Dear community, I have recently and also previously explained from time to time why I find the MSCI World in particular stupid and why I don't enjoy investing in such an ETF. If you want to know the exact reasons for this, you can also read about it here: https://getqu.in/YgdvFh/
Anyway, I have now found the time to take a closer look at ETFs. And I can tell you one thing: Soprano buys the MSCI World before GTA 6. To be precise, it has already happened. What sounds "normal" to some people is definitely not to me. Anyone who has read the old post and knows my opinion on the MSCI World and knows that I only hold 100k in individual stocks - no passive investing, no core satellites - will understand that it may be interesting for some to read the background to my change of heart.
One of the main reasons for my world aversion is that I don't like the weighting of bad assets by market capitalization at all. In my Sturm & Drang days, I once tried to get around this with a self-built portfolio with GDP weighting. In other words, you buy one ETF each for the USA, Euro Stoxx, Switzerland, Japan, UK, emerging markets, etc. and then try to weight them yourself based on their actual economic strength. What sounds like an incredible clusterfuck is actually one. I abandoned this idea after just a few months because, in my view, it combines the worst of active investment and passive investment. Since then, I have only had around 2% of my assets in an India ETF (which is currently under review) and 2% in an active fund and have invested the rest in hand-picked individual stocks.
But enough beating around the bush. I'll tell you which ETF I bought and, more importantly, what I was thinking. It is the $IS3R (+0,87%) (MSCI World Momentum Factor ETF). To explain it briefly: the ETF does not simply invest in all the companies in the MSCI World and weight them according to the question of how big the company is, but prefers to buy the shares that have performed well in the past.
I see three very specific advantages here compared to conventional index investments.
Firstly the main advantage of an ETF is that you can trust the ETF provider to react faster and better to trends than you would yourself. I keep hearing that the 70% USA in the world is not a problem at all, as the ETF would simply "reallocate" everything. If rebalancing is so great, then it's best to trade trends in a fund that was specifically designed for this purpose.
The second advantagel is that momentum (after value and before quality) is one of the factors that can achieve a statistically significant outperformance compared to the broad market. This should not be underestimated either.
The third and final advantage for me personally is that it covers a blind spot in my portfolio. I myself invest mainly in shares that are very profitable but are also growing well. This corresponds to the factors "quality" and "growth". A typical example of this would be Microsoft. And of course I also try to get such companies as cheaply as possible ("value").
However, what I regularly don't do is get into shares that already seem expensive but continue to rise massively. That's why I also miss out on opportunities like $AVGO (+1,07%) and $COST (+0,24%) - is simply because I am relatively cautious and don't use/understand charting techniques. Such stocks typically end up in the portfolios of colleagues like @Dividenden_Monteur while they starve on my watchlist. A momentum ETF gives me the chance to be on board here, and far more so than conventional world investors.
Of course, I should not completely ignore the potential disadvantage that such an ETF is fundamentally more susceptible to fluctuations and therefore more "dangerous" than the index.
For me, this is a test phase for now. I hope I can remain loyal to the investment. But maybe I'll go crazy again and switch back to pure US investments, either with a normal S&P or something more extreme with smart beta factors and leverage.
May the holy Amumbo be with you!
Amen.
