2Lun·

Part I


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So far, the core of my portfolio has consisted of the MSCI World $HMWO (-0,01 %) and has brought me around 26% price gains and a few distributions. However, comparisons and back tests have shown that the MSCI World is not the best choice for the portfolio.


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The satellites consisted mainly of shares in well-known, large and often safe companies. I have gradually changed this over the last few weeks and you could say that the portfolio is changing in the direction of growth stocks with significantly higher risk and return potential. Whether and how successful I will be here is not too important in principle, as I still have a solid core, but it is precisely this core that is in the dock today.


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After spending the last few weeks looking at my portfolio and getting a lot of positive input, information and tips here on Getquin.

I have found the following ETFs that could perhaps form a better core for my portfolio.


A) The best known first, the S&P 500 $IUSA (+0,06 %) . If I were to start investing again today and did not know the following ETFs, I would opt for this one instead of the MSCI World.


B) The ETF mentioned by @Epi mentioned ETF, $WTEF (-0,02 %) . A portfolio concept consisting of 60 % US equities + 40 % bonds. Almost like the ARERO 😜 $LU0360863863 (+0,01 %) only much better. Because the performance so far has been very close to that of the S&P500. And I think that in turbulent stock market years, bonds will provide stability and returns. However, the fund is only one year old and so there is still little data available.


C) Then we have my favorites so far, 2 actively managed ETFs from JP Morgan.

One is the global variant $JRDG (+0,02 %) including emerging markets. Here, undervalued companies are overweighted according to fundamental data. Since its launch in September 2021, this fund has returned 11.88% p.a.

And then the counterpart to the S&P500 $JRUD (-0,01 %) the aim of this ETF is to outperform the S&P500 and to this end it also includes US equities that are not included in the index.

Since launch, December 2019, 16.5% p.a. has been achieved.


D) Then we have four dividend growth stocks. These have also beaten the MSCI World at times: $TDIV (-0,49 %)
$FUSD (-0,38 %)
$FGEQ (-0,19 %)
$GGRP (+0 %)

The $FUSD (-0,38 %) with a return of 13.66% p.a. since its launch in March 2017.


E) The iShares Dow Jones Global Titans 50 $EXI2 (+0,3 %) which has outperformed the S&P500 for many years and has realized 17.38% p.a. over the last 5 years, for example.

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I did some back testing to see how you could build a portfolio with these ETFs. However, most ETFs have not been around long enough to provide meaningful data. I also find the backtest very tedious as no perfect allocation is calculated or suggested, instead I have to work my way forward percentage by percentage. In short, I was not successful in backtesting.

I used these websites for the tests and comparison:


https://www.portfoliovisualizer.com/backtest-portfolio#analysisResults


https://curvo.eu/


https://extraetf.com/de/etf-comparison?products=IE0031442068-etf,IE000KF370H3-etf,IE000HFXP0D2-etf,IE00BJ06C044-etf,NL0011683594-etf,IE00BYXVGX24-etf,IE00BYXVGZ48-etf,IE00BZ56RN96-etf,DE0006289382-etf

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I would prefer to take them all and only buy the ones that are doing badly at the moment. But that wouldn't work because these ETFs overlap a lot and the correlation is therefore very high. ☹️


Perhaps the most dispensable would be the "dividend ETFs", $TDIV (-0,49 %) and $GGRP (+0 %) . These have some of the highest fees and the weakest performance. However, these are precisely the ETFs that overlap the least with the others. $TDIV (-0,49 %) could pass as Europe (55%) share of the portfolio. If you want to take Europe into account. It would be interesting for me if one region is doing well and the other is doing badly, because I could then make counter-cyclical purchases.


If overlaps and correlations are very high and costs are similar. Then it wouldn't matter whether I have them all in small chunks or large shares of one or a few ETFs. The difference should then be marginal. 😅

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Should I really only choose one or a few? What am I missing out on? How do you find the right one(s)? Has anyone built a portfolio from these ETFs? How do you make the right decision?


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Part II


https://app.getquin.com/de/activity/HQueJcsExE

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16 Comentarios

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You want to build your core with a portfolio concept and optimize it using backtests, right?

Two thoughts on this:
1. for backtesting, it is essential to define what your goal is. Only then will you be able to search for an optimal allocation. What is your goal? Max CAGR, max Sharpe ratio, min max drawdown etc? But not every target is suitable for a core, because its function is stability, right? You would also have to define this and possibly even quantify it in order to make a meaningful search.

2. meaningful backtests are work! Such a backtest should go back AT LEAST the time you plan to invest in the future. So it has to be up to 2000 if you want to invest for another 25 years. Anything else gives you no relevant information and is blatantly subject to recency bias. The fact that the current ETFs have only been in existence for 3 years does not prevent the backtest. Portfoliovisualizer is a powerful tool and I don't know how deep you have dived into it. For example, you can search the Fund Screener for funds with comparable assets that are older. Or you can rebuild the respective strategy of an ETF manually and then test it. For example, you can easily test the Efficient Core ETF as a portfolio backtest 60% S&P500 + 40% US bonds with 50% leverage against a simple S&P500. You can put together your own MSCIWorld portfolio from various funds. As I said: a lot is possible, but it's work 😉
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@Epi I keep realizing: your knowledge is very great, mine is too small. I must try to close this gap. Can you recommend a book? Not about philosophy, but about investing, ETFs/equity strategies, markets and the economy?
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@Iwanowitsch How can you understand the markets without philosophy? Basically, you can only imitate what others have come up with.
It might be interesting to get you started:
https://mebfaber.com/wp-content/uploads/2016/04/GAA-Book-1.pdf
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@Epi I try to live stoically, to be stoic :D
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@Iwanowitsch Living stoically certainly helps with the stock market - but it's not much fun either. 😅
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I find your post interesting. I had similar thoughts and switched to the S&P500. At the time, I sold my DAX ETF and individual stocks. I kept the MSCI World. In my view, these can also coexist. However, the MSCI World is significantly lower in value. In any case, I can sleep well with it.

I wouldn't take all ETFs if they are similar. That inflates the portfolio and you are constantly comparing and analyzing. Pick one and see what the others are doing from time to time.
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How long have you had the $HMWO for?
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@Alpalaka about a year. Why?
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@Iwanowitsch Oh, then of course 26% is really bad. I understand.

But seriously now: I'm sure you found out in your backtests that a world makes around 7% pa. Now you've made 26% and are complaining because you're about 20% above the annual average.

If 26% pa is too little for you - how much do you want to make per year?
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@Alpalaka I would have made more in the same period with one of the other ETFs I mention in the article and you will almost certainly make more with one of the other ETFs in the long term. The longer the period under review, the greater the gap.
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@Iwanowitsch you missed my question :)
Backtests are always nice to show what has happened in the past - don't forget that.

Wait and see when you have 2 years in which you make +-0%. I'm curious to see if you'll still be complaining about 26% then
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@Alpalaka The bad years will come and will not fail to materialize. However, in my opinion, the MSCI World is not the best way to build a portfolio. It is certainly not the worst option either, but if you have read my article, you will have seen that there are a large number of ETFs that have outperformed the MSCI World over many years and will probably continue to do so.
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@Iwanowitsch I stopped reading after the first two sentences :/
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@Alpalaka let them do it. Back and forth, you know
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@Iwanowitsch I would like to follow you now.

But to turn etfs into such a science, I don't understand that. Individual values, ok, I understand. Please don't be angry 😉
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@Iwanowitsch The MSCI World should be retained as a basic holding. This ETF has the lowest volatility of all the others and is the most crisis-proof. Personally, I always look at which ETFs are better and have already tried out a lot. I am constantly considering adding European or Asian ETFs to my portfolio, but the performance of European ETFs is significantly lower than that of US ETFs. I don't think much of dividend ETFs because you have to have a lot in them for the payouts to be worthwhile. Personally, after a lot of back and forth, I use the World as a basis and also an AI ETF and the S&P 500 Inform. Technology. The overlaps are large but the performance is very good and promising. An ETF without the USA is being monitored in the watchlist but unfortunately it is not developing as desired 😊
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