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.
The experiment
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?
amber tree leaves 
Hey! I do something similar. I sold half my ETFs and invested it in dividend ETFs. Nobody knows if MSCI World + Emerging markets or the dividends ETFs are going to be better. I’m just going to mix it. In the meantime, i get nice dividends. In Romania dividends are taxed 10%. I’m happy with that.
LikeLike
Interesting move, with our likings for cash-flow producing investments, this might be something to look into.
Hope it works out well for you!
LikeLike
Sounds interesting, will look it up in the future. For now just some worldwide indexfunds, cheap & boring! But so far so good.. 😉
LikeLike
I am lucky that Canadian ETFs, have a lot of new products that offer covered call writing and currency hedge.
I own two Canadian high div. covered call and one European high div. covered call ETFs, they all have a 6% yield in my retirement account. By law, I will have to withdrawal 5% a year from my retirement account at age 71 so these EFTs are ideal.
LikeLike
We’re looking to ivnest with small batches in ETF’s as well, but are in no hurry. One demand is it has to pay dividends, secondly a broad coverage, so this sounds very interesting!
LikeLike
I prefer the passive way, nicely boring as I like it.
LikeLike
I’ve considered selling my individual stocks and just going with a few dividend paying ETFs. The only thing stopping me is options. I’d rather have a large portfolio in retirement that I can sell options against.
LikeLiked by 1 person
Well you ditched the high cost Mutual fond, hurray! 😉
Intersted to see how the active ETF approach will do against the more classic dividend growth approach some other have …
LikeLike
Actually, the dividend is a secondary effect of the strategy. I urgently need to reinvest the dividend and the money that I had left
LikeLike
Hi amber tree,
What ETFs did you buy? I wasn’t sure if the three ETFs on your portfolio post are the ones you’ve just switched to.
I am curious about the tax drag on your selection though. Do you think the new ETFs will provide more total return despite the higher taxes than a more passive total market ETF? I think I need to be more tax efficient in more portfolio but haven’t made any adjustments yet.
Best wishes,
-DL
LikeLike
I am looking forward to your analysis of the proposed new tax legislation 🙂 You probably don’t mind the dividents that much anymore (depending on the amounts).
LikeLike