Today I made a small—but significant—adjustment to my portfolio and sold off my entire ETF holding $PSRW (-0,23%)—the Invesco RAFI All World Value—in its entirety. I’ve invested the proceeds, on a nearly one-to-one basis, directly into the JPMorgan Global Equity Multi-Factor UCITS ETF, or $JPGL (-0,21%). I’m not a big fan of pure market-capitalization-weighted passive ETFs anyway, where you blindly end up overweight in the biggest tech giants. Instead, I prefer a rules-based approach and take great care to avoid introducing unhealthy concentration risks into my portfolio.
Since I’m 58 years old and plan to retire from active work in a few years, the issue of risk mitigation is naturally my top priority right now. Maximizing performance at any cost is no longer a goal for me; instead, stability and protecting what I’ve achieved are my top priorities.
In recent months, I’ve already significantly rebalanced my individual stock portfolio, noticeably reducing my tech exposure while simultaneously focusing more on solid value stocks and strong compounders. Since my previous ETF component $PSRW (-0,23%) was a pure deep-value index, and since my VanEck dividend ETF $TDIV (-0,76%) —which is already my largest position—is already heavily weighted in that direction, that would simply have been too much of a good thing. I would have ended up with a hefty double exposure to value stocks in my portfolio.
The JPGL is much better positioned in this regard. For those who aren’t yet familiar with the ETF: The JPMorgan Global Equity Multi-Factor strategically combines three proven factors—attractive valuation (value), high balance sheet quality (quality), and price momentum (momentum)—with a well-thought-out risk weighting. Added to this is a weighting model that appears to be heavily based on an equal-weighted approach, which prevents individual stocks from dominating the portfolio. The entire structure is strictly rule-based, and rebalancing—or rather, the strategy for the next three months—is determined on a quarterly basis. In this way, the ETF is continuously adapted to the current market environment. It thus systematically mitigates the typical weaknesses of pure market-cap indices and, in my opinion, is an excellent alternative to the classic global ETFs from iShares, Vanguard, or Amundi.
Incidentally, just how well this defensive approach works during difficult market phases was evident in the crisis year of 2022: While the broad MSCI World Index took a significant hit, falling nearly 18%, the $JPGL (-0,21%) held up extremely well thanks to its multi-factor approach, limiting the loss to less than -5%. It is precisely this relative strength and effective risk mitigation in bear markets that fit perfectly with my current stage of life.
I am, of course, aware that the $JPGL (-0,21%) currently has a relatively modest fund and trading volume compared to the giant standard ETFs. However, that doesn’t cause me any concern: JPMorgan has been pushing into the European market with its ETF division for quite some time, investing significant resources and demonstrating tremendous ambition, and is massively expanding its presence there. I firmly believe that the fund’s volume will increase significantly in the future as interest in smart-beta strategies grows.
As far as returns are concerned, I would actually have preferred the distribution-paying version $JGLP (+0,03%) , which currently yields about two percent. But since that one isn’t tradable through my broker at the moment, I’ve opted for the accumulation fund for now, to keep the money directly in the market. As soon as the distribution fund becomes available, though, I’ll switch over without any trouble. And since the old $PSRW (-0,23%) also covered emerging markets, I’m easily covering that portion by topping up my existing iShares Emerging Markets Value ETF $5MVL (-0,02%) . This keeps everything wonderfully organized, logical, and exactly as I envision it for my long-term setup.
$TDIV (-0,76%)
$WQDS (-0,34%)
$JPGL (-0,21%)
$5MVL (-0,02%)
* Formulated with the help of Gemini