🏦 Investing 🔗

A personal approach to building long-term wealth through simplicity, low costs, and global diversification.

🎯 Goals 🔗

• 📈 Growth: Target >4% annual growth above inflation.
• 🏦 Low Cost: Pay less than 0.1% per year in fees.
• 🎯 Target: Invest 25x my future yearly expenses.

💼 Current Portfolio 🔗

My current strategy prioritizes radical simplicity, using a single broad-market Exchange Traded Fund (ETF) alongside a cash emergency fund.

The Core ETF:

🛠️ Execution & Logistics 🔗

• Brokers: I use Schwab and CapTrader (Interactive Brokers) for buying funds.
• Currency: CapTrader (Interactive Brokers) is utilized specifically to exchange CHF to USD efficiently.
• Cadence: I buy monthly with a fixed cash amount.

🧠 The “Why” Behind the Strategy 🔗

Market-cap weighted funds provide massive global diversification at an incredibly low cost. By weighting by market cap, the invested money is naturally proportional to the actual market value of each company, sector, and country.

The Trade-off: The downside of market-cap weighting is that when a company, sector, or country is overpriced (e.g., during a market bubble), the fund automatically buys more of it. Conversely, it buys less of underpriced assets. For me, the simplicity and low fees outweigh this drawback.

🚫 Why I Avoid Alternatives 🔗

Here is a quick look at why I prioritize global equities over other common asset classes:

🕰️ Evolution: Past Allocations 🔗

Over the years, my strategy has evolved from complex factor-weighting back to pure simplicity. Here is a brief history of my past portfolio experiments and why I changed them.

🌍 1. The “Emerging Markets Tilt” 🔗

• Strategy: 50% World (VT) / 50% split equally between US (VTI/SCHB), Developed (VEA/SCHF), and Emerging (VWO/SCHE).
• The Logic: This intentionally underweighted the US and overweighted Emerging Markets compared to their actual market caps at the time, attempting to avoid localized bubbles across funds.

🌱 2. Adding Small-Cap Companies 🔗

• Strategy: 25% World / 50% US, Dev, Eme / 25% Small Caps (VB, VSS, SCHA, SCHC).
• The Logic: Owning funds that track small companies reduces concentration and potentially increases returns, but comes with the downside of increasing risk and volatility.

📊 3. Fundamentally Weighted ETFs 🔗

• Strategy: Equal weighting between traditional Market Cap ETFs (SCHB, SCHF, SCHE) and Fundamentally Weighted ETFs (FNDB, FNDF, FNDE).
• The Logic: Fundamental funds weight assets independently of price, using metrics like sales, cash flow, and dividends/buybacks. In theory, this buys more underpriced companies.
• The Downside: These funds carry higher costs (higher TER, higher turnover, higher bid/ask spread).

🎯 4. The Path to Simplification 🔗

Over time, I systematically stripped away the complexity:

1. Removed Small Caps: Dropped to reduce risk and simplify.
2. Removed Fundamental ETFs: Dropped to eliminate the higher trading and holding costs.
3. Removed Equal Weights: Stopped forcing equal splits between US, Developed, and Emerging markets, opting instead to match VT’s natural market-cap weighting (which inherently holds more US and less Emerging Markets).
4. Multiple World ETFs (VT + SPGM): Previously split equally between VT and SPGM before consolidating into a single fund.
5. Current State: Reached my current ultra-simple, single-ETF (VT) global portfolio.

📝 Posts 🔗

• How Banks Create Money to Facilitate Transactions: A Simple Example
• Rethinking Real Estate: The Hidden Downsides of Treating Your Home as an Investment
• The Simple Math Behind Early Retirement

Kaue's Way of Life

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