1Semana
At first: Welcome to the community ✌🏻
You always have to look what kind of replication your ETF does. It can be physical (the etf buys real stocks) or synthetic (the ETF does Swaps). Your EM ETF has a synthetic replication. That’s why getquin shows you different stocks, then the ones that are really part of the ETF. So don’t worry, your EM ETF does not invest into US stocks. You can choose a different EM ETF with physical replication to see the real allocation.
I have some questions for you, so i can give you some advise:
What is your main goal with your portfolio? Do you want to build wealth or a passive income?
Why do you invest in gold? The return not exceedingly high but some people want it as a security. But those buy physical gold.
Are you familiar with the distribution of Bitcoins and how so called whales effect the BTC price?
My answers to your questions:
Yes you have some overlap between the MSCI World and the Europe ETF but this is totally fine because your aim here probably isn’t mainly a greater diversification but a higher weight on european stocks and thereby less weight on US stocks.
In my opinion the Momentum ETF is not a good choice. It invests into stocks that had a high performance in the past but that doesn’t guarantee future returns.
The ideal allocation depends on your opinion on what’s the best ratio of risk and return.
Maybe create some test portfolios here on getquin with different allocations and look at the region and sector allocation. This way, you can adjust it and compare until you find your personal ideal allocation.
You always have to look what kind of replication your ETF does. It can be physical (the etf buys real stocks) or synthetic (the ETF does Swaps). Your EM ETF has a synthetic replication. That’s why getquin shows you different stocks, then the ones that are really part of the ETF. So don’t worry, your EM ETF does not invest into US stocks. You can choose a different EM ETF with physical replication to see the real allocation.
I have some questions for you, so i can give you some advise:
What is your main goal with your portfolio? Do you want to build wealth or a passive income?
Why do you invest in gold? The return not exceedingly high but some people want it as a security. But those buy physical gold.
Are you familiar with the distribution of Bitcoins and how so called whales effect the BTC price?
My answers to your questions:
Yes you have some overlap between the MSCI World and the Europe ETF but this is totally fine because your aim here probably isn’t mainly a greater diversification but a higher weight on european stocks and thereby less weight on US stocks.
In my opinion the Momentum ETF is not a good choice. It invests into stocks that had a high performance in the past but that doesn’t guarantee future returns.
The ideal allocation depends on your opinion on what’s the best ratio of risk and return.
Maybe create some test portfolios here on getquin with different allocations and look at the region and sector allocation. This way, you can adjust it and compare until you find your personal ideal allocation.
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1Semana
Hello, @ynnxs, and thanks for your feedback!
You're the only one who replied to my post, and I was amazed by your knowledge and passion being still so young.
I'll answer your question first, but consider I'm just a late beginner.
- My main goal is to improve the value of my portfolio in the long run, which means at least 15 years, or until my retirement. So I'd like to build wealth rather than get a passive income. I won't focus on dividends because they're tax inconvenient in my Country.
- They say "Gold helps to reduce a portfolio's volatility and should be put in a small percentage". Yeah, I'm not investing in physical because I'll never expect it to be delivered, I just hope replying to its index makes sense and gives even a small return in the long run.
- About the cryptocurrencies, I'm very cautious. I know their fluctuations are crazy and I'd put a very small % as part of my portfolio. I'm not going to use crypto wallets, but eventually, an ETN-like crypto basket. Just to see how they work. Although it's not said that I'll do it.
No, I'm not familiar with the BTC distribution and its whale pricing effect.
My idea of diversification is to be mostly exposed to the US of course, but also to a smaller part of European stocks and EM (15/20% each).
In short, you somehow discourage using the Momentum strategy. Noted ✅️
Would you recommend using $AASI or switching to $EIMI or $XMME for EM?
Actually, even though I'd decide to switch, I wouldn't sell the small amount of those shares unless I can do it with a profit and considering the exit fees.
Creating test portfolios is a smart idea 💡
I'll try it soon!
Have a great day!
You're the only one who replied to my post, and I was amazed by your knowledge and passion being still so young.
I'll answer your question first, but consider I'm just a late beginner.
- My main goal is to improve the value of my portfolio in the long run, which means at least 15 years, or until my retirement. So I'd like to build wealth rather than get a passive income. I won't focus on dividends because they're tax inconvenient in my Country.
- They say "Gold helps to reduce a portfolio's volatility and should be put in a small percentage". Yeah, I'm not investing in physical because I'll never expect it to be delivered, I just hope replying to its index makes sense and gives even a small return in the long run.
- About the cryptocurrencies, I'm very cautious. I know their fluctuations are crazy and I'd put a very small % as part of my portfolio. I'm not going to use crypto wallets, but eventually, an ETN-like crypto basket. Just to see how they work. Although it's not said that I'll do it.
No, I'm not familiar with the BTC distribution and its whale pricing effect.
My idea of diversification is to be mostly exposed to the US of course, but also to a smaller part of European stocks and EM (15/20% each).
In short, you somehow discourage using the Momentum strategy. Noted ✅️
Would you recommend using $AASI or switching to $EIMI or $XMME for EM?
Actually, even though I'd decide to switch, I wouldn't sell the small amount of those shares unless I can do it with a profit and considering the exit fees.
Creating test portfolios is a smart idea 💡
I'll try it soon!
Have a great day!
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1Semana
@Etf_Milano Thank you for the complements, I really appreciate that 🙏🏻
Having a long investment horizon is even more important than experience. If you’re able to maintain a high annual return, you can build significant wealth. You mentioned that you think about investing until you’re retiring and that is a really good aim. You could also think about investing a small amount into some single stocks that pay reliable dividends and increase them at a high rate. This would lead to a growing passive income which would allow you to reduce your working hours few years prior to your retirement. You would have more freetime without any negative impact on your financial situation. However since your tax situation is not very favourable and your main goal is to build wealth, you should look for companies that do more reinvestments than dividend payments. Usually companies with high dividend payout ratios are not able to reinvest enough into the business to grow the profit and the price doesn’t increase much over time. Look for companies with solid business models and a growing free cash flow as well as opportunities for price and margin increases. You should have some sector diversification to reduce risk of one sector having a crisis which may lead to dividend cuts or slower increases.
Imagine you want to invest 100€. You can either put it in a bank account and get a fixed rate of 3% or you buy 100€ worth of stocks that pay a starting dividend of 2€ per year. The difference is that the rate that you get from the bank is fixed but the dividends grow over time because companies increase them as they increase their profits. If they raise dividends 10% per year on average, you would earn 3,22€ every year after 5 years. If you wait another 10 years (so 15 years in total, as you said) you would be paid 8,35€ every year. That is 8,35% of your original investment. Now imagine you were able to have dividend increases of 20, 30 or even 40 percent per year or extend your investment horizon. That’s how Warren Buffet made the biggest share of his wealth. His personal dividend yield on Coca Cola for example is a massive 50% per year. That means that within 2 years he gets paid dividends as high as his original investment. If you have a long investment horizon, it’s definitely an investment strategy to consider.
If you want gold for stability, the Gold Index is indeed better than buying it physically due to the cost of buying, storing and selling. Having a small amount of your money in gold is totally fine.
I personally don’t trust Bitcoin because of the distribution. In Economics there is a theory that predicts a change of wealth distribution if something like a new currency is introduced. Those who first have access to it and have the necessary resources, are able to buy and hold large amounts before others have this opportunity. In the case of Bitcoin, you had a massive advantage if you had access to mining equipment and software. Obviously, people who could afford lots of good graphic cards and computers were able to mine the most Bitcoins. Also if you mine a Bitcoin you don’t actually have exactly one Bitcoin. You can “exchange” it for a certain amount of a real Bitcoin. This amount halves regularly (2009: 50 BTC -> 2012: 25 BTC -> 2016: 12,5 BTC -> 2020: 6,25 BTC -> 2024: 3,125 BTC -> 2028: 1,5625 BTC…)
If you had access to Bitcoin many years ago, mining Bitcoins was a lot more profitable than today because of the halving. This led to a concentration of Bitcoins. The Top 0.01% of all Bitcoin wallets own 27% of all Bitcoins. The Top 0.1% owns about 50% and the Top 1% owns over 90% of all Bitcoins. That comes with immense power to push the price into a certain direction. This way, most private investors pay for the profits of the whales. Always ask yourself where your profit comes from. Maybe your money is invested into a company that is profitable and creates new value through the work of its employees. But maybe you choose to put your money into a currency that doesn’t do anything productive. The only profit you can make is through the losses of others. The choice is yours 😉
Diversification is great because it reduces your risk and increases your chances for an outperformance. However overdiversification can have bad effects on your performance. Only adding more and more ETFs to increase the number of companies in the portfolio isn’t useful because you tend to add bad stocks that are (highly) underperforming. Why should you invest into the 3000th best stock of your portfolio instead of putting this money your most promising stock? However, adding European and EM ETFs is definitely a good choice. I’m a big fan of Canada because it’s a very stable country that also brings great returns. Maybe reduce some US exposure and add some Canada if you want.
It doesn’t really matter if you use $AASI or switch to an ETF with physical replication. If you want to include Small Caps into your portfolio, the $EIMI fits well. If you only want Mid and Large Caps, you can choose $XMME.
Switching is indeed not really recommended as you said.
I hope this is helpful. If you have any questions, don’t hesitate to ask them 😄
Having a long investment horizon is even more important than experience. If you’re able to maintain a high annual return, you can build significant wealth. You mentioned that you think about investing until you’re retiring and that is a really good aim. You could also think about investing a small amount into some single stocks that pay reliable dividends and increase them at a high rate. This would lead to a growing passive income which would allow you to reduce your working hours few years prior to your retirement. You would have more freetime without any negative impact on your financial situation. However since your tax situation is not very favourable and your main goal is to build wealth, you should look for companies that do more reinvestments than dividend payments. Usually companies with high dividend payout ratios are not able to reinvest enough into the business to grow the profit and the price doesn’t increase much over time. Look for companies with solid business models and a growing free cash flow as well as opportunities for price and margin increases. You should have some sector diversification to reduce risk of one sector having a crisis which may lead to dividend cuts or slower increases.
Imagine you want to invest 100€. You can either put it in a bank account and get a fixed rate of 3% or you buy 100€ worth of stocks that pay a starting dividend of 2€ per year. The difference is that the rate that you get from the bank is fixed but the dividends grow over time because companies increase them as they increase their profits. If they raise dividends 10% per year on average, you would earn 3,22€ every year after 5 years. If you wait another 10 years (so 15 years in total, as you said) you would be paid 8,35€ every year. That is 8,35% of your original investment. Now imagine you were able to have dividend increases of 20, 30 or even 40 percent per year or extend your investment horizon. That’s how Warren Buffet made the biggest share of his wealth. His personal dividend yield on Coca Cola for example is a massive 50% per year. That means that within 2 years he gets paid dividends as high as his original investment. If you have a long investment horizon, it’s definitely an investment strategy to consider.
If you want gold for stability, the Gold Index is indeed better than buying it physically due to the cost of buying, storing and selling. Having a small amount of your money in gold is totally fine.
I personally don’t trust Bitcoin because of the distribution. In Economics there is a theory that predicts a change of wealth distribution if something like a new currency is introduced. Those who first have access to it and have the necessary resources, are able to buy and hold large amounts before others have this opportunity. In the case of Bitcoin, you had a massive advantage if you had access to mining equipment and software. Obviously, people who could afford lots of good graphic cards and computers were able to mine the most Bitcoins. Also if you mine a Bitcoin you don’t actually have exactly one Bitcoin. You can “exchange” it for a certain amount of a real Bitcoin. This amount halves regularly (2009: 50 BTC -> 2012: 25 BTC -> 2016: 12,5 BTC -> 2020: 6,25 BTC -> 2024: 3,125 BTC -> 2028: 1,5625 BTC…)
If you had access to Bitcoin many years ago, mining Bitcoins was a lot more profitable than today because of the halving. This led to a concentration of Bitcoins. The Top 0.01% of all Bitcoin wallets own 27% of all Bitcoins. The Top 0.1% owns about 50% and the Top 1% owns over 90% of all Bitcoins. That comes with immense power to push the price into a certain direction. This way, most private investors pay for the profits of the whales. Always ask yourself where your profit comes from. Maybe your money is invested into a company that is profitable and creates new value through the work of its employees. But maybe you choose to put your money into a currency that doesn’t do anything productive. The only profit you can make is through the losses of others. The choice is yours 😉
Diversification is great because it reduces your risk and increases your chances for an outperformance. However overdiversification can have bad effects on your performance. Only adding more and more ETFs to increase the number of companies in the portfolio isn’t useful because you tend to add bad stocks that are (highly) underperforming. Why should you invest into the 3000th best stock of your portfolio instead of putting this money your most promising stock? However, adding European and EM ETFs is definitely a good choice. I’m a big fan of Canada because it’s a very stable country that also brings great returns. Maybe reduce some US exposure and add some Canada if you want.
It doesn’t really matter if you use $AASI or switch to an ETF with physical replication. If you want to include Small Caps into your portfolio, the $EIMI fits well. If you only want Mid and Large Caps, you can choose $XMME.
Switching is indeed not really recommended as you said.
I hope this is helpful. If you have any questions, don’t hesitate to ask them 😄
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•1Semana
@ynnxs hello again!
Compliments are deserved because I'm discovering a mine of knowledge reading your interesting messages. I'm genuinely speechless.
Yes, I have quite a long horizon and I don't want to mess up my investments, that's why any tips are appreciated and I'm ready to learn from my mistakes.
Since I'm still a beginner, I prefer to stay calm and grow my portfolio step by step. Single stocks are attractive for their returns, but I need time to understand more about them. They say it's not wise to proceed with a sort of "cherry picking".
Maybe someday I'll decide to add a single stock, but only when I feel confident enough to trust my actions and the chosen company. I agree with the diversification to avoid a collapse of the whole portfolio.
The actual Bitcoin hype doesn't excite me much. I see it as too big a gamble and I'm not a gambler. As mentioned, I could evaluate a very small exposure, not exceeding 5%. Maybe not even in BTC, but a different cryptocurrency.
Yeah, I feel like adding more and more ETFs is useless and makes rebalancing too difficult.
I already have 5 different products and I want to make it simple.
I noticed you're a Canada's big fan. You must have a reason for that. Wish you good luck and I'll keep an eye on your profile!
Thanks a lot!
Compliments are deserved because I'm discovering a mine of knowledge reading your interesting messages. I'm genuinely speechless.
Yes, I have quite a long horizon and I don't want to mess up my investments, that's why any tips are appreciated and I'm ready to learn from my mistakes.
Since I'm still a beginner, I prefer to stay calm and grow my portfolio step by step. Single stocks are attractive for their returns, but I need time to understand more about them. They say it's not wise to proceed with a sort of "cherry picking".
Maybe someday I'll decide to add a single stock, but only when I feel confident enough to trust my actions and the chosen company. I agree with the diversification to avoid a collapse of the whole portfolio.
The actual Bitcoin hype doesn't excite me much. I see it as too big a gamble and I'm not a gambler. As mentioned, I could evaluate a very small exposure, not exceeding 5%. Maybe not even in BTC, but a different cryptocurrency.
Yeah, I feel like adding more and more ETFs is useless and makes rebalancing too difficult.
I already have 5 different products and I want to make it simple.
I noticed you're a Canada's big fan. You must have a reason for that. Wish you good luck and I'll keep an eye on your profile!
Thanks a lot!
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1Semana
@Etf_Milano It’s always good to improve and expand your portfolio step by step and regularly check if it still meets your investment strategy. Starting with ETFs is great and limiting it to 5 indices seems reasonable. However, along your investment journey some strong and well known companies will experience a crash. If you’re interested in the company’s business, this is the time when you should start informing yourself about it. I can recommend youtube to learn how to evaluate the key metrics of a company. After a crash you can get a higher amount of shares for the same amount of money. Use this opportunity as an entry point. This way you can add some single stocks step by step and increase your share in the company. But you’re right. For the beginning, just ETFs is totally fine and you should never invest into something that you don’t understand. There is nothing worse than the fear of missing out (FOMO). You might find a stock that looks very promising and you might want to put a high amount of money into it. But you always need to do a deep research on the company, its financial development and its opportunities in the future. I don’t recommend buying a not well known company like a startup business in hope that it’ll be the next Nvidia. In most cases it won’t be and you’ll loose all your money. Better choose established companies that have solid financials and a good history of improving margins and profits.
I have to say that I do not expect Canada to bring a much higher return than the US but it’s more stable and US stocks are currently mostly overvalued. I don’t have a MSCI World because it’s mainly US Big Tech stocks. Instead I have a USA Prime Value ETF which invests into fundamentally strong and undervalued US companies. To spread the risk I added the MSCI Canada and European single stocks. I also have lots of US and Canadian single stocks. In summary I have 5 ETFs and 25 single stocks. The US makes up 50% which is still very high but lower than in the MSCI World. Canada contributes 25% and Europe 20%. I only have about 5% EM.
I’m happy to hear that you’re interested in my strategy and want to stay updated. I really appreciate that 😄
I have to say that I do not expect Canada to bring a much higher return than the US but it’s more stable and US stocks are currently mostly overvalued. I don’t have a MSCI World because it’s mainly US Big Tech stocks. Instead I have a USA Prime Value ETF which invests into fundamentally strong and undervalued US companies. To spread the risk I added the MSCI Canada and European single stocks. I also have lots of US and Canadian single stocks. In summary I have 5 ETFs and 25 single stocks. The US makes up 50% which is still very high but lower than in the MSCI World. Canada contributes 25% and Europe 20%. I only have about 5% EM.
I’m happy to hear that you’re interested in my strategy and want to stay updated. I really appreciate that 😄
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