Mustachian portfolios


#202

Thank you for your analysis! :slightly_smiling_face:

The 5-year tracking difference is indeed basically the same for both funds, according to Vanguard websites.

When the advantage of Vanguard US-funds is basically paid out in higher dividends, then this is not very tax efficient for Swiss investors, right? Still, mo’ money is mo’ money.

Regarding your small caps conclusion: Did you take into account that in the last years, large caps outperformed small caps? This has not been the norm historically and this timeframe could have had an influence in your analysis.


#203

What is better, get extra 0.23% and pay tax on it, or not get it at all?

Did you even look at the chart? Just compare the light blue (VWRL, Large+Mid) with the dark blue (Small Caps). Small Caps don’t seem to diverge from the Large+Mid, at least not in this 5-year period. I don’t have better data.


#204

My edit crossed with your post. My point is this: This reduces the advantage of US-funds at the end of the day.

Yes. I think your analysis is fine, but the data set (time frame) does not allow generalized statements about large caps vs. small caps funds performance.


#205

Thank you for the analysis. For the range you analyzed, this is indeed true. If you look at 3Y, the VWRL actually outperformed WOSC, but then at 1Y, the WOSC returned +100% over VWRL.

In any case, my basis was the long term performance (starting 2003) of underlying indexes. I can’t be sure about the future. Could be they will be 100% correlated from now on.

As of now, I only hold VWRL and AUUSI. My WOSC purchase is due in July to stick with my cost averaging regime. Until then I still have time to change my mind, but I don’t think I see an alternative.

Edit:
Another explanation to your riddle could be that EM Small Caps actually pulled the index lower. They performed poorly in last 1/3/5Y.


#206

this is a nice discussion!
i’d like to only add the details that concernign small or value investing, literature says that the over-and under performance might take more than a decade to develop. bojak’s horizon up there is 5 years, which is not a suitable basis to do analysis on the small caps. but in case your investment horizon is that short, small caps might not be your first choice :slight_smile:

[fixed the not]


#207

Thanks a lot mustachians for the great info!

I really like the approach of @glina and the mix of VWRL, WOSC (small caps) and Gold. Simple 3 ETFs approach.

Two questions (for everybody):
-> I am a bit worried about the low exposure to the CHF as I am planning to be here on the long term. If we look at the 3 ETFs portfolio on the blog, I like the fact of having some CHF exposures through the mid-cap CH (SMIM). It could be a nice way to replace the WOSC with a lower TER.
I am actually hesitating between
55% VWRL (all world)
10% WOSC (world small caps)
25% SMIM (Mid caps Swiss)
10% Gold
Or do you think that WOSC is an overkill and simply choose 65% VWRL / 25% SMIM / 10% Gold makes more sense?

-> In times of crisis, it is true that gold goes high but CHF too. AUUSI trades in USD. Therefore you may gain in Gold but lose from the currency side, hence suppressing the effect. I saw the ZKB Gold ETF trades in CHF but is much more expensive (0.3% management fee + 0.4% TER) and apparently lower return. Was it part of your decision making?

Edit: i have read @Bojack analysis and I should precise that my view is long term regarding small caps


#208

What should matter is the value of the underlying. Gold remains gold whether you measure its value in CHF or USD. If USD devalues faster, then I would simply expect higher gold prices in USD.

It’s probably more important whether the fund owns physical gold or not, but I am not an expert here.

There might be some cash not deployed in the fund currency, though.


#209

Can you please show me a 20y chart where I can see that small caps outperform large & mid? I cannot find it. In USA there does not even seem to be a global small cap ETF, and in Europe there is only the Developed World one, and it’s a small one. Your strategy does not seem to be too popular.

I just had a look at the 5y and that’s enough for me. Small Caps return has a very high correlation with Large+Mid. I don’t see the point. Why the heck do you have to overcomplicate it?

If you want to squeeze a guaranteed 0.3% per year and have small caps included (not that it makes ANY difference), then just buy the US ETFs already…


#210

MSCI World (Developed mid + lg caps)
https://www.msci.com/documents/10199/178e6643-6ae6-47b9-82be-e1fc565ededb

MSCI World Small Caps
https://www.msci.com/documents/10199/a67b0d43-0289-4bce-8499-0c102eaa8399

The graphs also show the equivalent ACWI and ACWI Small caps so there’s enough data to make an educated guess how different combination would work out :-).


#211

ZKB Gold summary: “The Gold Spot index tracks the gold spot price in USD. Currency hedged to Swiss Francs (CHF).”

You can also get UBS hedget to CHF if you prefer (AUCHAH). The return is slightly better with UBS thanks to lower TER.

Both UBS and ZKB funds hold physical gold.


#212

Panta rhei. Correlations change.

Cap-stock-correlations


#213

So the currency of a gold fund does indeed matter? :thinking:


#214

My mistake, sorry. Both UBS and ZKB exist as Hedged and Non-Hedged.

Hedged:


Non-Hedged


In both cases the UBS does slightly better probably due to TER difference.


#215

Well I would say yes, since you purchase it in a different currency, then automatically you won’t purchase the same amount with a fluctuating FX. However once it is in your hands you are safe from the FX risk?


#216

Thank you. Why hedging? :open_mouth: They probably have to keep selling gold to pay for it, no? :disappointed_relieved:
.

But why then offering hedged gold funds? To make money? :money_mouth_face:


#217

No, because there is only one type of gold. The price in any currency will always be proportional in ratio equivalent to the currency exchange rate, unless of course you hedge the currency.


#218

I justr want to add to be careful in comparing MSCI world with FTSE Developed market
FTSE consider S Korea a developed market. MSCI consider SKorea an emerging markets.
SKorea (Samsung) is approximately 2% of world cap. This could explain some differencies.


#219

Thanks for the charts, @glina. I had them right before my eyes, somehow didn’t connect the dots :stuck_out_tongue: .

Indeed. In the end, I don’t believe you will get a higher long term return without higher risk/volatility. Maybe the small caps were a good bet some years ago, but the guys who saw it first, covered this gap. To me the return/risk provided by VT is optimal and I don’t see the need to enhance it. At this level you pay a lot of volatility for a little extra return.


#220

Do you have the same opinion regarding SMIM (CHF) cf the mustachian blog?


#221

The SMIM has a total market cap of 167 billion CHF. That’s not a lot. Sure, it even makes sense to invest in a company with 1 billion cap if you know what you’re doing.

The point is, I don’t. I’m not a market expert, far from it. My strategy is to own the global market in the most unbiased composition. But everybody is welcome to choose their own strategy.