SRI boglehead portfolio - is it good or are there better options?

This week I spent quite some time reading about how to start investing. Got some very useful advice on this forum too. Now I feel I have gathered enough information to create my portfolio and start investing.

Preliminaries are that I do want to exclude certain sectors. Firm. So please no discussion about that if at all possible. For this reason I have decided to go with ETFs with an SRI label only.

I do max out my 3a each year before investing, and I will keep a good amount of money in CHF as securities for now. The risk part of my money I want to invest in ETFs. That will be 20k CHF to start with, and then 500 CHF each month. If things go well I could invest another lump sum at a later date.

The two ETFs I am thinking about buying are:

  • UBS MSCI World SRI USD a-acc 80%

  • UBS ETF (CHF) MSCI Switzerland IMI Socially Responsible A-dis 20%

There is an accumulating variant of the Switzerland ETF too, which I would prefer as I am in the saving phase. However, that ETF does only have 100 mio invested compared to 237. So I think the one I listed would be the better choice?

Would this be a meaningful portfolio, or do I need to make adjustments? Is it well diversed?

Would adding a Swiss

As for the broker, I will probably choose either DeGiro or Interactive Brokers. I have a little more trust in IB as it looks more professional. But I don’t think that I will hit 100k investment anytime soon, so maybe De Giro would be the better option?


Tangent

I also thought about adding a climate change fund. That would have beeen either

Lyxor S&P Global developed Paris-Aligned Climate (maybe 10%, and reduce the World ETF to 70%)

or

Lyxor S&P Eurozone developed Paris-Aligned Climate

The global one has only 54 Mio invested, which is very little compared to the 648 Mios of the Eurozone.

On second thought I discarded the idea as it has many duplications with the UBS World SRI ETF.

Hello,

Did you consider these ETFs ?

  • 70% in the iShares MSCI World SRI UCITS ETF (USD Distributive) (0.20% TER)
  • 10% in the iShares MSCI EM SRI UCITS ETF (USD Accumulative) (0.25% TER)
  • 20% UBS ETF (CHF) MSCI Switzerland IMI Socially Responsible A-dis

If you want a home bias portofolio.

Otherwise without home bias:

  • 88% in the iShares MSCI World SRI UCITS ETF (USD Distributive) (0.20% TER)
  • 12% in the iShares MSCI EM SRI UCITS ETF (USD Accumulative) (0.25% TER)

With your current portofolio you don’t target emerging market at all.

Thank you for the hint about the emerging markets. That’s probably a good idea to increase diversification. Also, the iShares world ETF might be preferable over the UBS one, due to 0.02% lower TER. Are there any reasons that would speak for the UBS ETF?

The iShares etf are domiciled in Ireland, that has some tax advantages as the withholding tax leakage is lower.

This index doesn’t care about the industry? So a company that reduces the CO2 emissions in a industry that has high emissions will not be included in the index, even though that that company does much more than many companies that are in low carbon industries and included in the index?

So?

It‘s the same fund, just different share classes. If you prefer accumulating, I‘d choose accumulating.

Why does a professional hitman not qualify for absolution - even though he does much more to repent for his sins than many other people who have had more mundane careers?

The world could work without hitmen, it can’t work without steel or concrete.

Making capital more expensive for a company that produces concrete will hinder it’s ability to invest in research or projects that will reduce the carbon emissions of concrete.

A company that reduces the carbon intensity of concrete by 25% while keeping the cost the same, would have the same impact as the solar and wind industry up to date.

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I would recommend to look what those “green” funds actually contain. You might be surprised a bit.
E.g. the top 10% of that climate change fund are just the usual big-tech companies like Microsoft, Google, Facebook,…

Also I wouldn’t recommend to add Switzerland. That’s home bias and is generally not a good thing. Imagine if you would live somewhere else, would you still add that?

Yes, there is always a question how much “responsible” inside when it is “responsible” on the can.
If you want something different, why not

Number 1 is Tesla, though.

Is that so? Reducing the risk of foreign currency devaluation seems reasonable to me:

I haven’t considered this particular ETF. I am trying to keep it simple, so just two or three SRI ETFs to cover the world market as well as possible. So if I were to include VanEck in my portfolio, it would be instead of the iShares World SRI. But VanEck has a higher TER than the iShares World SRI, less volume, and the top ten companies don’t seem that different. Maybe I am missing something, but iShares looks like the better choice?

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This is an equal-weight ETF, all components (at least originally) are equally represented. That means no such big concentration on big US tech.

Was just an idea for “something completely different”.

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That won’t help you, it only helps for unforeseen changes (short term). Also foreign income of swiss company will still be devaluated, and foreign stock usually adjusts based on the fx change (brexit was easy to see it in action, GBP drops → FTSE increases)

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Odd. I was going by the reasoning explained in these two articles:

Does it say why home bias is good?

E.g. the vanguard article: https://personal.vanguard.com/pdf/ISGGAA.pdf mostly explains that people have a home bias for various reasons, not that it’s particularly desirable :slight_smile:

Not all ESG funds are created equal.
You can sort them by score on https://www.etf.com/etfanalytics/etf-finder (ESG)

(This ETF is interesting, but use short: ESNG )

The reasons given are 1) ‘if something gets bad in other parts of the world, it could reduce the volatility in your portfolio. A home country bias could greatly help you if you need the money at this time of trouble.’

  1. ‘The second advantage is that you know more about what you invest in’

That’s very useful. Thanks a lot.

I think that the Portfolio @Yanikuza mentioned above looks very good:

70% in the iShares MSCI World SRI UCITS ETF (USD Distributive) (0.20% TER)
10% in the iShares MSCI EM SRI UCITS ETF (USD Accumulative) (0.25% TER)
20% UBS ETF (CHF) MSCI Switzerland IMI Socially Responsible A-dis

Or, if homebias is really not a good idea just the two iShares ETFs at 88% and 12%. Would that be well diversified?

I would argue that I “know more” about some tech companies based in the US than any of the CH-based companies in those SRI ETFs (some of which I possibly haven’t even heard of). :grin:

I’m sure you typed this on a Logitech keyboard :joy:

The more I think about it, the less sense it makes to select companies based on their carbon emission. You’ll just end up investing into industries that are already low carbon to begin with (or maybe not, more on that later).

What you’d want is invest in companies that invest in efforts to reduce carbon emissions. This could for example be a company that produces and develops meat replacements or a company that is improves the carbon footprint in a industry that will still exist in 30 years.

LafargeHolcim is the company with the biggest carbon footprint worldwide. Yet, I would argue that they do more to reduce carbon emission by researching concrete replacements than a company that wastes palm oil to produce fuel like Neste Oyj. Making capital more expensive for LafargeHolcim will mainly impact their ability to finance that research. Is this a good idea?

Now, Neste Oyj is included in the SRI index as well as Lonza. There are some issues with Lonza

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Nope, Cooler Master :love_you_gesture::grin:

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Probably that’s where green bonds make sense? Financing projects targeting carbon emission reductions.

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