iShares Core MSCI World ETF

No diversification vs. diversification

My portfolio of one or two stocks vs. the main indices since 2016, which one do you think is better?

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Hello, my Birthday is today and im turning 18 years old. Now I have the independence and support of my parents to invest.

I'm an 18-year-old Brazilian just beginning my investing journey, and I'd like to share my investment strategy for feedback from more experienced investors. I recently moved to Saudi Arabia, where I’m awaiting my iqama (residency permit). My father has one, and he’s handling the application for mine. I live under my parents’ tax forum, and they currently handle any tax obligations. With 1,000 euros ready to invest, I’m excited to build a portfolio with a balanced approach to growth and risk, starting with ETFs and, over time, branching out to include individual stocks and crypto.

Initial Investment Strategy

My primary goal is to create a foundational portfolio entirely focused on ETFs until I reach a portfolio size of 5,000 euros. Here’s the breakdown of my initial plan:

1. 50% IWDA $IWDA (+0.99%) (iShares MSCI World ETF): I’m allocating half of my starting capital to the IWDA ETF to establish a core of diversified global exposure. The IWDA covers large- and mid-cap companies in developed markets, giving me solid coverage across sectors and geographies.

2. 25% $XDEM (+0.9%) MSCI World Momentum ETF: I’m dedicating a quarter of my portfolio to the MSCI World Momentum ETF. My goal here is to capitalize on stocks that are currently outperforming in the global market, with the understanding that momentum strategies can offer higher returns (though with greater volatility). I want this portion to add a growth element to my portfolio.

3. 25% $XDEQ (+0.92%) MSCI World Quality ETF: I’m putting the remaining quarter into the MSCI World Quality ETF to provide balance. The Quality ETF focuses on stable, financially strong companies with high returns on equity, low debt, and stable earnings growth. I see this as a stabilizing element to counterbalance the volatility of the Momentum ETF.

Monthly Contributions and Cash Reserve Strategy

My dad will be giving me $150 each month, and I plan to divide this as follows:

- $100 per month into the ETF portfolio: This consistent investment will go towards expanding my ETF positions and growing my portfolio gradually over time.

- $50 into a liquid cash interest account: I’ll use this account as a cash reserve that’s easily accessible, enabling me to buy into individual stocks when they appear undervalued or experience significant dips. This approach lets me take advantage of market corrections and buy solid assets at better prices, adding a tactical layer to my strategy.

Long-Term Portfolio Allocation Goals

Once I hit $5,000 in my ETF portfolio, I’ll shift focus to incorporate individual stocks, with the goal of making them around 45% of my total allocation. Here’s my intended breakdown for this part of the portfolio:

1. 25% “Strong” Companies: This portion would go to large, well-established companies that generate significant cash flow. I’m particularly interested in the Magnificent 7, as these tech giants have strong fundamentals and an impressive cash flow, even though they come with valuation risks. I see them as a solid foundation for long-term growth.

2. 25% Quality Dividend Growth Stocks: I want a portion of my stock allocation to focus on high-quality, dividend-paying stocks, particularly those that have been overlooked or undervalued. This segment is intended for income and stability, with the aim of reinvesting dividends to take advantage of compounding over time.

3. 25% Value Stocks: For this segment, I’ll look for undervalued stocks that have solid fundamentals but may be trading below their intrinsic value. This is a more opportunistic approach that lets me capitalize on underpriced assets for potential upside.

4. 25% High-Growth Stocks: Finally, I plan to reserve a portion for high-growth stocks with strong upside potential. This is the riskiest portion of my stock allocation, focusing on companies in fast-growing sectors or those with strong innovation prospects.

In addition, I plan to introduce crypto as a small allocation—around 5% of my overall portfolio—to capture any high-growth potential. I recognize the volatility and risk associated with crypto, so I’m keeping this exposure small and will prioritize established coins with strong fundamentals.

Risk Management and Future Adjustments

Given my age and a long investment horizon, I’m comfortable taking on higher risks in this early stage. I’m looking for growth opportunities and am willing to accept market volatility as part of the process. However, I recognize the importance of a gradual shift toward stability, and I plan to adjust my portfolio composition as I age and my financial needs evolve.

By the time I reach my mid-30s, I intend to focus more on financial security and risk management, gradually adding defensive assets to the mix. This could mean increasing allocations in dividend-paying stocks, bonds, or even safer ETF options that emphasize preservation of capital. I also plan to establish an emergency fund to cover at least six months of living expenses, providing financial peace of mind and further stabilizing my overall financial position but this will happen once I move out of my parents house.

Seeking Feedback

I’m excited to start investing and am eager to hear if this strategy aligns well with my goals and circumstances. I’d love any suggestions on specific ETFs, stocks, or crypto that might be worth considering, or advice on adjustments I could make to further diversify or optimize my plan. Thanks in advance for your insights!

💭 Since the absurd increases of the past year, I have increasingly wondered: is it worth selling part of my portfolio? Stocks look increasingly overvalued, and I wonder if we haven't already reached the limit. How do you approach this? Do you take profits, stay put or switch to other investments? Curious about your thoughts! 💬

Also feel free to react on my positions!

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