Advice for ETF allocation

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Topic Author
makaros
Posts: 11
Joined: Fri Apr 16, 2021 3:47 pm

Advice for ETF allocation

Post by makaros »

Hi all

I am considerig this allocation scheme:

VANGUARD S&P 500 UCITS ETF (VUAA) - XET
ISHSIII-CORE MSCI WORLD U.ETF (IWDA) - EAM
ISHSV-S&P 500 INF.TE.SEC.U.ETF (QDVE) - XET
iShares Core MSCI EM IMI UCITS ETF (EMIM) - EAM
ISHSIV-AUTOMATION&ROBOT.U.ETF (2B76) - XET
ISHARES IV-HEALTHC.INNOVATION (2B78) - XET

with

15,0%
40,0%
25,0%
5,0%
7,5%
7,5%

My goal is long term growth overweighting the US market and especially the tech sector

Is this allocation too dangerous ? I know that there is high overlap of the first 3 ETFs

Any suggestion to better tune it?
Last edited by makaros on Fri Apr 16, 2021 4:47 pm, edited 2 times in total.
User avatar
galeno
Posts: 2273
Joined: Fri Dec 21, 2007 12:06 pm

Re: Advice for ETF allocation

Post by galeno »

Better tune it to WHAT? What logic did you use to construct your port?
KISS & STC.
Topic Author
makaros
Posts: 11
Joined: Fri Apr 16, 2021 3:47 pm

Re: Advice for ETF allocation

Post by makaros »

I have edited my initial post
Valuethinker
Posts: 42489
Joined: Fri May 11, 2007 11:07 am

Re: Advice for ETF allocation

Post by Valuethinker »

makaros wrote: Fri Apr 16, 2021 3:53 pm Hi all

I am considerig this allocation scheme:

VANGUARD S&P 500 UCITS ETF (VUAA) - XET
ISHSIII-CORE MSCI WORLD U.ETF (IWDA) - EAM
ISHSV-S&P 500 INF.TE.SEC.U.ETF (QDVE) - XET
iShares Core MSCI EM IMI UCITS ETF (EMIM) - EAM
ISHSIV-AUTOMATION&ROBOT.U.ETF (2B76) - XET
ISHARES IV-HEALTHC.INNOVATION (2B78) - XET

with

15,0%
40,0%
25,0%
5,0%
7,5%
7,5%

My goal is long term growth overweighting the US market and especially the tech sector

Is this allocation too dangerous ? I know that there is high overlap of the first 3 ETFs

Any suggestion to better tune it?
I think you would be better just to hold the global market in a single fund. You can work out what your effective US overweighting is with your projected portfolio.

Overweighting tech is about the last thing I'd do - given how much the sector has gone up. We are due another bear market cycle -- maybe around digital advertising? If you look in some of those funds, they often don't hold what we think they should hold? (ie Amazon is often listed as a consumer stock alongside WalMart).

The individual sector funds? That just adds to your risk, without compensatory return.
DJN
Posts: 809
Joined: Mon Nov 20, 2017 12:30 am

Re: Advice for ETF allocation

Post by DJN »

Hi,
I think that you have posted recently that you like a simple portfolio of VWCE or IWDA + EIMI which are nice enough combinations. However you haven't mentioned anything about ballast in either post.
The etfs that you have listed in this post may have some duplication involved, i.e. some of the companies may already be captured in the indices.
If you have a plan why don't you provide the bones of the plan here for some commentary? Do you want to have a basic portfolio with a tilt to tech and new medicine? Then allocate in your plan a percentage to those sectors of say 10% total and put the rest in plain vanilla global stocks and bonds etfs and then you can see how the tilting goes over time.
If I were starting a portfolio now I would go for VNGA80 at your stage.
BTW your location and tax status might be important in the choice of funds.
DJN
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.
Topic Author
makaros
Posts: 11
Joined: Fri Apr 16, 2021 3:47 pm

Re: Advice for ETF allocation

Post by makaros »

Valuethinker wrote: Sat Apr 17, 2021 2:52 am
makaros wrote: Fri Apr 16, 2021 3:53 pm Hi all

I am considerig this allocation scheme:

VANGUARD S&P 500 UCITS ETF (VUAA) - XET
ISHSIII-CORE MSCI WORLD U.ETF (IWDA) - EAM
ISHSV-S&P 500 INF.TE.SEC.U.ETF (QDVE) - XET
iShares Core MSCI EM IMI UCITS ETF (EMIM) - EAM
ISHSIV-AUTOMATION&ROBOT.U.ETF (2B76) - XET
ISHARES IV-HEALTHC.INNOVATION (2B78) - XET

with

15,0%
40,0%
25,0%
5,0%
7,5%
7,5%

My goal is long term growth overweighting the US market and especially the tech sector

Is this allocation too dangerous ? I know that there is high overlap of the first 3 ETFs

Any suggestion to better tune it?
I think you would be better just to hold the global market in a single fund. You can work out what your effective US overweighting is with your projected portfolio.

Overweighting tech is about the last thing I'd do - given how much the sector has gone up. We are due another bear market cycle -- maybe around digital advertising? If you look in some of those funds, they often don't hold what we think they should hold? (ie Amazon is often listed as a consumer stock alongside WalMart).

The individual sector funds? That just adds to your risk, without compensatory return.
Hi, thanks for the reply.

More info for my goal and myself: I am 28yo living in France and I have started investing for the past 1 year. Capital gains in France are taxed at 30%. I hold around 20 high conviction stocks (accounting for 50% of my portfolio) and I now want to build the remaining 50% with ETFs.

My goal is growth in the long term to complement my retirement fund. I plan to invest 400 euros per month on these ETFs and I am trying to find the best ETFs and the best weight for these ETFs based on my goal. I am confident in Tech but I am open to new interesting suggestions. My risk tolerance is not high either low. I could afford to lose 25%.

Would a selection like this be better?

VANGUARD S&P 500 UCITS ETF (VUAA) - XET 20,0%
ISHSIII-CORE MSCI WORLD U.ETF (IWDA) - EAM 45,0%
ISHSV-S&P 500 INF.TE.SEC.U.ETF (QDVE) - XET 25,0%
iShares Core MSCI EM IMI UCITS ETF (EMIM) - EAM 10,0%
Topic Author
makaros
Posts: 11
Joined: Fri Apr 16, 2021 3:47 pm

Re: Advice for ETF allocation

Post by makaros »

DJN wrote: Sat Apr 17, 2021 3:39 am Hi,
I think that you have posted recently that you like a simple portfolio of VWCE or IWDA + EIMI which are nice enough combinations. However you haven't mentioned anything about ballast in either post.
The etfs that you have listed in this post may have some duplication involved, i.e. some of the companies may already be captured in the indices.
If you have a plan why don't you provide the bones of the plan here for some commentary? Do you want to have a basic portfolio with a tilt to tech and new medicine? Then allocate in your plan a percentage to those sectors of say 10% total and put the rest in plain vanilla global stocks and bonds etfs and then you can see how the tilting goes over time.
If I were starting a portfolio now I would go for VNGA80 at your stage.
BTW your location and tax status might be important in the choice of funds.
DJN
I provided more info about my situation on the post just above
User avatar
galeno
Posts: 2273
Joined: Fri Dec 21, 2007 12:06 pm

Re: Advice for ETF allocation

Post by galeno »

I'm going to be a little harsh here. Don't take it personally. Remember. You are on a Bogleheads board.

Your 50% in "high conviction stocks" has a 95% probability to UNDER PERFORM the FTSE all world index over the next 5 years. On WHAT do you base your CONVICTION?

The other 50% in UCITS ETFs makes no sense other than you seem to like tech, complexity, and overlap.
KISS & STC.
Topic Author
makaros
Posts: 11
Joined: Fri Apr 16, 2021 3:47 pm

Re: Advice for ETF allocation

Post by makaros »

galeno wrote: Sat Apr 17, 2021 5:50 am I'm going to be a little harsh here. Don't take it personally. Remember. You are on a Bogleheads board.

Your 50% in "high conviction stocks" has a 95% probability to UNDER PERFORM the FTSE all world index over the next 5 years. On WHAT do you base your CONVICTION?

The other 50% in UCITS ETFs makes no sense other than you seem to like tech, complexity, and overlap.
Critisisim is welcome -- that's why I posted here. I am also not a very experienced investor (1+ years of experience).

By high conviction I mean that after doing a deep DD, I believe these companies will continue growing over the next 10 years.

I have recently decided to stop investing more into these stocks and instead invest this money into good ETFs to reduce the overall risk of my portfolio.
dylandog
Posts: 8
Joined: Sat Apr 10, 2021 5:01 am

Re: Advice for ETF allocation

Post by dylandog »

Hello , this allocation will you expose a lot to US market , without a real hedging if this market would have a downside in the close future ( that could be probable) . this asset allocation probably will be over than 25% in a strong bear time.
User avatar
Justfinance
Posts: 13
Joined: Tue Mar 23, 2021 5:09 am

Re: Advice for ETF allocation

Post by Justfinance »

Give it a try and report back on your learnings! :sharebeer
Laurizas
Posts: 249
Joined: Mon Dec 31, 2018 4:44 am
Location: Lithuania

Re: Advice for ETF allocation

Post by Laurizas »

makaros wrote: Sat Apr 17, 2021 4:32 am I could afford to lose 25%.
How did you react in March, 2020 when stocks were down 30 percent?
makaros wrote: Sat Apr 17, 2021 4:32 am Would a selection like this be better?

VANGUARD S&P 500 UCITS ETF (VUAA) - XET 20,0%
ISHSIII-CORE MSCI WORLD U.ETF (IWDA) - EAM 45,0%
ISHSV-S&P 500 INF.TE.SEC.U.ETF (QDVE) - XET 25,0%
iShares Core MSCI EM IMI UCITS ETF (EMIM) - EAM 10,0%
I think it is better then your first allocation.

Nevertheless, you are tilting toward US and tech which has had a great run for more then a decade, so, obviously, recency bias here.
https://www.bogleheads.org/wiki/Behavio ... cency_bias
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galeno
Posts: 2273
Joined: Fri Dec 21, 2007 12:06 pm

Re: Advice for ETF allocation

Post by galeno »

It's "better". But still too overlapped, complicated, and tilted to FOMO.

"Would a selection like this be better?

VANGUARD S&P 500 UCITS ETF (VUAA) - XET 20,0%
ISHSIII-CORE MSCI WORLD U.ETF (IWDA) - EAM 45,0%
ISHSV-S&P 500 INF.TE.SEC.U.ETF (QDVE) - XET 25,0%
iShares Core MSCI EM IMI UCITS ETF (EMIM) - EAM 10,0%"

1. Start with ONE world stock UCITS ETF. VWRD or one of its versions in other currencies. Stop here! You now own all the investible public companies in the world.

2. But if you insist and think you know more than the market you can SLIGHTLY tilt your equities to have more USA, EM, small caps, etc.
KISS & STC.
Topic Author
makaros
Posts: 11
Joined: Fri Apr 16, 2021 3:47 pm

Re: Advice for ETF allocation

Post by makaros »

Laurizas wrote: Sat Apr 17, 2021 10:41 am
makaros wrote: Sat Apr 17, 2021 4:32 am I could afford to lose 25%.
How did you react in March, 2020 when stocks were down 30 percent?
makaros wrote: Sat Apr 17, 2021 4:32 am Would a selection like this be better?

VANGUARD S&P 500 UCITS ETF (VUAA) - XET 20,0%
ISHSIII-CORE MSCI WORLD U.ETF (IWDA) - EAM 45,0%
ISHSV-S&P 500 INF.TE.SEC.U.ETF (QDVE) - XET 25,0%
iShares Core MSCI EM IMI UCITS ETF (EMIM) - EAM 10,0%
I think it is better then your first allocation.

Nevertheless, you are tilting toward US and tech which has had a great run for more then a decade, so, obviously, recency bias here.
https://www.bogleheads.org/wiki/Behavio ... cency_bias
I bought the dip actually. I have not sold a single stock or ETF since I started investing. I invest money I do not need in the near future.

Concerning the allocation I agree that it might be a bit biased but I have updated it to:

ISHSIII-CORE MSCI WORLD U.ETF (IWDA) - EAM 66,0%
iShares Core MSCI EM IMI UCITS ETF (EMIM) - EAM 9,0%
ISHSV-S&P 500 INF.TE.SEC.U.ETF (QDVE) - XET 15,0%
VANGUARD S&P 500 UCITS ETF (VUAA) - XET 10,0%

with total US weight of 68%
Last edited by makaros on Sat Apr 17, 2021 12:34 pm, edited 1 time in total.
Topic Author
makaros
Posts: 11
Joined: Fri Apr 16, 2021 3:47 pm

Re: Advice for ETF allocation

Post by makaros »

galeno wrote: Sat Apr 17, 2021 11:07 am It's "better". But still too overlapped, complicated, and tilted to FOMO.

"Would a selection like this be better?

VANGUARD S&P 500 UCITS ETF (VUAA) - XET 20,0%
ISHSIII-CORE MSCI WORLD U.ETF (IWDA) - EAM 45,0%
ISHSV-S&P 500 INF.TE.SEC.U.ETF (QDVE) - XET 25,0%
iShares Core MSCI EM IMI UCITS ETF (EMIM) - EAM 10,0%"

1. Start with ONE world stock UCITS ETF. VWRD or one of its versions in other currencies. Stop here! You now own all the investible public companies in the world.

2. But if you insist and think you know more than the market you can SLIGHTLY tilt your equities to have more USA, EM, small caps, etc.
Thanks for the valuable tips. Instead of VWRD I prefer IWDA + EMIM but essentially the idea is the same. To hold "all world".

I am thinking of this allocation:
ISHSIII-CORE MSCI WORLD U.ETF (IWDA) - EAM 66,0%
iShares Core MSCI EM IMI UCITS ETF (EMIM) - EAM 9,0%
ISHSV-S&P 500 INF.TE.SEC.U.ETF (QDVE) - XET 15,0%
VANGUARD S&P 500 UCITS ETF (VUAA) - XET 10,0%

Overweight in tech but total US weight is 68%.
I am 28yo and I think adding SP500 & SP500 inf tech are risky but could try and see how it goes.

I estimated these ratio for the above allocation:

Price/Earnings Ratio 20.98
Price/Cashflow Ratio 14.12
Price/Book Ratio 3.67
User avatar
galeno
Posts: 2273
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Re: Advice for ETF allocation

Post by galeno »

If this were 100% of your equity allocation I'd say OK. You're a young guy who likes to tilt hard to USA and tech.

But it's NOT. The other 50% is in your 10 high conviction stocks.

Which are?

"I am thinking of this allocation:
ISHSIII-CORE MSCI WORLD U.ETF (IWDA) - EAM 66,0%
iShares Core MSCI EM IMI UCITS ETF (EMIM) - EAM 9,0%
ISHSV-S&P 500 INF.TE.SEC.U.ETF (QDVE) - XET 15,0%
VANGUARD S&P 500 UCITS ETF (VUAA) - XET 10,0%

Overweight in tech but total US weight is 68%.
I am 28yo and I think adding SP500 & SP500 inf tech are risky but could try and see how it goes.

I estimated these ratio for the above allocation:

Price/Earnings Ratio 20.98
Price/Cashflow Ratio 14.12
Price/Book Ratio 3.67"
KISS & STC.
Topic Author
makaros
Posts: 11
Joined: Fri Apr 16, 2021 3:47 pm

Re: Advice for ETF allocation

Post by makaros »

galeno wrote: Sat Apr 17, 2021 1:09 pm If this were 100% of your equity allocation I'd say OK. You're a young guy who likes to tilt hard to USA and tech.

But it's NOT. The other 50% is in your 10 high conviction stocks.

Which are?

"I am thinking of this allocation:
ISHSIII-CORE MSCI WORLD U.ETF (IWDA) - EAM 66,0%
iShares Core MSCI EM IMI UCITS ETF (EMIM) - EAM 9,0%
ISHSV-S&P 500 INF.TE.SEC.U.ETF (QDVE) - XET 15,0%
VANGUARD S&P 500 UCITS ETF (VUAA) - XET 10,0%

Overweight in tech but total US weight is 68%.
I am 28yo and I think adding SP500 & SP500 inf tech are risky but could try and see how it goes.

I estimated these ratio for the above allocation:

Price/Earnings Ratio 20.98
Price/Cashflow Ratio 14.12
Price/Book Ratio 3.67"
Hi again,

After rethinking about my allocation I have now a new one:

iShares Core MSCI World UCITS ETF USD (Acc) - IWDA 65%

SP500 information technology sector - QDVE 25%

MSCI World Small Cap - IUSN 10%

Would that be a good idea? Too conservative?

My thinking is: IWDA for ~ all world, SP500 for Information tech sector US (I am bullish) and all world small cap.
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galeno
Posts: 2273
Joined: Fri Dec 21, 2007 12:06 pm

Re: Advice for ETF allocation

Post by galeno »

You lack EM.

"My thinking is: IWDA for ~ all world, SP500 for Information tech sector US (I am bullish) and all world small cap"
KISS & STC.
Valuethinker
Posts: 42489
Joined: Fri May 11, 2007 11:07 am

Re: Advice for ETF allocation

Post by Valuethinker »

makaros wrote: Mon Apr 19, 2021 6:19 am
galeno wrote: Sat Apr 17, 2021 1:09 pm If this were 100% of your equity allocation I'd say OK. You're a young guy who likes to tilt hard to USA and tech.

But it's NOT. The other 50% is in your 10 high conviction stocks.

Which are?

"I am thinking of this allocation:
ISHSIII-CORE MSCI WORLD U.ETF (IWDA) - EAM 66,0%
iShares Core MSCI EM IMI UCITS ETF (EMIM) - EAM 9,0%
ISHSV-S&P 500 INF.TE.SEC.U.ETF (QDVE) - XET 15,0%
VANGUARD S&P 500 UCITS ETF (VUAA) - XET 10,0%

Overweight in tech but total US weight is 68%.
I am 28yo and I think adding SP500 & SP500 inf tech are risky but could try and see how it goes.

I estimated these ratio for the above allocation:

Price/Earnings Ratio 20.98
Price/Cashflow Ratio 14.12
Price/Book Ratio 3.67"
Hi again,

After rethinking about my allocation I have now a new one:

iShares Core MSCI World UCITS ETF USD (Acc) - IWDA 65%

SP500 information technology sector - QDVE 25%

MSCI World Small Cap - IUSN 10%

Would that be a good idea? Too conservative?

My thinking is: IWDA for ~ all world, SP500 for Information tech sector US (I am bullish) and all world small cap.
Way overconcentrated. Mistaking knowing the product and the company from knowing what the stocks will do.

Read up on the "Nifty Fifty" crash of the early 1970s. The "one decision" stocks which turned out to not be so magical.

We hold it here that you can't beat, reliably, a fully informed market. You can only do so with inside information - and it's illegal to trade on that.

And be very sure the stocks in the S&P 500 IT sector are what you think they are. For example are Alphabet and Facebook members? I thought they were grouped with WalMart?
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tre3sori
Posts: 209
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Re: Advice for ETF allocation

Post by tre3sori »

makaros,
are you familiar with
IUSQ iShares MSCI ACWI UCITS ETF or
VWCE Vanguard FTSE All-World UCITS ETF
or even the Vanguard LifeStrategy Fund Family?
A one fund solution for stocks or even stocks AND bonds will make your investment life easier.

To these core holdings you can add S&P500 or tech funds as satellites to overweight the US market and the tech sector.
Will it that make your portfolio better? The future will tell.
Let every man divide his money into three parts, and invest a third in land, a third in business, a third let him keep by him in reserve. Talmud | 35% Real Estate, 45% Stocks, 15% Bonds, 4% Gold, 1% Cash
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