Here is my Exchange-traded funds (ETF) portfolio. I started investing in 2016 when I was in my mid-20s and my employer enquired what my retirement savings plan looks like (read more here). I did extensive research and it turns out that a number of ETFs (see below) are an ideal “conservative” investment to save for retirement while also earning passive income. That sounds perfect right?
My ETF Portfolio
- 77% World Index: The MSCI World is one of the biggest World Indexes and spreads its holdings across 1,600 of the world’s largest companies from the 23 most advanced economies. It’s essentially “investing in the world” and thus avoids excessive exposure economic fluctuations of single countries. The MSCI World ETF is globally diversified and thus immunizes investors against the risk of a single company going bust. I decided to invest in two different World ETFs:
- 1. The UBS ETF (LU) MSCI World UCITS ETF (USD) A-dis, a distributing (dividends!) physical ETF with a Total Expense Ratio (TER = annual cost of holding the ETF) of 0.30%. Looking at the historic growth chart, one can easily see that this is a slowly growing, low-risk, stable ETF with an average growth rate of 4-6% per year.
- 2. The ComStage MSCI World UCITS ETF, a distributing (dividends!) synthetic ETF, with a slightly lower TER of 0.20% and which was offered as a free ETF saving plan by my bank at the time.
- 4% Emerging Market Index: While emerging markets experience greater volatility, they are expected to deliver greater growth in the long term. I hence included a 4% share of the Amundi MSCI Emerging Markets UCITS ETF EUR (A) in my portfolio. The MSCI Emerging Markets is an accumulating synthetic ETF that includes 1100+ companies from 26 emerging markets (including Tencent, Alibaba, Samsung). Its TER is 0.20%.
- 18% DAX Index: I am holding ETF shares of the Xtrackers DAX UCITS ETF Income 1D, a replicate ETF, mirroring the German DAX, with a TER of 0.09%. I have to admit that I would no longer invest in a DAX ETF today and that I am planning to sell my shares in the near future (see home country bias)
ETF’s in my portfolio
|World Index||58%||UBS ETF (LU) MSCI World UCITS ETF (USD) A-dis||LU0340285161||0.30%||Physical||USD||Distributing|
|World Index||20%||ComStage MSCI World UCITS ETF||LU0392494562||0.20%||Synthetic||USD||Distributing|
|German Country Index||20%||Xtrackers DAX UCITS ETF Income 1D||LU0838782315||0.09%||Physical||EUR||Distributing|
|Emerging Market Index||4%||Amundi MSCI Emerging Markets UCITS ETF EUR (A)||LU1681045370||0.20%||Synthetic||EUR||Accumulating|
How did I start?
I was researching ways to save for retirement. A very adult topic and something every person becoming an
I continued my research and learned about Exchange-traded funds (ETFs). It was a podcast that mentioned World EFT Indices and how these are a form of “investing in the world’s economic growth”. Looking at the historic economic growth of the modern world, this was something I could relate to. I am certain that world economies will continue to grow at least until 2050 by when I will retire (and probably much much longer).
I also learned about the other benefit of ETFs, including their low cost, the possibility to earn dividends (passive income!), and tax benefits.
The decision was made.
My retirement savings will be a diversified World Index ETF, a combination of the MSCI World and the MSCI Emerging Market.
After I had decided that, I was uncertain about when and how to start. The best piece of advice at the time was to break the total investment amount into four equal pieces (each representing 25%) and to invest one piece/quarter every three months for 12 months (4 x 25% = 100%). This approach allows accounting for seasonal or temporary volatility. I did that and was confident with the decision.
Looking back, one thing I would do differently now is that I would not invest in a DAX ETF. I clearly became a victim of the home country bias at the time.
My ETF principles
From the beginning, my ETF strategy was very simple and consisted of four main principles.
- Low risk. Invest in slow-growing low-risk little-fluctuation slow-burner ETFs. Be modest and expect annual growth of 4-6%
- Diversify. Invest in a maximum of 4 ETFs covering global markets
- No trading. No panicking. Keep and hold – I am in for the long shot on a 10+ year investment horizon
- Keep costs low. Total Expense Ratio (TER) at a maximum of 0.30%
How I buy and sell ETFs
I am buying and selling ETFs, using a free online trader account at an online bank. I chose ING Bank as their online trader account is absolutely free and more than 200 ETFs can be bought without any transaction fees. When selling ETFs, ING Bank charges 0.29% which is the lowest I have seen on the market. More about ING Bank and their free trader account here: https://www.ing-diba.de/depotkwk/aa/aUKCGROZnA