Preface:

In the following, I would like to present how my portfolio has developed over the course of 2024.

This includes

1) my strategic orientation

2)Return on the portfolio.

The main topics are:

• Moving away from individual stocks
• Entry into gold and bitcoin
• Factor investing

Finally, I will give my own thoughts on how to proceed.

The main changes to my portfolio that have led

to my current strategy are presented below using a short timeline.

timeline:

My timeline

Beginning of 2024

At the beginning of the year, I pursued a 70/30 core satellite

strategy. The 70% ETF core again consisted of STOXX Europe.

MSCI World, Emerging Markets.

The 30% consisted of stocks such as: $CSIQ (-0,32%) , $O (+0,71%) ,$TSM (+1,24%)
$ADM (+0,89%)
$UMI (-0,29%)
$D05 (-0,62%)
$BMW (-1,34%)
$UKW (+0%)
$8031 (-3,27%)
$MUV2 (-1,86%)

February

Addition of gold to my portfolio. Target size 10%. Build-up in batches.

The remaining 70/30 strategy therefore only relates to the remaining

90%.

April-June:

Entry into Bitcoin via Trade Republic in several batches

at prices between 50k and 63k.

After exchange with @Epi to the fee schedule at Trade Republic

I sold them there in order to sell Bitcoin on a dedicated crypto exchange.

exchange.

June:

Thanks to @PowerWordChill I got to grips with factor investing. A Gerd Kommer book later, and after some internet research, I decided to

decided to transform my ETF strategy into a factor ETF strategy.

July-August 2024:

Sale of my shares. Concentration on the factor portfolio.

August - September 24:

Renewed build-up of Bitcoin with the aim of making Bitcoin a

a fixed component of the portfolio. Consideration is 5%-10%

of my portfolio.

The idea. Build up an initial position, then make regular

investments of €50 per week with the aim of growing to the target size

to grow to the target size. The rapid rise in October/November led me to

led me to leave it at €50 per week. And individual purchases in

larger tranches at an early stage with a portfolio size of 2.x%.

End of December 2024:

Position size of Bitcoin almost 5%.

I am not yet including Bitcoin in my gold/ETF quota. I'm still running it on the side.

I re-evaluated my factor weighting at the end of the year

and would like to fine-tune it a little. I will briefly present the result in the

following section.

In addition, I have decided to include a small

include a small proportion of real estate stocks. However, this will probably never

part of my strategy worth mentioning and contains - as of today - only

about 3% of my portfolio and only $O (+0,71%) ).

Overall breakdown of my portfolio:

As described above, I do not yet include Bitcoin in my overall strategy

part of my overall strategy so that rebalancing remains easier. This will

change when Bitcoin reaches its target size.

The rest is made up as follows:

ETFs:

$XDEM (+0,02%) 30.3% (MSCI World Momentum)

$XDEB (+0,13%) 10.1% (MSCI World Minimum Volatility)

$XDEV (-0,16%) 10.1% (MSCI World Value)

$ZPRV (-0,24%) 15% (MSCI USA Small Cap Value Weighted)

$ZPRX (-0,31%) 6.5% (MSCI Europe Small Cap Value Weighted)

$PEH (+0,09%) 4.5% (as a quality factor on emerging markets)

$5MVL (+0,2%) 4.5% (Edge MSCI EM Value)

$SPYX (-0,35%) 9% (MSCI EM Small Cap)

Gold

$EWG2 (+0,69%) 10% Gold ETC

Getquin Rewind and own data:

At the end of the post you will find my Getquin Rewind, as I was not able to embed the image in the text:

However, according to my own calculations, this cannot be correct.

My portfolio volume at the start of the year was around €103,500 with a return of €16,693. This would correspond to a total return of 19.2%. However, we are not yet talking about a time-weighted return, as my invested capital has roughly doubled over the course of the year. I therefore estimate my TTWROR to be higher.

My own thoughts and outlook:

I do not expect any major changes in strategy over the next few years. At some point, a strategy will have to be established. If necessary, I will make some adjustments to this strategy.

This includes the fact that I am dissatisfied with the costs of the emerging markets factor ETFs. So far, however, I intend to live with it. Should I

stumble across better products, I will consider switching. Especially as long as I stay within the tax allowance when switching.

I'll also have to decide how big my Bitcoin holding should ultimately be.

If you've been reading carefully, you'll notice that a lot of money has accumulated in the last year. Big profits, big investments. Due to personal circumstances, I will not maintain these rates in the same style, but will reduce them somewhat. I expect to be able to continue investing around 1.5-2k per month. This means that my financial goals are

with an expected return of 5% adjusted for inflation over many years.

I am half hoping for major setbacks in the near future and the associated favorable entries. However, in view of the impact that minor price jolts have had on society as a whole (thanks to populism), I don't really wish for them.

Do you have any suggestions, questions or comments? Is there anything that particularly interests you?

I am also happy to receive suggestions for improvement for future posts.

Best regards,

Your Smurf

PS: @DonkeyInvestor and me, that's love ❤. And now send me your coins! (So I can reward your next post appropriately).

PPS: I hope someone is interested.

What kind of year was it? H O L Y S H I T !

It didn't go quite as well as 2023, but it doesn't have to be +60% every year.

(https://getqu.in/BY7tzt/ Review 2023)

The excess return comes from $BTC (-2,27%) and the alt-coins I sold at the beginning of the year.

Congratulations to everyone who was invested in Pakistan and Argentina, these two actually managed to beat the S&P500. (little tip, have a look $DX2Z (+0,24%) have a look)

In developed markets, all factors have underperformed their peers, with the exception of momentum.

In the emerging markets, both Value $5MVL (+0,2%) , Quality $PEH (+0,09%) and small caps $SPYX (-0,35%) performed better than their peer group.

I have sold off some crypto this year and built up positions in several government bonds / government bond ETFs and $EWG2 (+0,69%) This now comprises almost 20% of the portfolio.

I will go into more detail at a later date as to why I built up this position.

But I can tell you this much: It has something to do with these two beauties:

$3VTE
$3EML (+0,13%)

Because I haven't shared my portfolio yet, but have been asked to do so several times, I'm using the end of the year to do so, here you go: 😘

And always remember, it doesn't matter what performance you had in 2024, what counts are lifetime returns. It doesn't do you any good to make 50%+ for 4 years in a row if you then lose 90% again.

Risk often only becomes visible when it materializes.

In the end I have to thank a very special person without whom this return would not have been possible, thank you Saylor Moon and please keep buying.

Smart Beta ETF

Part 1 What is Smart Beta & Quality ETF

Reading time: 8-10 minutes

Table of contents

• What is a smart beta ETF?
• Categories of Smart Beta ETF?
• Z-Value
• Methodology Quality ETF
• Conclusion and outlook

Disclaimer: No investment advice or recommendation, this article is for information purposes only. Before you decide on an ETF, take a closer look at it in terms of positions, sampling, regions, etc. I can't describe everything here as it would go beyond the scope of this article.

What are smart beta ETFs?

To understand smart beta ETFs, it is first important to know what "beta" is. Beta is a financial ratio that measures how much an asset/share (or a group of shares) fluctuates in relation to the underlying market. Simplified: if the German stock market has a volatility of 16 % and the DAX of 10 %, then the beta is 1.6.

The reference value for the beta is therefore the market. For "normal" ETFs, the beta should be close to 1, as the iShares Core MSCI World ($IWDA), for example, attempts to replicate the MSCI World Index and both are weighted according to market capitalization (not quite 1 due to tracking difference).

In contrast, smart beta ETFs attempt to achieve a higher return or lower risk (volatility) by selecting a different stock from the underlying market capitalization-weighted index (beta), e.g. by equal weighting or applying certain parameters such as price/earnings ratio or price/book ratio.

In addition to smart beta, there are also terms such as "tilt" or "enhanced" for this "smart" stock selection, i.e. the determined over- or underweighting of various characteristics.

Smart beta ETF categories

Roughly speaking, smart beta ETFs can be divided into the following categories:

• Quality (approx. 12 billion invested volume)
• Value (approx. 12 billion invested volume)
• Low Volatility (approx. 8 billion invest volume)
• Momentum (approx. 4 billion invest volume)
• Multi-factor
• Growth & Small-Cap (approx. 12 bn Investvol)
• Dividend (approx. 16 bn Investvol.)
• Equal-Weight

Even if one or the other strategy has been mentioned several times before, it is surprising that the investment volume of all smart beta ETFs is lower than that of the $IWDA (+0,01%) (EUR 73 bn)

So what is the approach behind the individual smart beta ETFs and could this present an interesting investment opportunity? To find out, let's take a look at the individual tilts and their methodology.

The Z-value

In order to understand the methodology of Smart Beta ETFs, it is necessary to deal with the so-called Z-value, as MSCI in particular seems to have fallen in love with this parameter for its Smart Beta ETFs.

The Z-value is a figure that shows the number of standard deviations of a data point (e.g. P/E ratio) from the mean value. In this respect, it is a ratio that compares the key figure of an individual stock with the key figures of all stocks in the index.

Simplified example based on P/E ratio

Share A: 10

Share B: 15

Share C: 20

Share D: 50

Mean value: 24

Standard deviation: 15.67

Z-value A: -0.88 (read: P/E ratio of 10 is 0.88 standard deviation below the mean)

Z-value B: -0.56

Z-value C : -0,24

Z-value D: 1,69

If the ETF now wants to overweight shares with a low P/E ratio, for example, it would weight the shares with the lowest Z-value higher.

If you are still stumped by this example - like a clumsy fireman - we recommend the following video:

z-Standardisierung (z-Transformation)- Einfach erklärt - DATAtab

Now to the individual categories, each showing a selection of the largest ETFs:

Quality ETF

Overweighting of companies with solid fundamental indicators such as high return on equity, stable earnings growth and low debt.

💰 Z-Score MSCI Quality ETF

There are 4 larger ETFs with the same methodology but focusing on different regions (TD = tracking difference):

• $IS3Q (-0,03%) (World | TER 0.30 % | TD 0.10 % | 3.5 bn Invest | 3Y outperformance vs World + 1,5 %.)
• $IUQF (+0,03%) (World | TER 0.25 % | TD 0.04 % | 1.7 bn | 3Y outperf. vs. world + 1,7 %.)
• $XDEQ (-0,01%) (USA | TER 0.20 % | TD n.a. | 1.9 bn | 3Y outperf. vs. S&P 500 + 0,3 %.)
• $IEFQ (+0,5%) (Europe | TER 0.25 % | TD 0.0 % | 3Y underperf. vs. Eurostoxx 600 - 4,1 %).

Index methodology:

• The ETFs are based on respective "parent indices", e.g. the MSCI World.
• In the first step, the variables are named for the quality ETF:
• Return on equity (12-month earnings per share [EPS] / latest book value per share [BVPS])
• Leverage ratio (total debt / book value)
• Stable earnings growth (measured by variability [standard deviation] of y-o-y eps for the last 5 years)
• The Z-value (see above) is determined for each share for the individual key figures
• Extreme values are then eliminated
• The Z-values are then added together for each share
• The shares with the highest total Z-scores are included in the ETF
• Rebalancing takes place every six months

On a site note: if you want to save some TER, you can use the Xtrackers ETF, these are usually 0.05% TER cheaper than the iShares counterpart with a similar tracking difference & are based on the same index & calculation logic.

💰 Wisdom-Tree-Quality-ETF

Track dividend payers with higher growth prospects at the same time

• 
  $GGRG (-0,04%) (World | TER 0.38 % | TD 0.32 % | 0.7 bn | 3Y Underperf. vs. World -2 %.)
• 
  $DGRG (+0,26%) (USA | TER 0.33 % | TD 0.02 % | 0.4 bn | 3Y outperf. vs. S&P 500 + 7,1 %.)

Index methodology:

• Variables:
• Growth factor: based on expected earnings growth (expectet eps)
• Quality factor: based on the last 3 years return on equity (ROE) and return on assets (ROA)
• Stability factor: earnings per share (EPS) must be higher than dividend per share (DPS)
• Exclusion criterion: Companies that do not meet Wisdom-Tree's ESG criteria are excluded
• Weighting: After the variable filter, the companies in the index are weighted according to the annual dividends paid
• Rebalancing takes place every six months

💰 Invesco RAFI Index:

• $PFT (+0,27%) (USA| TER 0.39 % | TD 0.33 % | 0.5 bn | 3Y underperf. vs. S&P 500 - 2,7 %.)
• $PEH (+0,09%) (EM | TER 0.49 % | TD n.a. | 0.04 bn | 3Y Outperf. vs. Emerging Markets IMI + 10,8 %.)

Index methodology:

• Variables:
• Cash flow, sales & dividends: Weighting from average values of the past 5 years and current book value
• The index weights are determined in proportion to the fundamental values of the companies. Calculation: fundamental values / market-capitalized free-float values.

Conclusion on the Smart-Beta Factor Quality

In the first part of this series, we looked at quality ETFs. The smart component consists of screening the stocks contained in the "parent index" according to quality factors such as earnings growth, leverage, book value, etc. and weighting them on the basis of their relative strength compared to the other stocks contained in the index.

If you want to track the world index, I would recommend the $XDEQ (-0,01%) However, the difference to the normal MSCI World is not so great that one could speak of real diversification.

I also find the smart beta approach exciting in order to set the focus of the smart beta ETFs differently on geographically different markets (e.g. USA Large CAP/Momentum, Europe: USA Large CAP/Momentum, Europe: Small CAP & Growth, Emerging Markets: Quality & Value). Unfortunately, the only Emerging Markets Quality ETF has a very low investment volume of only around EUR 40 million. Those for whom this is not an obstacle are welcome to take a look at the $PEH (+0,09%) as it has clearly outperformed the MSCI Emerging Markets and, in my view, quality factors can make good use of their opportunities, especially in such markets.

In the next parts, we will look at the other classes of smart beta investing - stay tuned!

The Fidelity Emerging Markets Quality Income UCITS ETF $FYEM (+0,02%) unfortunately has to go.

The Invesco FTSE RAFI Emerging Market $PEH (+0,09%) better reflects the quality factor in the emerging markets in my opinion.

I just never had it on my radar because it has such a meaningless name.

No bullshit @InvescoDACH What am I supposed to do with "RAFI"?

Rarely attractive financial instrument?

However, it has another shortcoming: with a fund size of ~ 35 million, it's really small... you can laugh at me if it's liquidated soon. 😘

Many users here are rightly enthusiastic about dividend growth ETFs.

The most popular are probably:

Fidelity Global Quality Income $FGEQ (-0,19%) and

WisdomTree Global Quality Dividend Growth $GGRG (-0,04%) / $GGRP (+0,3%)

On extraetf.com and finanzfluss.de you can find these under the investment strategy - dividends.

Which is understandable at first glance, but unfortunately only half the truth.

What you are actually buying here is the quality factor, but this does not appear under Fundamentals / Quality.

What is the quality factor?

The quality factor is part of an investment strategy that selects high-quality companies. The criteria for this factor can be "hard" (e.g. return on equity and free cash flows), but the application of this factor can also be based on "softer" criteria such as the quality of management, corporate governance and market position.

If you want to apply this to an index, you take an investment universe (e.g. the MSCI World) and place one or more filters over it that exclude all stocks that do not meet the criteria.

The remaining stocks can then either be sorted according to market capitalization/balances or other criteria can be added.

Let's take a look at what the target investment objective of the MSCI World Sector Neutral Quality Index is:

"The MSCI World Sector Neutral Quality Index captures large and mid-cap representation across 23 Developed Markets (DM) countries*. The index aims to capture the performance of securities that exhibit stronger quality characteristics relative to their peers within the same GICS® sector by identifying stocks with high quality scores based on three main fundamental variables: high Return-on-Equity (ROE), low leverage and low earnings variability."

In simple terms, this means that as much as possible should flow back to shareholders (through dividends or share buybacks), attention should be paid to sales growth and debt should be low.

These are virtually the prerequisites for sustainable dividend growth.

As all 3 ETFs (Fidelity Global Quality Income, WisdomTree Global Quality Dividend Growth and iShares / Xtrackers MSCI World Quality) invest in shares with similar characteristics and these overlap to some extent, it is no wonder that they also perform very similarly.

https://extraetf.com/de/etf-comparison?products=IE00BYXVGZ48-etf,IE00BP3QZ601-etf,IE00BZ56SW52-etf

It should be mentioned that the WisdomTree Global Quality Dividend Growth differs the most from the other two in terms of its composition. But with 589 stocks, it also holds twice as many stocks as the Global Quality Income or MSCI World Quality. And it also includes momentum screening.

Index Description:

"The index is rules-based, fundamentally weighted and is comprised of high quality dividend[1]paying companies from global developed markets, risk-filtered using a composite risk score ("CRS") screening, which is made up of two factors (quality and momentum), each carrying an equal weighting."

So the WisdomTree Global Quality Dividend Growth is only secondarily a dividend ETF.

It is actually a multi-factor ETF with a dividend filter.

To summarize, what is being done here is simply factor investing with extra steps and you could just as well use the cheaper MSCI World Quality $IS3Q (-0,03%) / $XDEQ (-0,01%) as well.

Gerd Kommer is proud of you. 😘

Pro tip: there is no MSCI Emerging Markets Quality ETF in Europe, but for the reasons described above you can buy the Fidelity Emerging Markets Quality Income

$FYEQ (-0,02%) as a proxy for the reasons described above.

(Edit: I use this myself $PEH (+0,09%) )

How do equity returns behave in relation to economic growth?

https://getqu.in/Ii4nBx/

The USA belongs in every portfolio! BUT: Country diversification is important!

https://getqu.in/NXy7mT/

A different perspective on gold and BTC - What can possibly go wrong?

https://getqu.in/BSxcSb/

There is nothing magical about dividend growth!

https://getqu.in/wL4sOf/

At what point is my portfolio diversified? - Are 30 stocks enough?

https://getqu.in/TdfxBy/

Tiny Titans strategy

https://getqu.in/JfQMe4/

--------------------------------------------------------------------

Crypto share

between 10-30 % of all assets

50 % $BTC (-2,27%)

45 % $ETH (-1,71%)

5 % $SOL (-0,26%)

--------------------------------------------------------------------

Equity / bond share

Multifactor portfolio with cash / bond reserve for countercyclical purchases.

--------------------------------------------------------------------

Target allocation bonds / cash:

20% - 0% of the total portfolio, depending on the distance from the last ATH

75% EUR

------> 50% cash + overnight ETF $CSH2 (+0,02%)

------> 12.5% Inflation Linked Govt Bonds $IBCI (-0,38%)

------> 12.5 % Germany Gov Bond $X03G (-0,05%)

25 % USD

------> 12.5 % TIPS US Inflation-Linked Bonds $XTIP (+0,1%)

------> 12.5 US Treasury Bond 3-7 Year $TR7G (+0,16%)

--------------------------------------------------------------------

Target allocation equities:

80-100% of total portfolio, depending on distance from last ATH

35.0% World AllCaps Market capitalization weighted

-> 35 % Developed + Emerging Markets $SPYI (-0,14%)

48.0 % Developed Markets Factors

-> 12.0 % Value Factor $XDEV (-0,16%)

-> 12.0 % Quality Factor $XDEQ (-0,01%)

-> 12.0 % Momentum Factor $XDEM (+0,02%)

-> 12.0 % Size Factor

----> 2.75 % US Small Cap Value weighted $ZPRV (-0,24%)

----> 2.75 % US Small Cap Quality $RTWO (+0,22%)

----> 5.5 % EU Small Cap Value weighted $ZPRX (-0,31%)

----> 1.0 % Japan Small Caps $ISJP (-0,29%)

17.0 % Emerging Markets

-> 2.0 % EM AllCaps $EIMI (+0,02%)

-> 5.0 % EM Value Factor $5MVL (+0,2%)

-> 5.0 % EM Quality $PEH (+0,09%)

-> 5.0 % EM Size Factor $SPYX (-0,35%)

Performance porn 2023:

https://getqu.in/BY7tzt/

$PSRW (-0,27%) , $PEH (+0,09%) , $PEF (+0,41%) , $PFT (+0,27%) equally weighted, for regular dividend income including dividend growth and still reasonably acceptable price gains.

Let's hear your opinion! Thank you 🙏

Alternative suggestions also welcome.