Passive Investors - What’s your reason for not putting all your funds into an All-World ETF?

Another way to put that is spending say $50 on Apple, $20 on Tesla and $1 on Caterpillar and lots of other out of favour companies. It does rebalance when the stocks fall out of the index, so it’s a slower rebalancing - certainly low costs is a great advantage due to that.

You are certainly buying what the market currently believes prices should be in proportion to that price, I’m not sure I’d describe that as neutral unless you believe in maximally efficient markets and at market peaks the concentration is particularly pronounced.

I did say CAPE which is significantly different and was referring to that of the S&P (i.e. US market), which is at very high levels due to stimulus. Levels only seen once before in 1999.

VWRL is heavily invested in this expensive US market (56% in US) and will therefore fall when prices there fall (looks like it might even be up to 3.45% just in Apple at present). I imagine the PE is brought down a little by other markets which are underpriced at present like the uk but it is heavily skewed to the US and FAANG in particular.

To be clear, I think VWRL is good (low fees, tracks market, most passive of funds, will follow global shifts over decades) and I own some, so I’m not saying it is bad just that if you want to find a downside this is the only one I can think of, and if attempting to invest in something else to counterbalance it avoiding the US would be a good start.

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An all world, all cap ETF ex USA would be good, especially for those that already have S&P 500 or Nasdaq 100 trackers.

They seem to have ex USA trackers in the USA but nothing available here.

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I just took the average return of every stock in that thread, it’s -10%, whereas VWRL has returned 20% in the same time period:

That’s pretty horrendous return, especially in a massive bull market.

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And as you’ll see in my above comment, I just managed to find this thread after about a year. The returns have been horrendous, even in this bull market.

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Haha! Great work @AchillesFirstStand

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Possibly the most common mistake I see new investors make is trying to pick a penny stock that will be the next Amazon or Tesla or whatever when they haven’t even learned the basics of how investing works yet. They pile all in to whatever is flavour of the month on the forums then end up stuck in a loser telling each other they haven’t lost if they don’t sell. I think this attitude of trying to go straight for the big winners is reflected in the Baggers thread. It’s not easy and takes a huge amount of luck.

Stock picking can work but it’s way easier if you already have the majority of your portfolio in a relatively safe set of steady stocks or ETFs, and you just take risks with a small percentage

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7a9

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The third option is the answer to everything.

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Sorry for the stupid question, but I don’t really understand the concept of size-match. How does it work? (I get the market cap vs equal cap difference)

Thanks

Even when it comes to taking risks, if you are going to stock pick (which I personally do, albeit as a minority of my investment) you should start by trying to pick winners and losers among business you’ve actually heard of. Anyone can get lucky on one or two obscure companies they’ve never heard of and don’t understand at the point of investing, but over the long term if that’s the extent of what they’re doing they will lose big. Developing the skill of relative comparison will increase the risk/reward ratio of such an investment.

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It means they’ve normalised for size when comparing the two indices - so they’ve tried to keep exposure to each market-cap size the same. Naturally an equal weighted fund index will have more smaller stocks than market cap weighted, so they’ve basically used several market cap weighted indices that together have the same exposure to large/medium/small cap stocks.

Basically they are saying that the outperformance of the equal-weighted index is largely attributed to it just having more smaller cap stocks, rather than the nature of index itself. It’s admittedly very nit-picky as at a surface level both are basically saying “more small = better” but it’s saying that can be achieved in a simpler manner.

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OK I see!

Thanks so much for taking the time to reply :pray:

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Have just returned to my thread for the first time since mid February.
At the time that Freetrade baggers comment felt somewhat condescending.
Fantastic reply. Nice to see some justice.

There’s nothing wrong with a serious investor (serious does not necessarily mean high net worth) taking a risk as part of their strategy, nor anything to be jealous about if their higher risk profile means better rewards in the long term. If there wasn’t serious money being invested in riskier ventures, business overall would likely have less investment and the return rate for all of us would be lower.

It’s those whose attitude to risk goes beyond reckless, who happen to do well and then try to persuade the impressionable to do likewise, who are the real issue. Those are in practise the minority; the majority are those who are sold on such advice and get burnt.

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Do you have a global small cap tracker that you use and could recommend ? The current dominance of big tech names in the world trackers does worry me.

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Not a recommendation, but WLDS is what I use and I think that’s well worth a look:

WLDS iShares World Small Cap (Fund)

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

More info & discussion on passive ETF choices in this thread:

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Hello there

What would you think if I told that you can take less risk and get higher returns - applying the doctrine of the margin of safety to a stock purchase?

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The reason is stonks like AMC and GameStop made a killing on those wouldn’t have if I played it safe