Feedback Requested - ETF Newbie

[KUMARV]

Hello Everyone,

I plan to start ETF sparplan in comdirect , and have shortlisted the below ETFs.

LU0496786574 - Lyxor S&P 500 UCITS ETF D-EUR - 3714
LU0252633754 - Lyxor DAX (DR) UCITS ETF EUR - 846
LU1681043599 - Amundi MSCI World UCITS ETF - EUR (C) - 790 -EUR
DE000A0D8Q07 - iShares EURO STOXX UCITS ETF (DE) – 1455
IE00BF4R5F15-Vanguard Euro STOXX 50 UCITS ETF - 20
LU0533033667 - Lyxor MSCI World Information Technology TR UCITS ETF C

I have chosen those ETFS which are currenlty free in Comdirect sparplan,

and also i hope the above ETFs give enough diversification in long term.

Request feedback from experts.

Thanks,

KumarV

[GetBetter]

Hi @KUMARV and welcome to our cozy community,

in terms of diversification it would be sufficient to simply pick an ETF on MSCI World such as LU1681043599. All the others on your list simply focus on different regions or sectors but do not widen the investment spectrum.

Before going into any more details it would be helpful if you could provide some more information. Especially it would be interesting to know the planned monthly installment, for how long you plan to be invested and where you are located.

[KUMARV]

Hello,

Thanks for your response.

I'm looking at a couple of thousand euros monthly for atleast 5 years plus.

The hope is I build a corpus which can be partly used for home purchase and

remaining corpus will be continued for retirement .

Best Regards,
Vinay

[GetBetter · Accepted solution]

A couple of thousand Euros per month is definitley a quite impressive number. Congratulations for that!

On the other side I have to say that 5 years is a critical small window. If there will be turbulences in stock market in the next months or few years (and that's not unlikely to happen) you won't have much time to wait for better prices.

I think it would be best to split the montly rate:

Invest the retirement portion of your montly rate in ETFs.

LU1681043599 or any other ETF that emulates the MSCI World is a good start. If you want you can easily add a second ETF that follow MSCI EM. And looking at your rate even 1-2 additional ETFs that focus on sectors that you expect to outperform in future would make sense.

From your shortlist LU0533033667 (information technology) looks most promising to me. Other examples would be automation or health.

And keep the money that you need for your home purchase on a boring bank accout. In case the stock prices continue to rise over the next five years you can still change plans, sell the ETFs (enjoy the earnings), buy the house and start the retirement part from scratch.

[KUMARV]

Thanks for your inputs.

Really appreciate it.

Will surely consider this while I decide on next steps.

Best Regards,
Kumar

[GetBetter]

You're welcome.

And feel free to come back with more question as they arise.

[KUMARV]

Thanks a lot for the offering further support,

In fact I did have another question :).

In parallel to sparplan,

I also want to do a one time investment ( around 10K) which

I wont need for say 5 years.

All the indices Ive been tracking have gone up in past 2-3 months and am not sure where to invest. YTD returns of most indices are quite high.(around 6-10 % )

What should be my strategy for one-time investment?

Thanks,

Vinay

[GetBetter]

That's a good question which I would love to have an answer for. 

First of all let me emphasize again that 5 years is a relatively short investment period and there will be no guarantee that you will end up with a positive result.

In case you are willing to take that risk you should at least try to avoid any additional risk potential. So your money should go in an ETF that is as diversified as possible which brings as back to MSCI World again (LU1681043599  from your shortlist).

Also MSCI World performed quite well in 2019 (almost +11% YTD). On the other side Q3 2018 was a disaster and compared to early October we are still around 2,5% behind. According to that intensive up and down it might be a good idea not to invest the whole 10k in one shot but to split it in 5-10 equal rates and increase the monthly rate by 1k to 2k until the money is fully invested (which shortens the investment period even more).

Under the bottom line: I do not know what to advise.

Whatever you do might be the wrong decision when looking back in 5 years.

Hope that helps

[GetBetter]

According to this diagram a one time investment over 5 years in MSCI World brought earnings between -9% and +25% in the past. The majority of all 5-year-periods ended in the green area however there are exceptions.

[KUMARV]

Thanks for your feedback and that kick a$$ chart :).

I have decided to delay my one-time investment see how the market goes for a few quarters.

I can use that as my emergency fund for now.

Thanks a lot for your support.

Best Regards,
Kumar