The best efficient market hypothesis portfolio (Europeans)
The best efficient market hypothesis portfolio (Europeans)
The goal is to create an all-world market-cap weighted portfolio whose weights for each security are as close as possible to the market-cap of the security with respect to the total.
This, while also keeping the expense fees and other costs as low as possible, the turnover rate as low as possible, and the number of stocks as large as possible.
Of course, we'll need to find a compromise among these requirements, using ETFs that are available to Europeans.
1) First attempt:
100 % Vanguard FTSE All-World UCITS ETF (USD) Accumulating TER=0.22
Expense ratio = 0.22
Number of stocks = 3559
2) Second attempt:
88 % SPDR MSCI World UCITS ETF TER = 0.12
12 % HSBC MSCI Emerging Markets UCITS ETF USD TER = 0.15
Total expense ratio = 0.124
Number of stocks = 1582+1381 = 2963
And the two weights are based very roughly on the current capitalization of developed and emerging markets.
First question: which one is better ?
Second question: can we do even better, given the goal ?
This, while also keeping the expense fees and other costs as low as possible, the turnover rate as low as possible, and the number of stocks as large as possible.
Of course, we'll need to find a compromise among these requirements, using ETFs that are available to Europeans.
1) First attempt:
100 % Vanguard FTSE All-World UCITS ETF (USD) Accumulating TER=0.22
Expense ratio = 0.22
Number of stocks = 3559
2) Second attempt:
88 % SPDR MSCI World UCITS ETF TER = 0.12
12 % HSBC MSCI Emerging Markets UCITS ETF USD TER = 0.15
Total expense ratio = 0.124
Number of stocks = 1582+1381 = 2963
And the two weights are based very roughly on the current capitalization of developed and emerging markets.
First question: which one is better ?
Second question: can we do even better, given the goal ?
Re: The best efficient market hypothesis portfolio (Europeans)
I find that VWCE is better because it is more diversified than the competitor
Re: The best efficient market hypothesis portfolio (Europeans)
There’s also the Vanguard FTSE Developed + FTSE Emerging combo, same approach as All-World but a bit cheaper. Also being FTSE it goes down further into mid caps than MSCI.
Re: The best efficient market hypothesis portfolio (Europeans)
Nice! Thanks. So, if we want to implement these suggestions, that would be something like
3)
88% Vanguard FTSE Developed World UCITS ETF
12% Vanguard FTSE Emerging Markets UCITS ETF
Total expense ratio = 0.13
Total number of stocks = 2199+1880 = 4079
^ this actually sounds like... the best combo I'd say? At least on paper. You pay a negligibly higher fee with respect to 2) but you get larger diversification.
Re: The best efficient market hypothesis portfolio (Europeans)
I hope something like Vanguard Total World Stock ETF (VT) https://investor.vanguard.com/etf/profile/portfolio/vt will be available eventually for the European Investor.
The information provided is intended to be entertaining. It is not to be construed as professional advice. Use it at your own risk.
Re: The best efficient market hypothesis portfolio (Europeans)
My wife uses Vanguard FTSE Developed + EM split per the market cap split on the FTSE All World monthly factsheet
https://research.ftserussell.com/Analyt ... nual=false
If you rebalance at the start of the month, it then moves v v closely with Vanguard FTSE All World.
Note the spreads are a bit higher (only one off remember) and transaction costs if I recall my numbers correctly but that’s more than made up for with the lower OCF.
https://research.ftserussell.com/Analyt ... nual=false
If you rebalance at the start of the month, it then moves v v closely with Vanguard FTSE All World.
Note the spreads are a bit higher (only one off remember) and transaction costs if I recall my numbers correctly but that’s more than made up for with the lower OCF.
Re: The best efficient market hypothesis portfolio (Europeans)
Yes, that would likely be the absolute best.tre3sori wrote: ↑Sat Apr 24, 2021 12:00 pm I hope something like Vanguard Total World Stock ETF (VT) https://investor.vanguard.com/etf/profile/portfolio/vt will be available eventually for the European Investor.
Awesome, I think I will do the same. Maybe just a yearly rebalance might be enough though. I don't think I'd have the discipline to do it monthly.Genghis wrote: ↑Sat Apr 24, 2021 12:32 pm My wife uses Vanguard FTSE Developed + EM split per the market cap split on the FTSE All World monthly factsheet
https://research.ftserussell.com/Analyt ... nual=false
If you rebalance at the start of the month, it then moves v v closely with Vanguard FTSE All World.
Note the spreads are a bit higher (only one off remember) and transaction costs if I recall my numbers correctly but that’s more than made up for with the lower OCF.
Re: The best efficient market hypothesis portfolio (Europeans)
We add to the portfolio monthly anyway. Point being is that if you add say today, you’re adding amounts based on the split as at 31 March. If you get the pdf on say 4 May which will be 30 April numbers and rebalance then, you’ll be v close to the All World exact split and it’ll then move accordingly.
Re: The best efficient market hypothesis portfolio (Europeans)
In case, just for fun, someone wants to obsess over the expense fees beyond any rational limit, I guess you could reduce it to something like 0.09 % by using the fact that S&P and Europe 600 have lower fees.
4)
Vanguard S&P 500 UCITS ETF 56 %
Lyxor Core STOXX Europe 600 (DR) UCITS ETF (Acc) 17.5 %
Vanguard FTSE Japan UCITS ETF (Distr) 7 %
iShares Core MSCI Pacific ex Japan UCITS ETF (Acc) 5 %
HSBC MSCI Canada UCITS ETF USD 2.5 %
Vanguard FTSE Emerging Markets UCITS ETF 12%
Expense ratio ~ 0.09
Total number of holdings 4467
However I am slightly cheating because of course S&P 500 and STOXX Europe 600 are not really equivalent to total market US and Europe, and then I guess there is also some redundancy like Poland, which as far as I know is both in the Europe ETF and in the emerging market ETF.
Also, even in the case this combo were perfect, I doubt I'd have the patience to do the rebalancing, and I wouldn't be surprise if there were additional costs that are not captured under the voice "Expense ratio".
EDIT = what I could do is split the American ones in
Vanguard S&P 500 UCITS ETF x %
SPDR Russell 2000 US Small Cap UCITS ETF (56-x) %
+1682
Lyxor Core STOXX Europe 600 (DR) UCITS ETF (Acc) 15.5 %
Xtrackers MSCI Europe Small Cap UCITS ETF 1C 2 %
+975
Total number of holdings = 7124
4)
Vanguard S&P 500 UCITS ETF 56 %
Lyxor Core STOXX Europe 600 (DR) UCITS ETF (Acc) 17.5 %
Vanguard FTSE Japan UCITS ETF (Distr) 7 %
iShares Core MSCI Pacific ex Japan UCITS ETF (Acc) 5 %
HSBC MSCI Canada UCITS ETF USD 2.5 %
Vanguard FTSE Emerging Markets UCITS ETF 12%
Expense ratio ~ 0.09
Total number of holdings 4467
However I am slightly cheating because of course S&P 500 and STOXX Europe 600 are not really equivalent to total market US and Europe, and then I guess there is also some redundancy like Poland, which as far as I know is both in the Europe ETF and in the emerging market ETF.
Also, even in the case this combo were perfect, I doubt I'd have the patience to do the rebalancing, and I wouldn't be surprise if there were additional costs that are not captured under the voice "Expense ratio".
EDIT = what I could do is split the American ones in
Vanguard S&P 500 UCITS ETF x %
SPDR Russell 2000 US Small Cap UCITS ETF (56-x) %
+1682
Lyxor Core STOXX Europe 600 (DR) UCITS ETF (Acc) 15.5 %
Xtrackers MSCI Europe Small Cap UCITS ETF 1C 2 %
+975
Total number of holdings = 7124
Re: The best efficient market hypothesis portfolio (Europeans)
(Strange that I couldn't find a US total market ETF domiciled in Europe. )
Re: The best efficient market hypothesis portfolio (Europeans)
Here is a thread from 2018 that may also be interesting: Extending the idea of "The best efficient market hypothesis portfolio" to asset classes beyond equities. viewtopic.php?f=10&t=251190
In this thread a series of freely accessible papers by Ronald Q. Doeswijk, Trevin Lam, Laurens Swinkels are mentioned that explore the idea of an investable global multi-asset market portfolio. Look at the collection of links in the Readme.pdf and the dataset available under
https://datarepository.eur.nl/articles/ ... /9371741/3
They updated the dataset to contain information up to 12/2020.
This is what "The Global Multi-Asset Market Portfolio 2020" looks like:
In this thread a series of freely accessible papers by Ronald Q. Doeswijk, Trevin Lam, Laurens Swinkels are mentioned that explore the idea of an investable global multi-asset market portfolio. Look at the collection of links in the Readme.pdf and the dataset available under
https://datarepository.eur.nl/articles/ ... /9371741/3
They updated the dataset to contain information up to 12/2020.
This is what "The Global Multi-Asset Market Portfolio 2020" looks like:
Last edited by tre3sori on Mon Apr 26, 2021 4:02 am, edited 2 times in total.
The information provided is intended to be entertaining. It is not to be construed as professional advice. Use it at your own risk.
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Re: The best efficient market hypothesis portfolio (Europeans)
I'd also pay attention to AUM values and the risk of an ETF being closed because it's not getting the needed investments. Please correct me if I'm wrong but I'm under the impression that newly formed ETFs don't have the necessary cash to correctly represent large indexes and this introduces higher than average tracking error. If that's the case, a tracking error not in our favor of say 0.1 could mean you might as well have invested in 1) in the first place and saved yourself the complexity.
Re: The best efficient market hypothesis portfolio (Europeans)
This is great. I was indeed thinking that perhaps I should be extending the research beyond a single asset class. There is one problem though: a portfolio with a good fraction of bonds would have a risk that is lower than my risk tolerance, so I'd have to do leverage, but that would require significant additional costs, nullifying the work done to stay on the efficient frontier.tre3sori wrote: ↑Mon Apr 26, 2021 3:17 am Here is a thread from 2018 that may also be interesting: Extending the idea of "The best efficient market hypothesis portfolio" to asset classes beyond equities. viewtopic.php?f=10&t=251190
With all equity the level of risk looks fair enough.
You are right. I would also likely have inefficiency problems due to be forced to buy distributing ETFs in order to have a fund size that is large enough (FTSE developed ACC is too small)vstariradev wrote: ↑Mon Apr 26, 2021 3:53 am I'd also pay attention to AUM values and the risk of an ETF being closed because it's not getting the needed investments. Please correct me if I'm wrong but I'm under the impression that newly formed ETFs don't have the necessary cash to correctly represent large indexes and this introduces higher than average tracking error. If that's the case, a tracking error not in our favor of say 0.1 could mean you might as well have invested in 1) in the first place and saved yourself the complexity.
I don't exclude that 1) accumulating might be the right way to go.
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Re: The best efficient market hypothesis portfolio (Europeans)
What is VT so different from vwrl ?tre3sori wrote: ↑Sat Apr 24, 2021 12:00 pm I hope something like Vanguard Total World Stock ETF (VT) https://investor.vanguard.com/etf/profile/portfolio/vt will be available eventually for the European Investor.
Re: The best efficient market hypothesis portfolio (Europeans)
VWRL doesn't have small cap.international001 wrote: ↑Mon Apr 26, 2021 9:48 amWhat is VT so different from vwrl ?tre3sori wrote: ↑Sat Apr 24, 2021 12:00 pm I hope something like Vanguard Total World Stock ETF (VT) https://investor.vanguard.com/etf/profile/portfolio/vt will be available eventually for the European Investor.
VT has more than twice the number of holdings and less than half the expense ratio with respect to vwrl.
Re: The best efficient market hypothesis portfolio (Europeans)
According to Bogleheads
The FTSE Global All Cap Index provides coverage of 98% of the world stock market capitalization. FTSE considers the market to consist of: [4]
Large cap stocks 70%
Mid cap stocks 20%
Small cap stocks 10%
Well, in virtue of this, another possibility would be
5)
FTSE All-World UCITS ETF (VWRL) 90%
Strategy of iShares MSCI World Small Cap UCITS ETF 10%
total number of holdings = 6912
expense ratio = 0.23
And if we could have small cap emerging we would improve but I couldn't find it.
I actually like this number 5). It's simple enough.
The FTSE Global All Cap Index provides coverage of 98% of the world stock market capitalization. FTSE considers the market to consist of: [4]
Large cap stocks 70%
Mid cap stocks 20%
Small cap stocks 10%
Well, in virtue of this, another possibility would be
5)
FTSE All-World UCITS ETF (VWRL) 90%
Strategy of iShares MSCI World Small Cap UCITS ETF 10%
total number of holdings = 6912
expense ratio = 0.23
And if we could have small cap emerging we would improve but I couldn't find it.
I actually like this number 5). It's simple enough.
Re: The best efficient market hypothesis portfolio (Europeans)
Interesting thread on efficient market portfolio, although not geared toward Europeans: viewtopic.php?f=10&t=207804
Re: The best efficient market hypothesis portfolio (Europeans)
Thank you. Yeah that interview of Sharpe is what motivated me to do thisSeasonal wrote: ↑Mon Apr 26, 2021 10:42 am Interesting thread on efficient market portfolio, although not geared toward Europeans: viewtopic.php?f=10&t=207804
BTW, minor correction
5 bis)
FTSE All-World UCITS ETF (VWRL) 90%
iShares MSCI World Small Cap UCITS ETF 9 %
Vanguard FTSE Emerging Markets UCITS ETF Distributing 1 %
expense ratio = 0.23
^ this is done to compensate the fact that MSCI world small cap has only developed countries.
Last edited by Astones on Mon Apr 26, 2021 11:22 am, edited 1 time in total.
Re: The best efficient market hypothesis portfolio (Europeans)
The MSCI EM IMI index covers 99% of market cap of EM and could be accessed through this ETF, MSCI EM IMI.
https://www.morningstar.co.uk/uk/etf/sn ... 0P0001377K
Combine with MSCI World product + small cap product for global coverage.
https://www.morningstar.co.uk/uk/etf/sn ... 0P0001377K
Combine with MSCI World product + small cap product for global coverage.
Re: The best efficient market hypothesis portfolio (Europeans)
nice.Genghis wrote: ↑Mon Apr 26, 2021 11:12 am The MSCI EM IMI index covers 99% of market cap of EM and could be accessed through this ETF, MSCI EM IMI.
https://www.morningstar.co.uk/uk/etf/sn ... 0P0001377K
Combine with MSCI World product + small cap product for global coverage.
you mean like the following ?
6)
SPDR MSCI World UCITS ETF 79 %
MSCI EM IMI 12 %
iShares MSCI World Small Cap UCITS ETF 9 %
Re: The best efficient market hypothesis portfolio (Europeans)
iShares Core MSCI World UCITS ETF 79%
iShares Core EM IMI UCITS ETF 12%
iShares MSCI World Small Cap UCITS ETF 9 %
The information provided is intended to be entertaining. It is not to be construed as professional advice. Use it at your own risk.
Re: The best efficient market hypothesis portfolio (Europeans)
Another factor is tracking error and simplicity. The SPDR fund is new https://www.morningstar.co.uk/uk/etf/sn ... 0P0001H0BKAstones wrote: ↑Sat Apr 24, 2021 10:00 am The goal is to create an all-world market-cap weighted portfolio whose weights for each security are as close as possible to the market-cap of the security with respect to the total.
This, while also keeping the expense fees and other costs as low as possible, the turnover rate as low as possible, and the number of stocks as large as possible.
Of course, we'll need to find a compromise among these requirements, using ETFs that are available to Europeans.
1) First attempt:
100 % Vanguard FTSE All-World UCITS ETF (USD) Accumulating TER=0.22
Expense ratio = 0.22
Number of stocks = 3559
2) Second attempt:
88 % SPDR MSCI World UCITS ETF TER = 0.12
12 % HSBC MSCI Emerging Markets UCITS ETF USD TER = 0.15
Total expense ratio = 0.124
Number of stocks = 1582+1381 = 2963
And the two weights are based very roughly on the current capitalization of developed and emerging markets.
First question: which one is better ?
Second question: can we do even better, given the goal ?
My assumption (versus Vanguard) is what you save by slicing and dicing (0.09%), is more than cost by inferior tracking error.
Amateur Self-Taught Senior Macro Strategist
Re: The best efficient market hypothesis portfolio (Europeans)
Yes, you are right, eventually you guys convinced me about this.Forester wrote: ↑Mon Apr 26, 2021 1:08 pm Another factor is tracking error and simplicity. The SPDR fund is new https://www.morningstar.co.uk/uk/etf/sn ... 0P0001H0BK
My assumption (versus Vanguard) is what you save by slicing and dicing (0.09%), is more than cost by inferior tracking error.
So the following might be the best solution.
^ this seems to be the simplest way to have exposure to all markets, and all market caps, with fairly low expense fees.
By the way, is there a way to determine with more accuracy the percentage of small cap with respect to the total market cap of the world ?
I just used bogleheads rough estimate of 10/90 but perhaps something more precise has been published ?
Re: The best efficient market hypothesis portfolio (Europeans)
Google MSCI ACWI small cap, you'll find a PDF summary for every possible index you can think of from EM mid cap to French small cap.Astones wrote: ↑Mon Apr 26, 2021 1:21 pmYes, you are right, eventually you guys convinced me about this.Forester wrote: ↑Mon Apr 26, 2021 1:08 pm Another factor is tracking error and simplicity. The SPDR fund is new https://www.morningstar.co.uk/uk/etf/sn ... 0P0001H0BK
My assumption (versus Vanguard) is what you save by slicing and dicing (0.09%), is more than cost by inferior tracking error.
So the following might be the best solution.
^ this seems to be the simplest way to have exposure to all markets, and all market caps, with fairly low expense fees.
By the way, is there a way to determine with more accuracy the percentage of small cap with respect to the total market cap of the world ?
I just used bogleheads rough estimate of 10/90 but perhaps something more precise has been published ?
In the end I bought the Vanguard global fund (VWRL), are you certain you want to go down this road of trying to combine Developed + Emerging funds?
Amateur Self-Taught Senior Macro Strategist
Re: The best efficient market hypothesis portfolio (Europeans)
I'm not very certain.Forester wrote: ↑Mon Apr 26, 2021 1:25 pm Google MSCI ACWI small cap, you'll find a PDF summary for every possible index you can think of from EM mid cap to French small cap.
In the end I bought the Vanguard global fund (VWRL), are you certain you want to go down this road of trying to combine Developed + Emerging funds?
My issue is that I would like to have exposure on small cap as well, whereas VWRL only includes large and mid caps. Therefore, a possible alternative to developed + EM could be something like
VWRL 90 %
iShares MSCI World Small Cap UCITS ETF 10%
I feel that including small cap is a good idea.
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Re: The best efficient market hypothesis portfolio (Europeans)
I don’t think 10% small caps will have a significant impact but I’m repeating what others here have said. I’m curious to see a portfolio comparison of between one including small caps and another excluding small caps. (I’m not at a computer right now) I suspect the difference would be very small but who knows.
Re: The best efficient market hypothesis portfolio (Europeans)
Yes so you can do this with 3 funds. Vanguard VWRL is your large cap global index then iShares and SPDR each have an MSCI World (aka Developed) Small Cap & MSCI Emerging Small Cap ETF. From memory the World fund is 0.30% and the Emerging fund is a bit more at 0.50%. The iShares ETF is WLDS.Astones wrote: ↑Mon Apr 26, 2021 1:36 pmI'm not very certain.Forester wrote: ↑Mon Apr 26, 2021 1:25 pm Google MSCI ACWI small cap, you'll find a PDF summary for every possible index you can think of from EM mid cap to French small cap.
In the end I bought the Vanguard global fund (VWRL), are you certain you want to go down this road of trying to combine Developed + Emerging funds?
My issue is that I would like to have exposure on small cap as well, whereas VWRL only includes large and mid caps. Therefore, a possible alternative to developed + EM could be something like
VWRL 90 %
iShares MSCI World Small Cap UCITS ETF 10%
I feel that including small cap is a good idea.
To be frank you could probably just hold VWRL and WLDS, something like a 70/30 split or whatever suits you, and forget the more expensive (and less liquid) EM small cap ETF.
Amateur Self-Taught Senior Macro Strategist
Re: The best efficient market hypothesis portfolio (Europeans)
Yeah, VWRL + WLDS sounds close enough to our goal. Concerning the allocation, ideally it should match the real weight of the underlying companies with respect to the global market. I need to find a website where this allocation is posted regularly.
Last time I checked in some website small cap stocks was somewhere around 14% the total market cap, so I guess the right way to go is indeed something like
VWRL 86 %
WLDS 14 %
We might be overthinking this, but since I plan to take a decision and then maybe stick with it for decades I'll allow myself the luxury of nitpicking .vstariradev wrote: ↑Mon Apr 26, 2021 2:19 pm I don’t think 10% small caps will have a significant impact but I’m repeating what others here have said. I’m curious to see a portfolio comparison of between one including small caps and another excluding small caps. (I’m not at a computer right now) I suspect the difference would be very small but who knows.
Re: The best efficient market hypothesis portfolio (Europeans)
I just copied that from reddit with minor changes:
Question: What is the right global all cap weighting (large/mid/small & developed/emerging)
If I wish to create an ETF portfolio tracking the right mix of large/mid/ small cap and both developed and emerging markets — how do I calculate the correct weights? For example, if I use
MSCI World
MSCI EM or MSCI EM IMI
MSCI World Small cap
...what are the correct weights for an all cap global portfolio?
Answer: Get the Market Cap from those PDFs (the links are always up to date) and then use them as proportions
(divide the market capitalization of each index by the sum of the market capitalization of all three indices)
https://www.msci.com/documents/10199/17 ... fc565ededb
https://www.msci.com/documents/10199/97 ... 7095acf1d3
https://www.msci.com/documents/10199/a6 ... 102eaa8399
Currently they are at 76.09% MSCI World, 12.78% MSCI EM IMI and 11.13% MSCI World Small Cap. Which gives you the MSCI ACWI IMI index...
The information provided is intended to be entertaining. It is not to be construed as professional advice. Use it at your own risk.
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Re: The best efficient market hypothesis portfolio (Europeans)
This is what I do:
iShares MSCI World + MSCI Emerging + MSCI World Small-Cap
(EUNL + IS3N + IUSN)
This covers 99% of world investable martket cap. You can easily look up how to weigh them. I overweight developed markets slightly so I use 80:10:10 for simplicity.
Full disclosure: I also overweight the US by adding an S&P500 ETF (SXR8) to the mix, but that’s unrelated to your question.
iShares MSCI World + MSCI Emerging + MSCI World Small-Cap
(EUNL + IS3N + IUSN)
This covers 99% of world investable martket cap. You can easily look up how to weigh them. I overweight developed markets slightly so I use 80:10:10 for simplicity.
Full disclosure: I also overweight the US by adding an S&P500 ETF (SXR8) to the mix, but that’s unrelated to your question.
Re: The best efficient market hypothesis portfolio (Europeans)
What about SPDR MSCI ACWI IMI UCITS ETF?
"The MSCI ACWI Investable Market Index (IMI) captures large, mid and small cap representation across 23 Developed Markets
(DM) and 27 Emerging Markets (EM) countries*. With 8,930 constituents, the index is comprehensive, covering approximately 99% of the global equity investment opportunity set."
TER 0.4%.
https://www.justetf.com/de-en/etf-profi ... 00B3YLTY66
"The MSCI ACWI Investable Market Index (IMI) captures large, mid and small cap representation across 23 Developed Markets
(DM) and 27 Emerging Markets (EM) countries*. With 8,930 constituents, the index is comprehensive, covering approximately 99% of the global equity investment opportunity set."
TER 0.4%.
https://www.justetf.com/de-en/etf-profi ... 00B3YLTY66
Re: The best efficient market hypothesis portfolio (Europeans)
Awesome, now I understand what you were saying before, thank you!
Alright, problem solved I'd say.
Either we use those 3 MSCI and we update the weights according to those three factsheets, or we rather use VWRL + WLDS.
Probably, the 3 MSCI is slightly better, since people usually recommend not to mix FTSE with MSCI, but both look good enough at this point.
Re: The best efficient market hypothesis portfolio (Europeans)
Here is how a portfolio of 76% iShares MSCI World + 13% iShares MSCI EM IMI + 11% iShares MSCI World Small Cap compares to 100% Vanguard FTSE All-World in the last three years (using Morningstar Instant X-Ray). In that period the difference was small.
The TER of such a portfolio was a bit lower (0.214%) than that of Vanguard FTSE All-World ETF (0.22%).
The number of different stocks in such a portfolio (not constituents of the indices!) is 7755 compared to 3559 in the Vanguard FTSE All-World ETF.
SPDR® MSCI ACWI IMI UCITS ETF samples the MSCI ACWI IMI index with only 1556 different stocks.
The TER of such a portfolio was a bit lower (0.214%) than that of Vanguard FTSE All-World ETF (0.22%).
The number of different stocks in such a portfolio (not constituents of the indices!) is 7755 compared to 3559 in the Vanguard FTSE All-World ETF.
SPDR® MSCI ACWI IMI UCITS ETF samples the MSCI ACWI IMI index with only 1556 different stocks.
The information provided is intended to be entertaining. It is not to be construed as professional advice. Use it at your own risk.
Re: The best efficient market hypothesis portfolio (Europeans)
Thank you. I was indeed expecting the difference to be rather small.
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Re: The best efficient market hypothesis portfolio (Europeans)
Thanks for the graphic! I think it shows the differences nicely.
I tried to compare FTSE all cap (say VT) vs FTSE large+mid but I couldn’t find a good FTSE large+mid covering both developed and emerging. Suggestions are welcome.
I tried to compare FTSE all cap (say VT) vs FTSE large+mid but I couldn’t find a good FTSE large+mid covering both developed and emerging. Suggestions are welcome.
Re: The best efficient market hypothesis portfolio (Europeans)
The equivalent of something like VT for Europeans does not exist. What we try to do is to go as close as possible.vstariradev wrote: ↑Tue Apr 27, 2021 11:05 am I tried to compare FTSE all cap (say VT) vs FTSE large+mid but I couldn’t find a good FTSE large+mid covering both developed and emerging. Suggestions are welcome.
You could combine Vanguard FTSE All-world with iShares MSCI small caps.
So far, it seems to me that the best we have come up with in this thread is what from now on I will call the 3-I funds: iShares world + iShares EM + iShares small cap.
I have noticed that all three ETFs are commission free with Degiro, so i am seriously considering going for that option as soon as I'll be back in Europe.
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Re: The best efficient market hypothesis portfolio (Europeans)
Yes, that’s the case unfortunately but I’m trying to compare performance of all caps vs large+mid for the longest possible period regardless of whether the fund is available to Europeans. The same results should still apply to our topic here. The reason that comparison would be better is because we’re not really comparing apples to apples when we mix MSCI with FTSE. Main reason is that they the two indices treat countries differently in terms of development and this is bound to have impact.Astones wrote: ↑Tue Apr 27, 2021 1:08 pmThe equivalent of something like VT for Europeans does not exist. What we try to do is to go as close as possible.vstariradev wrote: ↑Tue Apr 27, 2021 11:05 am I tried to compare FTSE all cap (say VT) vs FTSE large+mid but I couldn’t find a good FTSE large+mid covering both developed and emerging. Suggestions are welcome.
Re: The best efficient market hypothesis portfolio (Europeans)
You are right.vstariradev wrote: ↑Tue Apr 27, 2021 1:17 pm Yes, that’s the case unfortunately but I’m trying to compare performance of all caps vs large+mid for the longest possible period regardless of whether the fund is available to Europeans. The same results should still apply to our topic here. The reason that comparison would be better is because we’re not really comparing apples to apples when we mix MSCI with FTSE. Main reason is that they the two indices treat countries differently in terms of development and this is bound to have impact.
Oh, I see what you want to do now. How about comparing VT with VEU+VTI ?
VT has roughly 2000 holdings more than the VEU+VTI combo.
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Re: The best efficient market hypothesis portfolio (Europeans)
There must be something better, it appears they all contain small caps.
VEU (https://investor.vanguard.com/etf/profile/overview/veu):
- Seeks to track the performance of the FTSE All-World ex US Index.
VTI (https://investor.vanguard.com/etf/profile/VTI):
- Seeks to track the performance of the CRSP US Total Market Index.
- Large-, mid-, and small-cap equity diversified across growth and value styles.
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- Posts: 2748
- Joined: Thu Feb 15, 2018 6:31 pm
Re: The best efficient market hypothesis portfolio (Europeans)
VTI + VXUS has till more stocks than VT
But at some point, a bit more of diversification is just noise
But at some point, a bit more of diversification is just noise