2Mês
Impressive! 😲 You've really dug deep into portfolio and financial market theory! Such a level is very rare here.
I have a few questions out of interest.
1. how do you handle rebalancing? Do you do without or do you do it once a year, or...? There are also studies that show that rebalancing is at least as important as the actual factor selection. And if rebalancing, what influence does it have on the cost structure of the portfolio?
2. what are the expected performance indicators of your portfolio compared to B&H MSCIWorld? I mean CAGR, max drawdown, Sharpe ratio.
3. why did you refrain from diversification between asset classes (equities only) and between strategies (B&H/rebalance only)? Traditionally, the performance figures for multi-asset multi-strategy portfolios are significantly better. Since I haven't really understood why professionals do without it, I'll ask you about the rational reasons that I may be overlooking.
Thank you and good luck! 👍
I have a few questions out of interest.
1. how do you handle rebalancing? Do you do without or do you do it once a year, or...? There are also studies that show that rebalancing is at least as important as the actual factor selection. And if rebalancing, what influence does it have on the cost structure of the portfolio?
2. what are the expected performance indicators of your portfolio compared to B&H MSCIWorld? I mean CAGR, max drawdown, Sharpe ratio.
3. why did you refrain from diversification between asset classes (equities only) and between strategies (B&H/rebalance only)? Traditionally, the performance figures for multi-asset multi-strategy portfolios are significantly better. Since I haven't really understood why professionals do without it, I'll ask you about the rational reasons that I may be overlooking.
Thank you and good luck! 👍
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@Epi Thank you very much for your feedback. I'm very honored by the way. I really tried for months to get to the bottom of everything possible and to understand the connections.
I wanted to implement rebalancing with the 5/25 method, but my knowledge of Excel has currently failed me. I am currently implementing this manually, before the savings plan is executed, using the actual values and the savings rate.
As the rebalancing works by adjusting the monthly savings rate, I have no additional costs.
2. risk ratios (God willing and the paid AI is right to a certain extent)
Initial situation & methodology
17 UCITS-compliant ETFs, core-satellite mix, > 6,000 individual shares; fund HHI ≈ 648 → no clustering.
Weighted TER 0.24% p.a.; data basis: factsheets (Morningstar/justETF) + internal factor back-tests (GIPS-compliant calculation) .
Unless otherwise stated, all key figures refer to EUR-
total returns and look-through risks 2008-2025.
Long-term return (CAGR)
Back-test 2000-2025 with factor premiums results in ≈ 8% p. a. (band 7-9%) and thus +100-300 bp above MSCI ACWI benchmark .
Reference: MSCI World ETF in EUR delivers 8.45 % p. a. over 30 years  - the portfolio realistically achieves +0.5-1 % extra through value/size tilt.
Volatility and risk/return ratios
Ex-ante 1-year volatility 15-17 % (benchmark ≈ 14 %) .
Expected Sharpe > 0.6; Sortino > 0.8 thanks to dividend/quality component. Beta 0.98-1.00 to ACWI; Treynor correspondingly slightly above Sharpe. Tracking error 3-4 % p.a.; current IR 0.2-0.3 (target > 0.5)
Tail risks & drawdowns
Corona 2020: estimated max drawdown ~-30 %; recovery within 7 months .
Lehman 2008: down ~-45% to -50%; recovery < 18 Monate .
Ex-post Worst-Case (1973-2025 Proxy, MSCI World) zeigt -55 % Drawdown mit 159 Monaten Recovery;
Portfolio wäre ~5-10 Punkte besser (Factor-smoothing). 97,5 %-VaR 10 Tage ≈ -20 %, Expected Shortfall ähnlich – liegt im üblichen Aktien-Risk-Budget für Pensionskassen.
Institutionelle Risiko-KPIs
Solvency II SCR 39 % des Marktwerts .
Jensen-Alpha positiv (SMB, HML, MOM-Loadings) – Faktor-Regressions zeigen systematisches Alpha .
Stress-Backtest 2000-2020: 85 % der Krisen mit geringerem Drawdown als ACWI bestanden.
Liquidität & Operationelles Risiko
80 % des Portfolios in 98 % und 0 Fehlabwicklungen in 12 Monaten .
Kleinster Fonds (JPM US SMC) inzwischen > USD 230m AUM → closure risk low .
ESG & concentration risk
Article 8 coverage; controversial sectors largely excluded. CO₂ intensity below index median; Dividend Leaders < 150 tCO₂/mio USD sales .
Top 10 stocks < 5 % of the portfolio;
Apple < 1.5 % .
I have been going back and forth on how to best manage the large, mid, small and the regions. I know there are a lot of ETFs. But I'm sure I can manage them better.
At least that's my bet. And that's what we all do here. And I can't be accused of not having done enough research.
To be honest, I'm a bit proud of it too. Now time just has to be with me.
I wanted to implement rebalancing with the 5/25 method, but my knowledge of Excel has currently failed me. I am currently implementing this manually, before the savings plan is executed, using the actual values and the savings rate.
As the rebalancing works by adjusting the monthly savings rate, I have no additional costs.
2. risk ratios (God willing and the paid AI is right to a certain extent)
Initial situation & methodology
17 UCITS-compliant ETFs, core-satellite mix, > 6,000 individual shares; fund HHI ≈ 648 → no clustering.
Weighted TER 0.24% p.a.; data basis: factsheets (Morningstar/justETF) + internal factor back-tests (GIPS-compliant calculation) .
Unless otherwise stated, all key figures refer to EUR-
total returns and look-through risks 2008-2025.
Long-term return (CAGR)
Back-test 2000-2025 with factor premiums results in ≈ 8% p. a. (band 7-9%) and thus +100-300 bp above MSCI ACWI benchmark .
Reference: MSCI World ETF in EUR delivers 8.45 % p. a. over 30 years  - the portfolio realistically achieves +0.5-1 % extra through value/size tilt.
Volatility and risk/return ratios
Ex-ante 1-year volatility 15-17 % (benchmark ≈ 14 %) .
Expected Sharpe > 0.6; Sortino > 0.8 thanks to dividend/quality component. Beta 0.98-1.00 to ACWI; Treynor correspondingly slightly above Sharpe. Tracking error 3-4 % p.a.; current IR 0.2-0.3 (target > 0.5)
Tail risks & drawdowns
Corona 2020: estimated max drawdown ~-30 %; recovery within 7 months .
Lehman 2008: down ~-45% to -50%; recovery < 18 Monate .
Ex-post Worst-Case (1973-2025 Proxy, MSCI World) zeigt -55 % Drawdown mit 159 Monaten Recovery;
Portfolio wäre ~5-10 Punkte besser (Factor-smoothing). 97,5 %-VaR 10 Tage ≈ -20 %, Expected Shortfall ähnlich – liegt im üblichen Aktien-Risk-Budget für Pensionskassen.
Institutionelle Risiko-KPIs
Solvency II SCR 39 % des Marktwerts .
Jensen-Alpha positiv (SMB, HML, MOM-Loadings) – Faktor-Regressions zeigen systematisches Alpha .
Stress-Backtest 2000-2020: 85 % der Krisen mit geringerem Drawdown als ACWI bestanden.
Liquidität & Operationelles Risiko
80 % des Portfolios in 98 % und 0 Fehlabwicklungen in 12 Monaten .
Kleinster Fonds (JPM US SMC) inzwischen > USD 230m AUM → closure risk low .
ESG & concentration risk
Article 8 coverage; controversial sectors largely excluded. CO₂ intensity below index median; Dividend Leaders < 150 tCO₂/mio USD sales .
Top 10 stocks < 5 % of the portfolio;
Apple < 1.5 % .
I have been going back and forth on how to best manage the large, mid, small and the regions. I know there are a lot of ETFs. But I'm sure I can manage them better.
At least that's my bet. And that's what we all do here. And I can't be accused of not having done enough research.
To be honest, I'm a bit proud of it too. Now time just has to be with me.
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•2Mês
Re 3.
I probably won't be able to give you a well-founded answer here, as I haven't looked at it from this approach.
I went ALL IN with the 100% shares. However, I wanted different weightings similar to the $GERD principle.
I believe that the emerging markets and Europe still have a lot to offer and that mid and small caps are quite capable of beating large caps in the long term.
That's it. I only had the structure in my head, but not the justifiable approach as to why I did it that way. It just feels right to me.
I probably won't be able to give you a well-founded answer here, as I haven't looked at it from this approach.
I went ALL IN with the 100% shares. However, I wanted different weightings similar to the $GERD principle.
I believe that the emerging markets and Europe still have a lot to offer and that mid and small caps are quite capable of beating large caps in the long term.
That's it. I only had the structure in my head, but not the justifiable approach as to why I did it that way. It just feels right to me.
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@Bidax So, if I understand correctly, you went from 1 MSCIWorld ETF (benchmark) to 19 ETFs for +0.5-1% extra (including some shift in risk).
If you offset the extra return against the lifetime hours invested, then hopefully you get more than the minimum wage. At least that makes you understand why so many people choose not to follow your path. 😏
But the question of why only a multi-factor portfolio and not a multi-factor asset strategy portfolio is still open. I would be most interested in this fundamental question.
Edit: That's done. You were quicker! Thank you!
If you offset the extra return against the lifetime hours invested, then hopefully you get more than the minimum wage. At least that makes you understand why so many people choose not to follow your path. 😏
But the question of why only a multi-factor portfolio and not a multi-factor asset strategy portfolio is still open. I would be most interested in this fundamental question.
Edit: That's done. You were quicker! Thank you!
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@Epi 🫣
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2Mês
@Bidax To 3: Okay, it feels right, even though you don't know the alternatives? Interesting. 🤔
Is it not an option for you to run other strategies alongside your multi-factor strategy? Or are you done with all the portfolio theories now?
It's also a high psychological risk to rely solely on the efficient market hypothesis. I hope you are aware of that.
Is it not an option for you to run other strategies alongside your multi-factor strategy? Or are you done with all the portfolio theories now?
It's also a high psychological risk to rely solely on the efficient market hypothesis. I hope you are aware of that.
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2Mês
@Epi That is not correct. I just didn't have it on my screen. I just wanted to use my result and observe it. It is certainly wrong to say that I categorically exclude other things. I'm not doing that. But I admit; it was extremely exhausting to form the construct. I wanted to rest for a year first.
If I may ask, what approach would you have in mind to generate the total multifactor recipe? Crypto, gold, bonds, private equity... ?
And no, I've tasted blood and it feels better to know what you're talking about. I'm just starting out and I still have a lot to learn.
If I may ask, what approach would you have in mind to generate the total multifactor recipe? Crypto, gold, bonds, private equity... ?
And no, I've tasted blood and it feels better to know what you're talking about. I'm just starting out and I still have a lot to learn.
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@Epi Is that what you mean?
Risk-Parity / All-Weather
30 % equities
55 % bonds (nominal + infl-linked)
15 % commodities (incl. gold)
Would have a Real CAGR of 5 - 6 % and a Sharpe of 0.60 - 0.70 and Max DD of - 20 %
Risk-Parity / All-Weather
30 % equities
55 % bonds (nominal + infl-linked)
15 % commodities (incl. gold)
Would have a Real CAGR of 5 - 6 % and a Sharpe of 0.60 - 0.70 and Max DD of - 20 %
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2Mês
@Bidax Almost. ;-) I'm not sure if there are ready-made concepts for what I mean. I'm talking more about a mix of different, uncorrelated asset classes and strategies. What exactly the mix looks like depends on the individual risk appetite, the possible savings rate, the intended withdrawal rate and the retirement date. For example, you could take the following allocation as a starting point and optimize it with Markowitz: 25% B&H multifactor equity ETFs, 25% B&H gold (2/3)/BTC (1/3), 25% momentum interest rate strategy 2xSPYTIPS (see my article), 25% dual momentum multi-asset strategy GTAA/ 3xGTAA. With such a portfolio, a relatively constant 15%pa at maxDD -20% should be possible (Sharpe approx. 1.2-1.4). I myself have a slightly different strategy allocation due to personal path dependencies: 1/3 gold cycle, 1/3 (3x)GTAA, 1/6 2xTIPS, 1/6 ETF trading. The specific allocation can change on a monthly basis. At the moment I am sitting on approx. 1/3 gold, 1/3 cash, 1/3 GTAA and other. This allows me to sleep peacefully or go on vacation, I have YTD approx. +10% with -10% max. DD. Since I started to deal with momentum models 3 years ago, I understand less and less why investors rely so heavily on the high volatilities and low returns of B&H equity ETF models. Perhaps you can explain it to me? Why did you spend all your time on the complex factor models and not on the relatively simple momentum models? Not an accusation, but pure interest.
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@Epi A great thing. I have to take a look. I actually didn't have that on my screen yet. I'll get back to you. But it'll take a while. I'll get in and give you some feedback. It certainly sounds interesting.
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@Epi but I don't think I have the knowledge or perhaps the sense. But I'm going to find out more and take a very close look.
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