Market Musings 070226: My ETF Model Portfolio

Sat 2:47pm by Edmund Shing

39 comments 2498 reads

Market Musings 070226:

My ETF Model Portfolio

Podcast: After the correction, is gold still a safe haven? (click on link to listen)

In this podcast, Edmund Shing, Global Chief Investment Officer, reviews the recent performance and volatility of gold and gives his outlook.

My ETF Model Portfolio

How have I gone about creating an ETF model portfolio?

First, some basic principles.

I have deliberately taken a relatively high risk approach at the moment, as I judge that we are in a sweet spot for financial market risk.

You will thus not find any defensive choices in the 8 ETFs I have chosen for this model portfolio - no bond ETFs, for instance.

This will change over time, as my assessment of market risk changes.

I have adopted a dual momentum approach, selecting the 8 ETFs according to:

Do they have strong absolute positive price momentum over the last 6 months?
Do they have strong relative price momentum (versus the broad global stock market) over the last 6 months?
Do they give some measure of regional and sector diversification from other ETFs in the selection?

Is the global stock market trending higher? Yes

All major stock markets are trending higher over the last 6 months - but it is clear that the US is now lagging behind other regions such as Emerging Markets and Europe.

This should be unsurprising, as we have an positive environment of:

Solid/accelerating economic growth
Falling or low inflation
Abundant global macro liquidity
Low or falling central bank interest rates
Earnings growth projected to be 10%+ for each region's stock market in 2026
Valuations that are pretty reasonable outside of US mega-cap tech stocks

In recent months, the MSCI All Country World ex US index (in blue) has shown much stronger performance than US large-caps (in green), a continuation of the 2025 outperformance trend.

This has been helped by a renewed bout of US dollar weakness against most major and emerging market currencies.

Which regional stock markets are outperforming the global stock index?

Emerging markets have been strong, led by Asian markets such as the tech-heavy Korean KOSPI index and cheap commodity-linked Latin American markets such as Brazil and Mexico.

Unlock with Email

Unlock with Google

Already have an account?
Login here

Edmund Shing

Mon 8:36am

Tricky question. I think ultimately silver goes higher and even potentially exceeds the recent USD120/ounce high , but may take some time and will likely consolidate first.

jamesalastair

Mon 9:28am

There are other reasons for holding ETFs:

1] Your platform does not give you access to a market of interest, or individual stocks of interest because they do not have a CREST certificate. For this reason, I own the Polish market through iShares MSCI Poland UCITS ETF USD (Acc) (LON:IPOL) .

2] You do not have sufficient time but want greater diversification in your portfolio.

3] It is a short term tactical trading decision. I own silver bullion through Wisdomtree Metal Securities (LON:PHSP) and I doubt it will be in my portfolio in 6 months because it is time to rotate into the silver miners. Similarly I have been in and out of iShares Oil & Gas Exploratn & Prod UCITS ETF USD A (LON:SPOG) as a 6 to 9 month trading vehicle (currently not owned).

4] Risk management. You would rather hold Global X Copper Miners UCITS ETF USD Acc (LON:COPG) than individual miners. I get this, but have the expertise, interest and time to pick individual copper miners.The Copper Deficit: Why the Timelines Diverge and Why Friedland Is Still the Outlier Who Might Be Right

5] The benefit of ETFs over individual shares is that you only have to get the theme and direction right. It saves a bunch of time. You create alpha by being right on the theme.

Have a look at this ETF portfolio (located at the bottom of the page): About - Alastair Kendall. It is up 89% for the past 12 months, even after the metal market correction. I use a mix of ETFs and shares in my own portfolio. This is my actual portfolio weighted for a £100k start point, (not showing my UK and European small caps), and it is up 47% for the 12 months: Portfolio - Alastair Kendall. The point is it is a mix of ETFs and shares.

I would not be so quick to write off ETFs. We all have jobs and ETFs are a huge time saver and risk diversifier.

Best wishes

Alastair

Mon 9:32am

Great post Edmund. Really enjoyed reading it this morning over my coffee.

Mon 9:39am

Completely agree ... we are here to maximise the comfort of our dotage!

Wigge

Mon 9:43am

I hold ETF's and individual NAP's style stocks as I beleive they complement each other. ETF's gives you the opportunity to invest in non-UK companies that could be costly to invest in given FX costs etc and at the same time you spread your risk across multiple companies.

Mon 10:26am

Agree ... 1 to 2 months of consolidation, and possibly even further retrenchment to solid support at US$65.53 on COMEX prices (if they even have any meaning), but silver will ultimately go much higher. The large silver miners are valued on US$45 silver; if the silver price holds then we can expect large earnings surprises for the likes of Wheaton Precious Metals (TSE:WPM) which has 30% exposure to silver; Pan American Silver (TSE:PAAS) , Fresnillo (LON:FRES) , Hochschild Mining (LON:HOC) , First Majestic Silver (TSE:AG) and others.

To make money on silver bullion, we need silver to go higher (obviously!)

To make money on silver miners, we just need silver to hold its ground. Anything about 60USD will have a large impact on cashflow as the 20USD will just drop straight down.

Take one example: Pan American Silver (TSE:PAAS), where profits and NPV are modelled by analysts on $45 silver:

Sales: $45.00

AISC: $15.43 (last reported figure)

"Profit": $29.59

With silver at $60:

Sales: $60.00

AISC: $15.43

"Profit" $44.57

Percent increase = 51%

Latest COMEX feed I have from Friday is $77.69. I wonder what that will do for the SP? Seems a no brainer to me.

Mon 10:29am

Don't hold your breath Harry. Continue buying Var Energi ASA (STO:VARo) because Millibrain will ensure they have no competition for gas in the UK market, and any profits the likes of Serica Energy (LON:SQZ) make will be grabbed by Rachel from accounts. So much self harm ... it really is tragic.

intuitive6191

Mon 10:32am

Saltash Bob

"I've never invested in ETF funds owing to their lack of transparency and
therefore my inability to be sure what I am actually invested in,"

I think that this point has been covered in the responses below. A more nuanced concern is the counter party risk, particularly with synthetic ETF's where the security of the underlying positions can be difficult to establish. This has been discussed a few times on Stockopedia and many ETF investors will only invest in physical ETF's to try and mitigate this risk.

If you are interested in researching further, the link below gives an European perspective on ETF risk. As usual, there is no investment which gives 100% security so you have to weigh up the risks to your own personal circumstances.

I'vuropa.eu/press/financial-stability-publications/fsr/special/html/ecb.fsrart201811_3.en.html

For my own part, I am a very long term rather cautious investor, however, as part of a portfolio I have held a gold ETC for over 10 years in addition to mining stocks and trusts. It is something I am fairly comfortable with.

I would agree with other posters here that a combination of indivdual stocks, investment trusts and ETF,s give a very useful spread of investment options and allow very good diversification. I find the articles by Edmund and Jamesalastair very interesting and also hope that they continue as a regular feature on Stockopedia.

Rudy65

Mon 11:09am

I hold #WENS as an alternative to #ENGE

Mon 11:51am

From what you and posts from several subscribers following have been quick to point out and outline to my gratitude , ETFs serve a very valuable function in complementing personal investment in individual stocks, both smoothing out the risk of individual companies suffering some misfortune and also casting a wide enough net to ensure the higher earning are captured and let go of at an appropriate time as market leaders change within a given sector. Certainly the returns mentioned by Alistair Kendall for his sub sector accounts holding ETFs have been exceptional over the last period and persuade me to use a mixture of both styles of investing in future.

JSchoffer

Mon 12:17pm

Thanks Edmund another great insight. I followed your Market Musings 301125: Ideas for H1 2026 post by creating a mini portfolio of the ideas. My only issue is I didn't put much in!

Simon O'dowd

Tue 8:35am

Thank you for this. CB5 has higher charges than X7PP, which has identical performance over the years, 0.20 TER.

iwright7

Tue 8:52am

I got started buying ETFs to diversify out of the UK on Trumps Liberation Day. My current list is below, (with quite a bit of Edmund overlap).

All have graphs that go up left to right, and all but one (a World Value ETF I brought this week) are in profit:

pka

Tue 9:47am

Hi iwright7, thanks for showing us your ETF portfolio. Would you mind sharing how you selected those ETFs?

Tue 10:14am

pka,

They all exibit recent "Trend Clarity" (a steady upward climb) which you can select by "eyeballing" a 12M graph and were at or near a 52Wk High when purchased.

Alternatively you can apply the last 90 days regression techniques of "Stocks on the Move" by Andreas Clenow.

Also I try to pick ETF themes that are, "of their time".

Tue 10:34am

Hi iwright7, thanks. You seem to be using a momentum approach for selecting ETFs. Which website do you use to "eyeball" their 12M graphs?

Tue 10:40am

One other thing that alerted me to country index ETFs like Poland and Spain is a new wonderfully simple 6 month rebalence strategy. Its called "The Lazy Man's Momentum Strategy".

It wont shoot the lights out, but it has produced about +3% excess return historically (13%/annum), for next to no input...

https://papers.ssrn.com/sol3/p...

Tue 10:43am

Stockopedia or justETF websites

Tue 11:49am

Thanks iwright7. That paper is interesting. I suspect that its 13% per annum historic return would have been higher if it had included an 'absolute momentum' filter in its selection rules. An example of such a filter is the one Edmund Shing describes in this post, which is to only include an ETF in the portfolio if it has had positive price momentum over the last 6 months. This additional filter would change the strategy into a 'dual momentum' one. The main benefit of this filter is to keep the portfolio out of a candidate country's ETF during a long bear market in that country's equities.

Tue 1:13pm

Yes I am sure you are correct that the Lazy Momentum ETF Strategy can be improved upon using the likes of Dual Momentum etc.

Indeed Gary Antonacci has "evolved" his Dual Momentum Strategy of 10 years ago into wider assett classes (inc Bitcoin), additional technical indicators and differnet timeframes. It depends on how deep you want to go to try to push up the excess return%.

Market Musings 070226: My ETF Model Portfolio