4H·

A Change in Strategy and Why I'm Now Focusing on 4 ETFs 🔄

Hi everyone,

I'm 21 and invest €2,000 entirely in ETFs. In September, I restructured my portfolio, and I want to show you what it looks like now and what my reasoning was behind it.

The Strategy Change

Until now, I still held the Xtrackers MSCI World Financials ($XDWF (-0,26 %) ) and the individual stock IREN ($IREN (-0,12 %) ) in my portfolio. I sold both of them entirely and invested the proceeds in my core ETF. My portfolio was too scattered for my liking: a sector bet here, a single stock there. I wanted a clear structure with a broad core and a few targeted additions where I know exactly why they’re there.

My savings plan (€2,000/month, executed on the 15th)

🌍 €1,000 – SPDR MSCI ACWI IMI ($SPYI (-0,14 %)
)

This is my core. Over 9,000 stocks from developed and emerging markets, including small-caps. This essentially gives me the entire global stock market in a single ETF. No matter what else I do, this part ensures a broad base.

📉 €500 – iShares Edge MSCI World Value Factor ($IWVL (-0,03 %)
)

Historically, value has been a driver of returns over long periods, and after years of growth dominance, I find undervalued companies particularly appealing. It also helps balance out the heavy weighting of U.S. tech stocks in the global ETF.

💻 €250 – iShares S&P 500 Information Technology ($IUIT (+0,35 %)
)

My deliberate bet on tech. I believe that technology and AI will shape the coming decades, and I want to be specifically overweight in that sector. I realize this is a concentration risk, but at 21, I can afford the volatility.

🌏 €250 – iShares Edge MSCI EM Value Factor ($5MVL (-0,59 %)
)

Emerging markets are relatively undervalued and have long-term growth potential. Using a value-investing approach, I’m specifically buying the undervalued companies there.

My reasoning behind this

A broad global ETF as a stable core (50%) surrounded by yield-oriented additions (50%). My investment horizon spans several decades, which is why the portfolio is deliberately focused entirely on stocks.

What do you think? Would you weight things a little differently, or do you have any concerns about a particular component?

I’m looking forward to your feedback! 🙌

4Positions

44 840,43 €

3,15 %

12 Commentaires

TotallyLost@TotallyLost

I’d take another look at whether the MSCI World Value Index is the right vehicle for tracking this factor.
Sure, it’s performed well over the last two years, but for long stretches when other value funds were doing well, it was simply lagging behind…

I’d also question whether the index’s sector neutrality makes sense.
Actually, I’d like my value fund to include the sectors that are currently undervalued.

In the past, the index has often been packed with the weaker stocks in their respective sectors (cheap for a reason).

I’d rather go with $TDIV and/or $BUYB —which, by the way, also have a stronger value orientation than the MSCI World Value (according to Morningstar StyleBox).

The recent outperformance of the MSCI World Value is primarily a methodology effect.
Due to the required sector neutrality, the index must hold stocks with low valuations across all sectors, including the tech sector. As a result, semiconductor stocks, among others, were included in the index, causing the ETF to unintentionally benefit from the AI boom. Its strength is therefore based more on growth and momentum drivers than on traditional value investing.

In other words, the outperformance over the past two years is attributable not to the value factor but to the momentum factor.
Further evidence of this is that, as of today, the top stock with the highest weighting is $MU —the same top stock as in the MSCI World Momentum Index.

It’s a bug, not a feature.

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Wealth-Accelerator@Wealth-Accelerator

I really like this shift, and I predict that the entire 2,000 euros might end up in the $SPYI soon 😉

At least that’s how I’ve been investing, even after a long period of figuring things out 😅

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Epi@Epi

Do you actually realize that the EM Value index is more tech-heavy than the ACWI? 😅

The EM Value index's performance is almost entirely driven by the semiconductor boom.

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Paul@paul_finesse_

@Epi I’d like to weigh in on this as well.

I got into emerging markets (EM) in my late 20s and, of course, have been able to generate good returns from EM to this day (thanks to the high proportion of tech and semiconductor stocks). That’s why I’m currently weighing whether to keep the EM ETF as a true long-term core holding or to sell it sooner while the cycle is still booming. Because when these stocks correct, one or more EM ETFs will likely take a hit.

Looking back at the past, there’s never really been any sign of sustained outperformance over the years.

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der_Don@der_Don

@Epi I agree with you there, but it wouldn't be very smart to skip the EMs entirely, even if they're already included in the $SPYI.

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Paul@paul_finesse_

@der_Don What are your current thoughts on whether to hold onto EM as a separate ETF? You’re already considering this in the World portfolio. I’m just trying to decide whether to sell EM or keep holding it separately.

The only thing I see right now, though, is a high weighting of semiconductor stocks, which makes me focus solely on the return.

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der_Don@der_Don

@paul_finesse_ That’s right; semiconductors are currently driving EM markets strongly. Nevertheless, I still see EM as significantly undervalued compared to developed markets, especially compared to the U.S. Thanks to the value-oriented approach in the 5MVL, I’m also more broadly diversified and am not just jumping on the chip bandwagon. In the ACWI alone, I’d find EM’s weighting of around 10% too low. With a weighting in the mid-20% range, I’m also somewhat less dependent on the U.S. and the dollar.

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DEW_7240@DEW_7240

Alongside my buy-and-hold portfolio, I’m running a momentum strategy that uses pretty much the same ETFs you’re using.
What you need to be aware of is that by including the value and IT sector ETFs, you’re also introducing more volatility into your portfolio. There’s a lot more movement in these sectors right now.

As you say, you have time and can rebalance your portfolio whenever you want (just not too often, please).

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emppsb@emppsb

This is what I call, peace 👌

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Metis@Metis

How much do you make at age 21 if you can invest 2k? 🫠
I'm currently making just ~2,300€.

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der_Don@der_Don

@Metis About 3k net. I still live at home and don't have any fixed monthly expenses. That's why I'm able to save so much. I'm aware, though, that I won't be able to keep up this savings rate in the long run.

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Metis@Metis

Oh, well, I guess that explains it. 🤣
Enjoy it while you can!

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