Recently, I was at a meetup where a speaker showed the historical results of an ETF portfolio based on country ETFs. As I have been looking into a solution for my mutual funds, I decided to pull the trigger.
What is the portfolio about?
The concept is known as the global dividend strategy. The portfolio invests in the countries with the highest current dividend yield. You rebalance every year or quarter. As simple as that. You can consider this active investing with passive instruments.
Historically, this portfolio has performed very well. Recent years, it has not been doing that great. Did the technique loose its edge? Is it a temporary glitch? Only time will tell.
To be clear, in a bear market, you get hit as hard as the world index. The goal of this portfolio is NOT to protect you against a crisis. It historical performance has shown outperformance vs the MSCI All Country.
As of Mid April, I have sold my most expensive mutual funds that I have (hurray for that) and I have invested the proceeds in a global dividend strategy ETF portfolio.
All in all, this was easier to do than I thought. It shows I have no emotional bond with previous investments.
I keep track of the actual portfolio in ETFS vs the mutual funds. That allows me to see on occasion who does better. I do not want to make this a weekly exercise, to avoid hindsight regret.
Right now, the ETF portfolio is ahead of the funds portfolio with 188€. Not jumping to conclusions here, not making long term projections.
What “bothers” me on the ETF portfolio is the dividend it pays. It is not tax efficient and it increases my admin work I have. Sadly, in order to get exposure to these countries, US based trackers seem to be the only way to go.
In fact, it is only this blogposts that made me realise I have to track it. Otherwise, the ETF portfolio will be soon behind the mutual funds that accumulate. Nobody said it would be easy. It is fun!
Do you use ETFs for active investing?