Me: M(34)
• Time horizon: Long term
• Amount invested as of now: CHF 100K
• Annual investments planned: CHF 40K

While I tried to keep potential economic forecasts and outlooks out as much as possible when creating, I did consider two macro trends in which i strongly belive:

1. CHF in the medium term will continue to gain value against the EUR and USD, hence the currency hedging.
2. The US stock market will continue to outperform other developed markets in the long term, hence the high weight of US assets in the portfolio.

ETF
Link
Curr
TER
Total allocation

ISHARES MSCI WORLD SRI-CHFHD (dist)
https://www.ishares.com/ch/individual/en/products/316040/ishares-msci-world-sri-ucits-etf
CHF
0.24
35%

VT
https://investor.vanguard.com/investment-products/etfs/profile/vt
USD
0.07
25%

Vanguard Small-Cap Value ETF
https://investor.vanguard.com/investment-products/etfs/profile/vbr
USD
0.07
8%

VANGUARD FTSE ALL WO X-US SC (VSS)
https://investor.vanguard.com/investment-products/etfs/profile/vss
CHF
0.07
3%

UBS ETF (CH) MSCI Switzerland IMI Socially Responsible (CHF) A-dis
https://www.justetf.com/en/etf-profile.html?isin=CH0368190739
CHF
0.28
10%

ISHARES CORE CHF CORP BD CH
https://www.ishares.com/ch/individual/en/products/261150/ishares-chf-corporate-bond-ch-fund
CHF
0.15%
10%

iShares Swiss Domestic Government Bond 7-15 (CH)
https://www.justetf.com/en/etf-profile.html?isin=CH0016999861
CHF
0.15
5%

L&G Longer Dated All Commodities UCITS ETF
https://www.justetf.com/en/etf-profile.html?isin=IE00B4WPHX27
USD
0.3
5%

Do you have suggestion/opinion?

 

[virtualhope]

@johnstead Looks complicated to me, why the bonds and commodities when you invest long-term?

You also have a pretty large home bias (10 vs 2-3%) and invest according to SRI/ESG which I personally wouldn't do (either you invest into an ETF to make money or you hand-select companies that are actually responsible instead of this ESG BS).

To compare it, here a link to three different portfolios: https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=7RRW7xDYqIrwj48pS9eZBo

• 1 - About what you wrote down here, though I had to use US ETFs so some things like Swiss Domestic Government Bond I had to replace with something not very similar
• 2 - Just all in VT
• 3 - My personal portfolio, all in IWDA

Make your own assumptions based on the graphics, my recommendation would be to just go all in VT if you believe in EM, https://www.justetf.com/en/etf-profile.html?isin=IE00B8BVCK12 if you believe that the hedging is worth it and just IWDA if you don't care about the hedging (anymore).

 

[grace750]

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[johnstead]

@virtualhope

Looks complicated to me, why the bonds and commodities when you invest long-term?

mmmm Good point, it is for stability mostly, kind of have somthing that goes anticyclical but I get your point, guess i'm bias becouse i always got told put some bond on your portfolio

https://www.justetf.com/en/etf-profile.html?isin=IE00B8BVCK12 if you believe that the hedging is worth it and just IWDA if you don't care about the hedging (anymore).

on short/medium term would like keep something currency headged, i saw that one you suggested but it has TER of 0.55% vs the 0.25% of the SRI version

 

[virtualhope]

@johnstead

i saw that one you suggested but it has TER of 0.55% vs the 0.25% of the SRI version

You can compare them by opening e.g. https://www.justetf.com/en/etf-profile.html?isin=IE00BMZ17V16#overview and then add IE00B8BVCK12 in the chart as a comparison.

YTD you SRI was better (19.36 vs 17.59), but since October 2020 it's worse (27.26 vs 27.37) by a slim margin.

An additional difference is that the SRI version is younger and much smaller which can be bad if you want to buy or sell large amounts because of the liquidity.

The TER is much lower with the SRI because its number of holdings (416 vs 1512) is much lower.

 

[johnstead]

How about the tax optimization? I never fully got it, i understand that US based ETF are better then EI becouase you can claim the tax on the dividends back. How about US based vs CH based?

 

[onewayjesus]

@johnstead Personally I am not hedging anything.
What for?
The CHF will always be stronger on the long run, but dont forget that these cycles come and go….the FED finished up on their interest rates/charges -> the rest of the world did not.
Thats why the USD is super weak currently.

Since you invest like me in the long run, it makes no sense to hedge, the US ETFs will always outperform all others and even with the risk of the devaluation….make a better profit.

And one thing more:
If the USD crashes, the whole world will burn like 2008/2009….people tend to forget that the USD is the main currency and if this goes south, you wont be safe in any environemnt (ok maybe in gold lol).

I personally invest the same like you, but monthly and in 3 different ones + I gamble and investes into a canadian uranium etf, as uranium is highly under value in my eyes.
Already almost 40% up since June….

IVV Arca
QQQM Nasdaq NMS
URTH Arca

All via Interactive Broker, almost no fees, currently I get so much more USD for my CHF….so I can buy so much more in but on the performance sheet it might look worse due to the weak USD.
Once the world is on the same time line as the FED, the USD will rise again….
So you double profit basically

Long term is 20+ years from me….so in this hindsight, I have no fear of going doen that road

 

[emethalethia]

@johnstead All in on TQQQ and SOXL

 

[aucmdgirl]

@emethalethia Semiconductor is cyclic and nasdaq comes mainly from big five, also it has an AI bubble. Long time maybe higher gains possible, but also higher risk then the strategy from OP

 

[maintjie]

@johnstead RemindMe! 180 days

 

[aucmdgirl]

@johnstead I think looks great. If you want to have more diversity you could buy real estate etf europe or switzerland. At the moment they are cheap

 

[nutmegger1955]

@johnstead RemindMe! 10 days

 

[travis73]

@johnstead Is there a personal reason you want to tilt this portfolio towards SRI (socially responsible)?

Is there a fundamental reason why you want to tilt towards small cap value? (There are, I just wonder if it’s worthwhile for you)

Personally, if there are no personal reasons to not want a normal all world ETF, I‘d just go into Vanguard All-World, instead of ftse all world x-us and vt and the small cap value.

The extra costs are probably not worth it (both the tilt and the complexity)

It makes sense to use a CHF hedged ETF as part of your portfolio, however I‘d recommend here, too, that you use the non-SRI version if you have no personal reasons. Additionally, remember that US-Companies, especially big ones, make international revenue and are demographically and geographically very diversified (MSFT, AAPL, etc), so avoiding us companies for usd reasons is not that smart, even swiss companies earn usd if they are big enough, which hurts their revenues. It’s not that easy.

Feel free to ask followup questions!

Btw - do you want bonds for performance or for stability? There is no need to have bonds if you have the stomach for big drawdowns. What is your opinion on that?

Also, what are your allocations? That matters a lot!

 

[johnstead]

@travis73

Is there a personal reason you want to tilt this portfolio towards SRI (socially responsible)?

No, I could not care less about SRI, I do have it for 2 reasons:

• ISHARES MSCI WORLD SRI-CHFHD (dist), i wanted to have something CHF headged somehow traking the world stock market (ok if not in a perfect way), but there are not a lot of ETF doing that, the only other I could find is https://www.ishares.com/ch/individual/en/products/251407/ishares-msci-world-chf-hedged-ucits-etf but at a TER of 0.55 looks expensive. If anyone has any suggestion for a good ETF CHF headged traking the total stock market, would have my thank you

• UBS ETF (CH) MSCI Switzerland IMI Socially Responsible (CHF) A-dis, the nice thing of this ETF is not the SRI part, but that has 5% cap on each company holding, giving you a bit of diversication, otherwise if you take a classic ETF on SMI 50-60% goes to in UBS, NVS, ROCHE, NESTLE that does not give a lot of diversication, and on CH stock market SRI does not seems a exculde a lot of companies

Is there a fundamental reason why you want to tilt towards small cap value? (There are, I just wonder if it’s worthwhile for you)

- ISHARES MSCI WORLD SRI-CHFHD (dist) it is very concetrated, as well VT as bias towards big corp, so i think it is good think have a increase a bit explosure to small cap stocks with an ad hoc EFT

Btw - do you want bonds for performance or for stability? There is no need to have bonds if you have the stomach for big drawdowns. What is your opinion on that?

It is for stability, though that is a good point, i may consider to take it out that leg

It makes sense to use a CHF hedged ETF as part of your portfolio, however I‘d recommend here, too, that you use the non-SRI version if you have no personal reasons. Additionally, remember that US-Companies, especially big ones, make international revenue and are demographically and geographically very diversified (MSFT, AAPL, etc), so avoiding us companies for usd reasons is not that smart, even swiss companies earn usd if they are big enough, which hurts their revenues. It’s not that easy.

That is correct though i think that i have most allocated to US so not really avoiding them, no?

What is you opinion on the comodity part, I kept becouse can be anti-cyclical but not sure if that makes sense?

 

[churley79]

@johnstead What is your salary that you have spare money to invest 40k per year?

 

[johnstead]

@churley79 140k-160k range

 

[resjudicata]

@johnstead RemindMe! 30 days

 

[reallife]

@johnstead RemindMe! 30 days