I have been writing Covered Calls for the last 2 years, but was not able to outperform the market (like 90% of all investors).
I am thinking of 80% VOO and 20% UBS SMI ETF, or everything in VT.
Any thoughts?
What’s the index in VOO?
If a Swiss index then not SMI, it’s not very diversified.
Might want to add some SPI Extra to counterbalance NESN, ROG and NOVN.
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S&P500
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My thinking is mostly (Fundsmith and) VOO as well.
- Europe is looking into a recession
- Emerging markets will have super high inflation and less discretionary spending due to food shortages as Russia falls out
- US will benefit from LNG sales to the EU as well as the replenishment of the NATO stockpiles that are now gone into Ukraine
- China might get a hit if it takes side with Russia (+ evergrande & co mortgage bubble)
- Asia might get a hit if China starts to play imperialism again (think Taiwan)
- bond market is and will be useless for a while
SP500 has outperformed historically over the years. I don’t see why it wouldn’t do it again.
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One could think it’s bound for mean-reversion?
You have to consider that it’s always relative to what is already priced in. The ex-US economy doesn’t have to perform better than the US to get a better performance from ex-US stock than US stock. It’s sufficient if e.g. US companies can’t meet their (very high) market expectations while ex-US companies meet their (lower) market expectations.
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I have no clue what’s going to happen. The US has its own issues. I just threw out there a reason we could use in hindsight to justify a future underperformance of the SP-500.
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you can assume that everything’s already priced in, unless you think you’re smarter than the market.
Also the not-reaching-the-extreme-expectations is also priced in already.
Recursion: see recursion. 
I would think the mean-reversion is happening on the next crash, which might come down to the 200MA of the SP500 (to around 3500 points), that’s a 20% drop, not the end of the world.
US only (MSCI USA) is outperforming the world (MSCI World) since 2012. It has under-performed from 2004 to 2011 and with a very small exception, from 1972 to 1998, so the World has beaten US only for quite a good period of time:
There is no guarantee that US only will outperform in the future. There are plenty of promizing companies in the East. Switzerland (iShares MSCI Switzerland - EWL) has outperformed US only (SPY) from 2006 to 2014 and could do it again: https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2022&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&leverageType=0&leverageRatio=0.0&debtAmount=0&debtInterest=0.0&maintenanceMargin=25.0&leveragedBenchmark=false&reinvestDividends=true&showYield=false&showFactors=false&factorModel=3&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&symbol1=EWL&allocation1_1=100&symbol2=SPY&allocation2_2=100
More importantly than that, I wouldn’t invest in the US only as a swiss investor because if something bad happens in the US/to US companies, the US governement is likely to protect US investors but may not have the ability to extend that protection to foreign investors. To me, inter-countries diversification is to handle the tail risk of one country’s whole stock market going awry, which isn’t likely but would be devastating if it happened and an investor was invested in that market solely.
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Except …when it didn’t.
Look at '98 through 2011 or so.
(Sure, that’s only 13 years. But then, 2011 was less than 13 years ago).
EDIT: Whoops, somehow didn’t see Wolverine’s post above.
I’d be surprised if they don’t.
But if “the West” were to impose economic sanctions on them the way they’re doing it with Russia at this point, I wouldn’t be surprised if that backfired at least as much on the West. Chinese manufacturing power is immense.
Sure, it did underperform in certain sections of time. However, the underperformance is much less (-10 to -20%) compared to the overperformance (+100%) it had since then, basically any slice I take on the long term chart.
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sorry
sorry maybe this was already addressed. But is the outperferomance including currency conversion, dividend reinvestment etc? I remember than comparing MSCI USA and MSCI Switzerland would seem to favor USA (3% p.a. more performance since 1994 or something) but at the same time the USD lost 3% p.a. vs the CHF, making it a wash.
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I think they are both measured in dollars (on most portals), so the answer would be “not sure”. 
Otherwise compare a CHF hedged Total World ETF to a CHF-hedged SP500 ETF to get the answer.
The CHF will probably continue to outperform, especially if we are running into a stock market crash again.
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I don’t think that works because the hedging in those ETF is reset monthly, right? Not sure you are going to capture long term currency devaluation fluctuations. But somebody more knowledgeable than me can correct me if I’m wrong.
Now the million dollar question: what are those specific sectors to select, and what are the ones to avoid?
Betting against US tech in the last 10 or 15 years would have been a very bad idea.
Betting against US stock market was the same story. Even after the Corona crash, US stock market outperformed developed and emerging markets.
Increasing home bias is always a bad idea (from my point of view), unless you live in the US. Overweighting sectors? Same question as above: how do you want to pick the potential winners? Gold didn’t gain much in the last years (and it doesn’t produce anything - it’s just a hedge), bond allocation doesn’t make sense atm at all.
I think just keep investing in all-world index funds. The index is self-adjusting, so e.g. if Switzerland magically increases from 3% worldwide stock market share to 10%, it will be reflected.
From my point of view, it’s more important to think about your risk tolerance. If you can’t sleep well due to overvaluation, you might have too much percentage allocated to the stock market part of your portfolio.
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I have a more general suggestion not to follow any prognosis about the future development of any market. The analysts or whoever can’t predict it. Sometimes someone is right, but purely by chance.
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“overvalued growth stocks” are the disruptors of these 20 years
- Tesla with EVs
- Microsoft with Azure and Office365
- Apple with the touch display and then the complete iEcosystem
- FB who invented social networking
- Netflix/Spotify/YouTube who “invented” streaming
- Google who made everything available at your fingertips
These giant companies have such a high valuation because they made such a moat for themselves and basically harvested the majority in the market upfront. NFLX and SPOT tend to be punished recently, but they’re still Nr 1 in their sector.
Also, overvalued ARKK-style “nonprofitable tech” stocks are the ones that solve problems, who are challenging the status quo and are looking into sky-high valuations in 10yrs time. It’s a bet, but it might be worth it.
Utilities and other low-PE stocks are getting relatively overvalued if they produce nothing but a 3-4% dividend in an environment where the 10yr US treasury notes are also valued at 3% slowly. You basically take on a risk for no additional potential gains.
The US is traditionally very innovation-friendly, so anything that resurrects like a phoenix after a coming recession will probably be a US company or also have a registered seat in the US.
Technology and especially software moves the world forward. It has been like this since the last 50 yrs, I don’t see that changing anytime soon.
these are exactly the sectors that need software (DeepMind, robotized agriculture, big-data use cases, AI-powered underwriting, new digital mobile apps for insurance clients) to make a competitive advantage.
- how to invest into cash? Basically you are saying to just not buy stocks and keep CHF instead?
- Swiss and especially EU real estate are also overvalued, so in a rising inflationary environment these RE pools will slowly be losing asset value (while not generating too much income), won’t they?
in a coming recession, wouldn’t anything smaller than large cap be at a risk of not surviving the recession?
I believe we are about discussing options and not just the “passive total world ETF” mantra…
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Another point is that “US market” is a rather formal definition. For example the already mentioned Spotify is a Swedish company traded for some reason in US.
So you should rather look to where company’s earnings are coming from, and for big companies, US or Dutch (ASML) or Swiss (Nestle) ones, the answer is usually “from everywhere” (and “mostly from US”).
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@user137 already answered a lot of what I also would refer to.
I think there’s a video from Warren Buffett about gold. He’s not a fan of it. Also, you would have to check how much hedge gold provided during the financial crisis 2007-09 or other crises before. I remember people talking about Silver already 5 years ago, citing that it’s on the rise and Bill Gates owns a lot of silver (back then - not even sure if the story is true).
What are the “strong indications” that the strategy is not going to work anymore? All those predictions from “analysts” usually have one thing in common: they don’t turn out to be true. I remember people writing books and predicting the stock market to crash for the last 10+ years. Guess what: I used to believe those crash prophets back in the days. Which was utterly stupid, looking at it from hindsight. At least those crash prophets made some good money selling books and their own funds…
It would be more interesting to know what they recommend, not what they say is not viable anymore.
The problem I see with all those analysts is that none of them has a crystal ball. Let’s take for example the analysts following certain stocks and giving buy, hold or sell recommendations. From what I’ve seen for most of the single stocks I hold is, that those predictions are worthless. If I had bought every time some analyst downgraded a stock, I would have made much more money, because usually the stock price was going up after the downgrade.
So yes, I think it makes sense to think about it. But then you have to come up with a solid plan.
I totally second this! Holding 100% shares during a bull run is easy. You still need to be comfortable with when stocks go down over and extended period of time, e.g. 3 years. It still depends on where in your investment timeline you are.
I see it similar to user137: most real estate in european countries is overpriced (even though I only know the German and Swiss market, and a little bit the market in Czech Republic, Slovakia and Romania). It might be good for capital preservation, but not if you want to grow your net worth significantly.
So why not just buy Roche, Novartis and Nestle? They anyway make up 60% of the SMI.
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