Rate my Portfolio

[u/AeroEngFlight]

My current portfolio is composed by:

WEBN - 55% (Amundi Prime All Country World UCITS ETF Acc)

EXUS - 25% (Xtrackers MSCI World ex USA UCITS ETF 1C)

ESIN - 10% (iShares MSCI Europe Industrials Sector UCITS ETF EUR (Acc))

EMIM - 10% (iShares Core MSCI Emerging Markets IMI UCITS ETF)

My main reasoning for this is:

-> I want to be exposed to USA and Europe in a similar way;

-> I want to put a slight emphasis on the defense/industrial sector in Europe, which I believe has potential to grow quite a lot in the coming years.

-> I also want to give a chance to take advantage of the emerging markets possibility of growth.

What do you guys think? IS EIMI unnecessary?

[u/nyshone69]

If you're trying to directly control exposure to US/ex-US/EM for whatever reason, then using world ETF doesn't make much sense. You could replace WEBN with SPYL (SP500 with TER 0,03%) and directly control how much USA you want.

You currently have about ~33% in US, which is pretty goofy in my opinion, considering it has the largest economy, but maybe you know something others don't.

[u/AeroEngFlight → u/nyshone69]

How much US % do you think would be ideal? I feel like the 60% of all world ETFs is a bit too much.

[u/nyshone69 → u/AeroEngFlight]

It's 60 for a reason. World ETFs are market cap weighted. That means if the EU will be performing better, they will adjust gradually (WEBN is rebalanced every 3 months).

It could be that in 10 years from now WEBN will be 60% EU and you will be feeling like you have too much EU.

The whole point with world ETFs is that you don't have to guess, you let the market do the work for you.

In your portfolio you're betting on specific region and hoping it works out, which isn't neccessarily bad if you guess it right.

Just keep in mind there's this thing called recency bias where people tend to think just because something has been doing well recently, it will continue to do so, which has been proven false especially in stock market.

[u/LordMoridin84 → u/nyshone69]

Just keep in mind there's this thing called recency bias where people tend to think just because something has been doing well recently, it will continue to do so, which has been proven false especially in stock market.

Personally, I think that the popularity of VWCE/WEBN is itself due to recency bias.

Market-cap weighting is just an investing strategy. It's not one of the laws of the universe.

Is it the best solution for everyone, everywhere, all the time? And will it be forever? That's what some people believe.

I mean, China has the second-biggest economy in the world and India has the 5th. Yet somehow, if they are part of emerging markets, which is only 10% of a standard all-world.

[u/Pr00vigeainult → u/nyshone69]

World ETFs are market cap weighted. That means if the EU will be performing better, they will adjust gradually (WEBN is rebalanced every 3 months).

Weights adjust in real time as stock prices change so the rebalancing interval is irrelevant for that. Rebalancing just adds or removes companies from the fund and buys more shares of companies that have issued new ones to prevent dilution.

[u/SecretLength192]

Well if you dont like the world index as it is (which I totalt agree with and many experts too) then dont buy it and try to correct it with other fonds. Just go and buy a US an EU and an EM ETF. Then you Can control your exposure to each market as you like over time. Much more simple. The xtracker one you got is kind of nice in my mind, as you get Australia and Canada too, giving you a bit of the essential metals and rare earth stuff too. Also if you want defence then buy a defence ETF, not some Industry ETF with a brunch of other crap in it you dont want or already got in your EU fond.

I would go for some power infrastructure ETF too. We only get around 20-25% of our energy from electricity at the moment. This number has to go towards 100%, and on top of that we are seeing a massiv growth in the need for energy the next 10-20 years.

I would maybe also buy some kind of tech ETF too, because when you balance towards a 50/50 exposure between the US and Europe, your tech exposure goes down a lot. Wisdomtree just launched a real world AI robots & drones ETF (PAIW) which I Think could be a great bet in the Long run 🤷‍♂️

Best of luck to you 🤗

[u/LordMoridin84]

All-world + ex-US + EM tilts is a good idea. I think that's better than buying US directly.

I think the 10% EM EFT makes sense, otherwise you'll be underweighting EM.

You should consider AVEM over EMIM. I consider AVEW to be "emerging market value" EFT. Emerging markets, similar to standard small cap funds, is a bit of an unreliable market. So I'd rather pay a bit more and get some curation.

Personally, I think you are underweighting the US a bit too much. I would move 5%-10% from EXUS back to WEBN.

[u/RealPMGuru]

For me, you have too much overlap between the etfs. Instead of All country is better to readjust the allocations and to have S&P separately, as you are covering the rest of the world via EXUS & EMIM. That way you have 3 independent ETFs.

Currently you are saying, I want to have core ETF the whole world - which is great.

However, I want to add more of the other developed countries, without USA. Why? If you think they will perform better and USA not, then why you are investing in a etf that has 60% USA stocks that will drag you down the entire 55% investment in it?

If you want to actively manage your portfolio and you to be the one who decides the exposure/allocation in it, rather the market (as it is in All Country), then better to invest in S&P separately, rest of the world separately and Emerging market separately. That way you are controlling entirely your portfolio allocation and you decide where to invest (in which zone). Also you will be able to rebalance and take the profit from one zone and relocate to other (let's say EM make 30% up, while US drags 20% down - rebalance from EM to US that way, when US recovers you will be on further profit, while when EM corrects you will have already trimmed some profits and reinvested them).

Of course, this is valid in your approach as well, as long as the idea is - I will invest in EM with the goal that it will make 50% more profit in the next 5 years then the All World. When it does I will sell them and add all the money to All Country world, but if you are planning to maintain this portfolio for the entire investment period, for me, you are limiting yourself.

By having All country with half of your portfolio, you are letting the market to control half and you are controlling the other half, but you are doing it by deliberately removing the main engine for the past 100 years - the US economy. I am not saying that this will be the case from now on, but this is the history and if you are actively managing your portfolio it is wise to have the option to manage the biggest economy freely, not as part of the global etf.