Upgrading to the "Weltportfolio" by Gerd Kommer

Investing / Portfolios
1

Hey guys. I’ve just finished the book by Gerd Kommer “Souverän investieren…” and I’m pretty stoked on his promoted worldportfolio and I’d like to slowly transform my current portfolio to one that’s similar to his.

My current portfolio looks like this:

  • MSCI World 70%
  • MSCI EM IMI 30%

I used to keep it simple as I haven’t been in the investment-world for that long. That’d also be one of my questions: From when on is it reasonable to have a portfolio that consist of 3-5 ETFs? In my case we’re talking around 100k.

My “upgraded” portfolio template looks like this:

  • MSCI World 32.50%
  • MSCI USA Small Cap 16.25%
  • MSCI Europe Small Cap 16.25%
  • MSCI EM IMI 25%
  • Dow Jones Global Real Estate 10%

I mainly differ from Kommer in that I don’t use any value-ETF’s, mainly because they would replace the MSCI World which I don’t feel like selling right now as it would be replaced with another three ETF’s according to Kommer which would then be quite extensive. But as I haven’t had any Small-Caps yet, I added USA & Europe 50:50, equally weighted in sum as the “Large&Mid cap” MSCI World.

I’d really like to hear your thoughts on my template? Is it stupid not to replace the MSCI World with more value-oriented indices?
The total TER of the new portfolio would be 0.24%.

2

If you don’t understand why he picked what he picked (with backtest and theory) I’d suggest to stay away from his advice and simply choose VT.

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3

Are you referring to the value-premium? I’d say I do understand the thoughts behind it, I just think the complete portfolio with its 9 ETFs would be a bit overkill for “only” 100k…

4

No, the whole thing of deviating from simple market cap weighting. The more you deviate from it, the more you need to ‘know what you own and know why you own it’.

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5

Thanks for your replies. So do I get this correctly that you’re not a big fan of the Worldportfolio as a whole, (or at least not for a beginner) rather than my asset allocation?

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Of course not. As far as pure passive strategies go i’m a big believer in simple market cap weighting. Investment is getting increasingly competitive, factors come and go, people catch onto them and exploit quickly, especially in well-researched large cap universe. Resourceful people, Ph.D’s much smarter than you, me or Kommer. What may have worked in the past may not necessarily work in the future, or as they print in factsheets smoking kills past performance is not indicative of future results. If you don’t have time/skills/resources to do the research yourself and stay up to date, let the market do it for you and go with simple market cap weighting.

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7

I didn’t read that book, but have a look a this:

Buffett
56d0b64c2e52651a008b9fa3-750-563.png750×563 108 KB

I very much share the sentiment of @hedgehog. If you think that you can choose a mix of passive index funds and keep beating VT for the next 30 years, then probably it will have to be at higher volatility, so it will be even more of a nerve-wrecking ride.

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Thanks @hedgehog and @Bojack. I’ll rethink this. I’d still search for a way to integrate small-caps into my portfolio though, just not with such an overweight. Or is this a bad idea?

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You can buy VT ETF - it includes all caps from most countries with market cap weight.

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Can I buy VT when I’m not with IB? I’m currently at Strateo

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hey @Leap,
i am more on the small/value-tilt side than others here in the forum, as you can see with my portfolio.
To me it’s bot valid to say

  • keep it simple: VT, or
  • i’d like to participate in the small/ value premium and hence do a bit of weighting.

the latter imposes a loooong investment horizon, 20y+, and insignificant trading costs increase relative to simply VT.

I found for myself that that the trade-off between picking value stocks (i.e. value -ETF) and hence losing diversification vs. the whole market is often an argument against.

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12

Thanks @nugget
I’d consider the simplicity of VT but I thought it wasn’t (easily) available to Swiss investors. Also I can’t seem to find it on justetf.com. I know that some people here on the forum have it but I thought that they all were with IB which I’m not.

Right now I’m torn between going with VT from now on (if available) or adding my above mentioned Small-Caps ETFs for around 10% of my portfolio, though it’d complicate things as I’d have 4 ETFs to manage…

13

There is an equivalent to VT in Europe, the SPDR MSCI ACWI IMI UCITS ETF but it has a TER of 0.4% so quite a bit more than VT. It did outperform the more popular Vanguard VWRL though (which is missing the small caps) since inception.

Alternative way to reproduce VT is to combine:

HSBC MSCI World UCITS ETF USD with 0.15% TER
iShares MSCI World Small Cap UCITS ETF with 0.35% TER
iShares Core MSCI Emerging Markets IMI with 0.18% TER

If you do this mix according to market cap weight, you should land at an effective TER of ~0.16-0.17% but you’ll have to rebalance yourself and transaction costs will add to your effective expenses.

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14

Ok thanks, I’ll look into it.

15

for the part of administering 4 funds, i made my robo advisor that you can make a copy of. it’s based on google finance. it takes care of the rebalancing. of course, the purchases you still have to to :smiley:

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16

VT can only be bought at IB or Degiro. I think Degiro said they were going to remove VT but people still seem to be able to buy it.

Something to consider: The MSCI All-World index has a lot less stocks than the FTSE equivalent (VWRL). e.g. 1800 vs 4000.

So even if past performance was similar, combined with the TER 0.4(MSCI) vs 0.25(VWRL), makes me favour VWRL. More diversification, cheaper, and better tracking difference in the past.

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MSCI ACWI IMI consists of 8880 constituents as opposed to 3185 of the FTSE All-World, since the FTSE All-world does not have any Small Caps.

MSCI World + MSCI World Small Cap + MSCI EM IMI = 8880 constituents with an effective TER of 0.16-0.17% if you mix 3 ETFs to achieve that.

Vanguard VT consists of 8000 holdings. On the other hand, VTI + VXUS will give you around 10000 holdings and an effective TER of 0.07%.

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18

i can find it with swissquote too, but since i am not a client, i dont know about buying it there. cornertrader for sure has it too, i had VBR (US small value) with them

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Sorry yes, VT should be tradeable with most swiss brokers. I had it confused with europe, where brokers started not offering some US securities due to regulations concerning KIID documents.

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and sorry i forgot to point out that justetf.com shows a set of ETFs that has nothing to do with what is available in switzerland :slight_smile:
on the webpage they say “ETFs approved for sale in europe”, maybe vanguards US-domiciled funds dont. but then, should i be able to buy them in UK? :thinking: