My ETF Investment Strategy

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Good morning guys! Finally it’s time to talk about ETFs, and in particular about my ETF Investment Strategy.

In this article I want to tell you something about the ETFs’ world, the broker that I’m going to use to invest, the criteria I’ve taken into account while choosing which ETFs to invest and the Investment Strategy I’ll follow.

If you’re interested in this topic, keep reading!

What is an ETF?

As I anticipated you many times, in the next weeks I’ll start to invest in ETFs (Exchange-Traded Funds). For those who don’t know, an ETF is a pre-built portfolio. There are ETFs dedicated to stocks, bonds, commodities and so on.

So by investing in an ETF, you’re basically investing in a bunch of different stocks or bonds etc. This is why they’re particularly suggested to investors who are looking for an effective financial tool to diversify their Investment Portfolio.

If you want to deepen the Diversification topic, you can find here an interesting article I wrote some months ago about it. In that article, I analyze the 5 dimensions along which you should diversify your Portfolio.

Indeed this is the reason I’m adding ETFs to my Investment Portfolio, which is currently composed of P2P Lending, Real Estate crowdfunding, Trading, and individual stocks.

Why Degiro?

As you may have understood, I chose Degiro to invest in ETFs. In this section, I’m going to explain why, its advantages and its disadvantages. I think that knowing the instrument that allows us to invest is very important. Do you agree?

Degiro is a Dutch broker founded in 2008 in Amsterdam. It is famous for its low commissions and this is the main reason that led me to choose this broker (controlling costs is very important!).

For instance, these are the commissions for trading ETFs on Degiro:

As you can see, they’re very low compared to the ones of other brokers. Besides there is a long list of ETFs that are completely free, under some circumstances. I’m talking about the trading fees, not the annual fees of every single ETF. Keep in mind this list, I’ll talk more about it later.

Commissions are very low also for Stocks and other instruments, but today I want to focus on ETFs. However, you can easily find the Fee Schedule on their website.

If you decide to try Degiro, I have a subscription link.

Criteria taken into account

I already wrote an article about the criteria that should be taken into account while looking for a good ETF. You can find it here.

I repost an interesting infographic that I created about this topic:

To make my choice I took into consideration all the information in the article. In particular, I focused on:

  • Bid-ask spread and Liquidity
  • Costs
  • Fund Size
  • Diversification

In theory, is very simple. We need to look for ETF characterized by low bid-ask spread and high liquidity, low costs, big fund size, and high diversification. In the next section, I’m going to tell you the 5 ETFs I chose and why I chose them.

My ETF choices

This is the moment to tell you the 5 ETFs I intend to invest in for my ETF Investment Strategy. I also want to describe a little bit them, so you can understand why I chose them.

iShares Core MSCI World UCITS ETF

  • ISIN: IE00B4L5Y983
  • Category: Stocks, Global
  • Fund Size: 19’800mln
  • Current Expenses (TER): 0,20% per year
  • Volatility: 12,36%
  • Risk Profile: 5 out of 7 (justetf.com)
  • Dividend policy: Accumulation
  • Geographical exposition: US (62,48%), Japan (8,35%), UK (5,41%), France (3,82%), Canada (3,40%), Other (16,54%)
  • Main positions: Apple (2,68%), Microsoft (2,45%), Amazon (1,75%), Facebook (1,08%)
  • Present on Degiro / Degiro Free ETF List: Yes / Yes

iShares MSCI Emerging Markets UCITS ETF (Acc)

  • ISIN: IE00B4L5YC18
  • Category: Stocks, Emerging Markets
  • Fund Size: 640mln
  • Current Expenses (TER): 0,68% per year
  • Volatility: 12,52%
  • Risk Profile: 6 out of 7 (justetf.com)
  • Dividend policy: Accumulation
  • Geographical exposition: China (29,20%), Korea (12,10%), Taiwan (11,86%), India (8,89%), Brasil (7,41%), Other (30,54%)
  • Main positions: Alibaba (4,48%), Taiwan Semiconductor Manufacturing (4,30%), Tencent (4,17%), Samsung (3,69%)
  • Present on Degiro / Degiro Free ETF List: Yes / Yes

Vanguard FTSE All-World High Dividend Yield UCITS ETF

  • ISIN: IE00B8GKDB10
  • Category: Stocks, Global
  • Fund Size: 855mln
  • Current Expenses (TER): 0,29% per year
  • Volatility: 9,82%
  • Risk Profile: 5 out of 7 (justetf.com)
  • Dividend policy: Distribution
  • Geographical exposition: US (38,00%), UK (8,90%), Japan (7,90%), Switzerland (5,40%), Canada (4,10%), Other (35,70%)
  • Main positions: JP Morgan (1,80%), Johnson & Johnson (1,70%), Nestle (1,50%), Procter & Gamble (1,50%)
  • Present on Degiro / Degiro Free ETF List: Yes / No

iShares Developed Markets Property Yield UCITS ETF USD (Dist)

  • ISIN: IE00B1FZ350
  • Category: Stocks, Global (Real Estate)
  • Fund Size: 2’750mln
  • Current Expenses (TER): 0,59% per year
  • Volatility: 10,57%
  • Risk Profile: 6 out of 7 (justetf.com)
  • Dividend policy: Distribution
  • Geographical exposition: US (56,83%), Japan (8,86%), Hong Kong (6,58%), UK (4,67%), Germany (4,60%), Other (18,46%)
  • Main positions: Prologis (3,53%), Simon Property Group (2,96%), Welltower (2,35%), Public Storage (2,11%)
  • Present on Degiro / Degiro Free ETF List: Yes / No

WisdomTree Physical Gold

  • ISIN: JE00B1VS3770
  • Category: Commodity (Gold)
  • Fund Size: 6’955mln
  • Current Expenses (TER): 0,39% per year
  • Volatility: 10,80%
  • Present on Degiro / Degiro Free ETF List: Yes / Yes

That’s it. These are the 5 ETFs I intend to invest in. Maybe I’ll change my mind, but at the moment I chose them. What do you think about them? Tell me in the comments!

But how am I going to invest? And when? Read the next section to find it out!

Investment strategy

I’ve already written down my Investment Strategy. It’s a kind of a mix between different strategies I found on the Internet and I think it’s a good strategy for me and my Goals.

Here it is, hoping you like it!

ETF Investment Strategy

This is how I want to diversify my ETF Portfolio. Global stocks (iShares Core MSCI World UCITS ETF) will have greater weight, followed by Emerging Markets Stocks.

Besides I will invest my initial capital in 4 tranches. Every tranche will consist of 25% of my initial capital. If everything goes well, the first will be within the end of 2019 (mid-December). Then the second at the beginning of March 2020, the third in mid-May 2020 and the last at the beginning of August 2020.

I love having clear plans and this is the schedule I created for my ETF Investment Strategy:

This is my current plan. In the last months, I saved 10’000€ but I want to split them into 4 tranches. You can see in the image above how every tranche will be composed. This strategy allows me to acquire shares of every ETF at different prices. Something similar to the “Dollar Cost Averaging” strategy.

After these 4 first tranches, I want to continue to invest the new money that I will have available, and I intend to invest in ETFs throughout all my life.

4 ETFs out of 5 are present in the Degiro’s free ETFs list, so I’ll save money by trading them. Saving money is the very first step, and this is a great way to do it.

I chose ETFs that accumulate dividends but also that distribute them because I want a new (little) source of income to finance eventual new businesses or investment opportunities.

Conclusions

Here we are at the end of this long article, this is my ETF Investment Strategy! I believe and I hope I have written the most important things about my new future adventure. For sure in future I’ll write more about this huge topic: updates, rebalances, new ETFs and so on.

ETFs are a super interesting topic and I’m happy to start this new adventure! I hope this article will be useful to you and I want to remind you that I am always available for a constructive comparison about what I write.

I also would like to remind you that you can follow me also on Instagram, where I post new interesting things every day!

If you’re interested in my content, I suggest you to stay always tuned and to subscribe to the blog 😀

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