@DonkeyInvestor Interesting question(s).
With the XDEB, I used the MSCI World Value, Momentum, Min Volatility and Quality ( $XDEQ ) in a backtest. For the last 26 years, the combination I mentioned has had an interesting profile.
According to Curvo, the Sharpe ratio at 60/20/20 was 0.6; the average annual growth rate was 9.29%;
If I take out the minimum volatility and replace it 1:1 with value, i.e. 60/40 momentum value, I only get slightly different results. Share ratio 0.58; return 9.51%. An interesting alternative indeed. It has to be said that 26 years is certainly not too long as far as factor investing is concerned, but at least not as short as with other ETFs.
As far as small cap value ETFs are concerned, the basic idea is that the value effect is historically particularly strong in small caps. In the backtest via Curvo in the 70/30 mix, the two together have had a return of 11.5% since 1994 with a Sharpe ratio of 0.6% The volatility is higher.
Let's move on to the last three mentioned. These are just factors on the emerging markets. The $PEH actually looks lousy in terms of historical performance, as far as I can see here at Getquin. The value and smallcap don't seem to be doing quite as badly. The more interesting question, however, would be whether they perform worse than the emerging markets. Curvo unfortunately can't find $PEH at all. According to Curvo, the other two have outperformed Emerging Markets 50/50 since 2019. However, this is not really a reliable time period.
In this sense, the low volatility and the factors on the emerging markets would be the first ones I would part with. Even with the latter, because of the high costs. Tendentially, I try to have several factors in the portfolio so as not to underperform in a downturn like the recent one in value. At the same time, I try not to chase the best factor at the moment. As far as I know, this can change. I haven't looked for any specific sources yet. However, I think you will find something about this on the internet. It's more what I've remembered from reading various sources.
What are your thoughts? And last but not least: What are your reasons for scrapping the ETFs mentioned?
Thanks for the feedback and I hope my explanation at 22:30 on the computer wasn't too cryptic as I tried to make sense of everything.
With the XDEB, I used the MSCI World Value, Momentum, Min Volatility and Quality ( $XDEQ ) in a backtest. For the last 26 years, the combination I mentioned has had an interesting profile.
According to Curvo, the Sharpe ratio at 60/20/20 was 0.6; the average annual growth rate was 9.29%;
If I take out the minimum volatility and replace it 1:1 with value, i.e. 60/40 momentum value, I only get slightly different results. Share ratio 0.58; return 9.51%. An interesting alternative indeed. It has to be said that 26 years is certainly not too long as far as factor investing is concerned, but at least not as short as with other ETFs.
As far as small cap value ETFs are concerned, the basic idea is that the value effect is historically particularly strong in small caps. In the backtest via Curvo in the 70/30 mix, the two together have had a return of 11.5% since 1994 with a Sharpe ratio of 0.6% The volatility is higher.
Let's move on to the last three mentioned. These are just factors on the emerging markets. The $PEH actually looks lousy in terms of historical performance, as far as I can see here at Getquin. The value and smallcap don't seem to be doing quite as badly. The more interesting question, however, would be whether they perform worse than the emerging markets. Curvo unfortunately can't find $PEH at all. According to Curvo, the other two have outperformed Emerging Markets 50/50 since 2019. However, this is not really a reliable time period.
In this sense, the low volatility and the factors on the emerging markets would be the first ones I would part with. Even with the latter, because of the high costs. Tendentially, I try to have several factors in the portfolio so as not to underperform in a downturn like the recent one in value. At the same time, I try not to chase the best factor at the moment. As far as I know, this can change. I haven't looked for any specific sources yet. However, I think you will find something about this on the internet. It's more what I've remembered from reading various sources.
What are your thoughts? And last but not least: What are your reasons for scrapping the ETFs mentioned?
Thanks for the feedback and I hope my explanation at 22:30 on the computer wasn't too cryptic as I tried to make sense of everything.
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@SchlaubiSchlumpf mega good, thank you. I'll send you a few extra coins right away. You've invested a lot of time, built up a portfolio that's right for you and checked everything cleanly and rationally. You rarely see that. Your contribution would have been even more valuable if the information had been shared directly there.
Personally, I'm not interested in volatility at all. I also like to keep things simple, which is why the ETFs I mentioned would not make it into my portfolio.
Personally, I'm not interested in volatility at all. I also like to keep things simple, which is why the ETFs I mentioned would not make it into my portfolio.
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@DonkeyInvestor Mega sweet and thank you very much. In fact, volatility is not my number one priority either. So throwing out the XDEB would be one of the first things I would do if I had to slim down. I think the 0.3% difference in returns is so marginal that I think it could be the other way around for the next 20 years. A better argument against volatility for me would be Ben Felix's statement in one of his videos that volatility is not a real factor, as it also has a high overlap with value. However, I haven't really found any good sources for this yet. But I can well imagine it.
The others on the EM bother me mainly because of the high costs. You really have to be convinced of factor investing to go for it.
Many thanks for the kind words :)
The others on the EM bother me mainly because of the high costs. You really have to be convinced of factor investing to go for it.
Many thanks for the kind words :)
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@SchlaubiSchlumpf What do you think of multi-factor ETFs?
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@DonkeyInvestor In itself, there are good arguments in favor of a multi-factor etf. Essentially, saving time, being able to set your own weighting and tax savings. My argument against it is that I can't really get a good look at how these ETFs work. I can imagine, for example, that they would not use 30% momentum and 30% small caps, as I have. They are also more expensive than average. Even if there are good arguments for the price, I think $GERD, for example, is very expensive.
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