Those 5% parts can be simplified as 70% VWRD, 15% MSCI World Equal Weight or Small Cap Value and 15% VHYD, no? Or even 80% VWRD and 20% Small Cap Value should limit US/MegaCorp exposure enough but much simpler and cheaper?
Momentum is heavily correlated with Mega Cap Tech and the US thus eroding your goal.
No, that would be an invest of 70% VWRD and 30% Other Stocks - aka another asset allocation than 100% VWRD. My point above was that You consciously take on minor positions that donât have an impact as such. This because the individual positions are tiny, and their return was fairly close to VWRD.
95% VWRD and 5% VHYD will likel give you nothing but the return of 100% VWRD and a tiny bit of noise. 15% VHYD is a different thing.
Now, you consciously take a bunch of different, tiny deviations from VWRD where you for each assume that they roughly equate to VWRD⊠and you take their noise together and assume that all together, they still kind of match VWRD and even better, that their respective deviations from VWRD blend out. Meaning you diversify the tiny positons so that in result and combined, they give you prett much a VWRD like return only. Thats why I im the above, exemplary example, used 5 tiny positions of 5% each.
The result is a different asset mix that has characteristics that are very close to VWRD. So your benchmark was still VWRD but not 70% VWRD, 30% something else. Thats the point I tried to make here.
Negative: at the Moment, Momentum has a smaller US exposure than VWRD. Other than Microsoft and NVidia, it as well has a lower exposure to the FAANGS. I know, its temporal and counter intuitive. The point of Momentum is to increase the Market Beta a bit again, as VHYD has a lower Market Beta than VWRD and what matters here - VHYD and World Momentum together give you pretty much a VWRD like return, but in combination You still have (even during the goldilocks years we had u til end of 24)⊠you still get that return but wit less geographic and single Stock concentration than VWRD