Portfolio check

Investing / Portfolios
1

Hi all,
Looking for some feedback on the following portfolio, I am trading with Swissquote and have about 200k to invest at 30 y.o.

50% VWRL or iShares MSCI ACWI (not decided yet, the latter includes small caps, trying to work out whether it makes sense to have small caps included or rather separate)
5-10% Small caps through SPDR WOSC (in case I do not have small caps included above)
5-10% UBS EM ETF
5% ARKQ
5% ARKG
10-12% other stocks (Shell, Apple mostly)

Remaining amount is cash.

Would be super helpful to hear your thoughts on whether the portfolio makes sense, you see any overlaps, or any optimisation potential in terms of TER.

2

Why do you overweight EM, EM are included in VWRL?

Why do you overweight growth companies with expensive funds? Academic research suggests that growth companies tend to underperform value over longer periods and that active managers tend to underperform the market because of fees. There is no evidence that managers that did well in the past continue to do so.

10-12% seems like a huge portion for play money. 0% is the optimal allocation for play money if you want to improve your expected risk adjusted return.

Is there a reason that you use IE funds and not US funds? US funds are more tax efficient for US securities.

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3

Thanks so much for the reply! Very helpful

Why do you overweight EM, EM are included in VWRL?

Fair point, I missed that. No need for the EM Fund then.

Why do you overweight growth companies with expensive funds? Academic research suggests that growth companies tend to underperform value over longer periods and that active managers tend to underperform the market because of fees. There is no evidence that managers that did well in the past continue to do so.

If you are referring to the small caps - I have read on this forum that it is good to have some exposure to them and VWRL would not include them. Do you believe this does not make any sense?
ARKQ/ARKG are of course also growth companies - I will likely not keep them very long term but interested to see if their performance will be worth it this year. It is a bit of a gamble I admit

10-12% seems like a huge portion for play money. 0% is the optimal allocation for play money if you want to improve your expected risk adjusted return.

It’s not really play money, these are stocks I already had before I started optimising my portfolio. I should probably sell them this year and redistribute into VWRL.

Is there a reason that you use IE funds and not US funds? US funds are more tax efficient for US securities.

Purchasing funds on SIX is cheaper through Swissquote. More expensive for US-listed funds
Exchange rate comes on top for the funds not denominated in CHF - that’s an advantage of VWRL
The whole tax argument confuses me - I have read numerous entries on this forum around this. Is it not true that US-funds withhold 15% tax on dividends? Happy to be proven wrong and switch to US-listed funds. I know VT has lower TER also.

4

You can claim all Taxes back on US withholding taxes if you own VT. With VWRL you can’t claim 15% of US WHT back. The cost of VWRL is also higher than VT. The total difference is around 0.3% per year.

I was taking about the ark etfs. They are expensive growth funds that are highly concentrated.

The expensive buy cost and bad FX rate is the reason, why Interactive Brokers is such a popular broker in this forum.

5

You can claim all Taxes back on US withholding taxes if you own VT. With VWRL you can’t claim 15% of US WHT back. The cost of VWRL is also higher than VT. The total difference is around 0.3% per year.

Ok I did not know. I guess in the end the lower cost of trading through SIX / Swissquote vs the 0.3% cost savings with exchange rate fees will more or less cancel each other out. I do take your point on IB - I guess I prefer to have a Swiss-based broker but I will look into them

I was taking about the ark etfs. They are expensive growth funds that are highly concentrated.

I take your warning and I may indeed be wrong. But, it’s a risk I have taken. Do you think it makes sense to keep a separate allocation of said 5-10% for small caps as well though? If so would the SPDR WOSC be a good ETF for this? Again they’re on SIX, TER rather high though.

6

I personaly hold a small cap value tilt (45% in taxable, 35% overall) in my portfolio because I believe that the fama-french 5 factor model is a good asset pricing model.

Idiosyncratic risk is not a compensated risk because it can be diversified away, so you do not improve your expected return with the ark funds but you increase your risk because of the concentration.

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