Cranking up my ETF game

Diversification is a well know and very important term when you play the investing game. It’s one of the core principles to apply. Your portfolio is a never ending work of art, constantly evolving and developing itself. The latter is your job. By making sure you have a broad range of companies from different areas and sectors, your defence against volatile behaviour is strong. It’s possible to start from scratch and pick your own individual companies. I for one am proceeding as such (partially). However, as I don’t want to spend every minute of free time researching new companies and strategies, ETF’s are a part of my portfolio as well. These boost my diversification much faster than I can think of. So time for a recap of this part of my portfolio and review if I can amend/add anything.

An important factor to bear in mind is that the ETFs below have already one characteristic in common. I can buy them free of charge through my account abroad. I still have a German account which I use to purchase ETFs free of charge. (Great word isn’t it…free of charge)

Besides that, the tax rate on dividend income and capital gains is lower in Germany. The latter is substantial if we decide to move back in the future. Let’s say I want to keep my options open. Ow yeah, if there’s a blood sucking parasite of the tax authorities reading this, it’s all legal!

iShares STOXX global select dividend

What I like about this ETF is that it provides a worldwide range and it consists of companies that payout dividends! Bonus points for the latter. Highest stack of companies is based in the US (20%), Hong Kong (11,53%), Australia (11,20%) and Great Britain (11,10%). Sectors include Finances (27,5%), Real Estate (16%) and Energy Infrastructure (12,5%).

iShares EURO dividend.

Here we have companies located in Europe, with biggest positions in Finances (29%), Industry (23,5%) and Energy Infrastructure (10%). The dividend payout is great as well. Diversification of countries is the highest in Great Britain (28,90%), France (16%), Germany (14,70%) and Switzerland (13,70%).

Ideally, I would like to add an ETF with bigger positions in the technology sector as I truly believe that robotics, cloud computing, semiconductor industries and SaaS companies will play a significant part in our economy. Besides that, I would like to increase my stakes in the USA and Asia.

Following options I’m currently investigating:

iShares MSCI USA Quality Dividend. 

20.6% of this ETF is within the Technology sector. However, it’s 100% focused on the US market and the dividend payout isn’t great. These factors are keeping me from taking a leap at this point.

iShares Asia Pacific Dividend

The great thing about this ETF is that the dividend payout is high. Biggest countries here are Australia (52%), Hong Kong (24,3%) and New Zealand(10,5%). I don’t know much about the Australian economy so I definitely should do some more research.

As you can see, geographically seen, I’m covered. Well, it’s a start but far from ideal in my perspective. The only negative point about ETFs is that you don’t have a say in the positions they hold. This is why I combine them with a personal portfolio. Together with keeping my investment principles in the back of my mind, the search is on.

One last piece of advice. Was this you when you saw the stock market drop this week?

If so, you should definitely reconsider if you belong in this world!

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