Simple Equity Portfolio

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Topic Author
Mister643
Posts: 33
Joined: Wed Aug 21, 2019 6:00 am

Simple Equity Portfolio

Post by Mister643 » Mon Sep 02, 2019 2:47 pm

Hello,

Unfortunately, my local broker, XTB, is not going to introduce small cap and emerging markets value ETFs to build a more complex all value portfolio. Taking into account this and the fact that I am not willing to pay the 10$ custody fee charged by Interactive Brokers until the market crashes, since I prefer to keep more than 90% in cash and only DCA for now, I have decided to build a simple equity portfolio based on the available instruments:

1/3 Global Value Factor UCITS ETF (USD) Accumulating (VDVA) - PER 10.2, PBV 0.9, ROE 8.9%, Div Yield 3% (has large, mid and small cap value - do not know the exact proportions; US 61%, Japan 8.5%, Europe 21%)

1/3 iShares Edge MSCI Europe Value Factor UCITS ETF (EUR) Accumulating (IEVL) - PER 11.24, PBV 1, Div Yield 4% (large and mid cap EU equities)

1/3 iShares Core MSCI EM IMI UCITS ETF (USD) Accumulating (EIMI) - PER 12.03, PBV 1.51, Div Yield 2.3% (large, mid and small cap blend EM equities)

I don't like it much because I don't have EM value ETF available (my broker said the NAV, market cap and liquidity levels are too low), but do you have any better idea of how to implement a simple diversified equity portfolio using only accumulating ETFs? I'm struggling to make one from the few available instruments that are available.

steveyg50
Posts: 35
Joined: Tue Jul 09, 2019 6:35 pm

Re: Simple Equity Portfolio

Post by steveyg50 » Mon Sep 02, 2019 6:21 pm

Going off on a tangent I have a question or two for you.

I've been going through the MSCI website and looking at the data sheets/graphs for various factors etc. I have to say I haven't made up my mind, but at the moment I'm thinking the long term argument for small cap, quality and momentum seems believable, I am less convinced about value, although this seems very popular.

In particular MSCI Europe Value seems very unappealing. Its under-performed MSCI Europe for last 5, 10, 15 years and since 1998 according to MSCI data.
https://www.msci.com/documents/10199/4e ... 7c2b2fb5ae

what is it makes you think Europe value is going to be a winner in the future?

The other question - have you considered MSCI China and MSCI India ? You seem bullish on EM and seem like a guy looking for an edge/out-performance.

There seems more of an out-performance 'edge' to MSCI China/India compared to MSCI EM than there is in small cap and value for example.

I think personally, its maybe not for me, for me maybe safer to just track MSCI EM (or similar index), but I wondered if you had considered China/India index tracking?

Topic Author
Mister643
Posts: 33
Joined: Wed Aug 21, 2019 6:00 am

Re: Simple Equity Portfolio

Post by Mister643 » Tue Sep 03, 2019 6:54 am

steveyg50 wrote:
Mon Sep 02, 2019 6:21 pm
Going off on a tangent I have a question or two for you.

I've been going through the MSCI website and looking at the data sheets/graphs for various factors etc. I have to say I haven't made up my mind, but at the moment I'm thinking the long term argument for small cap, quality and momentum seems believable, I am less convinced about value, although this seems very popular.

In particular MSCI Europe Value seems very unappealing. Its under-performed MSCI Europe for last 5, 10, 15 years and since 1998 according to MSCI data.
https://www.msci.com/documents/10199/4e ... 7c2b2fb5ae

what is it makes you think Europe value is going to be a winner in the future?

The other question - have you considered MSCI China and MSCI India ? You seem bullish on EM and seem like a guy looking for an edge/out-performance.

There seems more of an out-performance 'edge' to MSCI China/India compared to MSCI EM than there is in small cap and value for example.

I think personally, its maybe not for me, for me maybe safer to just track MSCI EM (or similar index), but I wondered if you had considered China/India index tracking?
All factors are cyclical. If we do not take into account cycles, value crashes momentum like Andre Agassi. There's no chance for momentum Bitcoins stock investors in growth companies to survive the next market crash.

So without thinking about cycles, we know that value outperforms all other factors. Good. What else we know? We know that value is a depressed asset. So buying it now will not only provide the best long term returns, but will double crush the opponents coming from a low current level.

Adding small cap value and having a mix between large cap and small cap value also brings us superior returns. Even Fama, the father of EMH has said that value and small caps outperform the market on the long term. He considers that this is because of superior risk. Perhaps. Other say that value stocks are less risky because they are less expensive and you don't have to bet on capital appreciation because you earn dividends.

I think there are too many Bitcoiners in the stock market. I think there is almost no chance you cannot outperform the market since there are so many buying junk indexes such as MSCI World, MSCI Emerging Markets or Barclays Aggregate Bond Index. Why is this? Because few people think. It's a complicated process and it is not for everyone. Second, because people don't have long term ratification. They want results now. Investing is about long term. Everything else is speculation.

I think all these "investors" buying the market as a whole without thinking will be very unhappy of their returns. I will rather not invest at all than buy the whole market which is very expensive and has no upscale potential. If you're not able to think, then cash deposits are great. Being greedy and investing in Bitcoin stock indexes will not make you financial independent, will only jeopardize your bankroll and you will perhaps lose all the money on the short term while not gaining what you wanted on the long run.

I know that the value premium is at least 4% for Emerging Markets equities while for developed markets it is less but no less than what the market provides. So I have an edge that is called the value premium which is recognized by both value investors and efficient market hypothesis fans. Just because I come from an Eastern European country does not mean that I'm not smarter than 90% of the amateurs buying the broad market who call themselves investors. I will prove that I am right on the long run when everybody else will see their portfolios crashed in the beta vortex bubble. Because as Warren Buffett said nobody has ever been rewarded for mass stupidity.

Topic Author
Mister643
Posts: 33
Joined: Wed Aug 21, 2019 6:00 am

Re: Simple Equity Portfolio

Post by Mister643 » Tue Sep 03, 2019 7:10 am

This is a great podcast about how one can build an all value portfolio:
https://paulmerriman.com/ultimate-value ... portfolio/

I cannot even imagine there are still people buying blend funds. I would do everything possible to have access to value funds, but unfortunately they are not available in my country (except for DM large caps). Everything else is junk right now. It's ok to buy the market when the market crashed with 50%, but to buy it now it is really crazy. I will laugh when all these people will lose their lifetime savings because they thought that following the herd is safe. It is never safe doing what everybody else does.

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Re: Simple Equity Portfolio

Post by LadyGeek » Sat Sep 07, 2019 2:33 pm

I removed several off-topic posts and replies. As a reminder, see: General Etiquette
We expect this forum to be a place where people can feel comfortable asking questions and where debates and discussions are conducted in civil tones.

...At all times we must conduct ourselves in a respectful manner to other posters. Attacks on individuals, insults, name calling, trolling, baiting or other attempts to sow dissension are not acceptable.
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