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The Perfect ETF Portfolio

Guest contributions and interviews

A guest contribution by the "Finanzwesir"

By Albert Warnecke
7 minute read

An article about ETFs on a blog targeted toward venture capitalists? What’s up with that? Aren’t ETFs something like the antithesis of equity crowdfunding? Correct.

  • Equity crowdfunding: Active; ETF: Passive
  • Equity crowdfunding: Concentrated – all angel investors that I know of have a portfolio of 10 to 20 startups at most. ETF: Widely diversified, an ETF from MSCI World comprises 1,600 companies from 23 countries.
  • Equity crowdfunding: Clusters – smart investors follow the principle: “Cobbler, stick to your last.” They only invest in sectors they understand. ETF: All industries, weighted capital, done.
  • Emotional: Equity crowdfunding is exciting. ETFs are boring.

So why should a venture capitalist bother with ETFs?



The magic word is diversification, the only free lunch on the capital market or, as the Nobel Prize winner for economics Merton Miller (1990) once said, “An investor’s best friend.” Combining the asset classes of venture capital and indexing increases your chances of success, as the stock market and venture capital demonstrate a significant negative correlation in the long run.

You also gain a few operative advantages.


Indexing follows Socrates’ principle: “I know that I know nothing.” Indexers believe neither in market timing (I know when it is time to purchase and when to sell) nor in picking stocks (this will be the best share of the year).
If one does not know what to buy and when to buy, one buys them all and keeps them. If you buy them all, future winners are definitely included in the portfolio. If you do not sell, then you are sure to be invested on those 10 days of the year on which the annual return is made. J.P. Morgan noted: Only those who always play along will get the long-term market return. If you miss the ten best days of the year, you only receive two-thirds of the maximum possible return (6.1% instead of 9.5%).

This approach involves very little prognosis. An indexer needs only one conviction: Prices will rise in the long term. He does not have to hope that a certain politician wins an election and then, like Trump, privileges the fossil-burning sector, or that a preliminary clinical study delivers what it promises.

An indexer’s portfolio is mostly murphy-free. The Murphy who claimed: Anything that can go wrong will go wrong. An indexer’s portfolio does not contain illusions that can burst. He holds the market and receives the market return minus very moderate costs.

The deal: Just sit around and cash in on the average each year. This is one of the operative advantages I mentioned previously: You do not have to do much to receive the market return. Everywhere else, you have to be proactive to maintain your chances. Not here. In my opinion, it’s a gift from heaven for the ever-busy person of the 21st century.


The disadvantages

  1. Indexing requires a lot of time. Investing in a stock for less than 10 years is considered taboo. Indexing takes two to three decades to develop its potential.
  2. An indexer has to be deaf, blind, and ignorant. Anyone who reads too much investment porn, watches too many ARD stock market hotspots, and spends too much time in the echo chambers of social media will lose out. At some point one will get tired and sell because of another crash-prophet going amok, advertising with the “secret tricks of the gold buyers.”


In practice

What do you have to pay attention to while creating your portfolio? A good portfolio follows these three criteria:

  1. Seamless = You want to invest in all 23 industrialized and 23 emerging countries
  2. No overlaps = No risk of clustering. You do not want two funds to overlap and for you to suddenly realize: I have invested in China twice
  3. Self-stabilizing = Changes should be tracked automatically. Take South Korea, for example; it is currently an emerging market. If South Korea becomes an industrialized country at some point, it will not be part of the emerging market ETF any longer. You will want it to appear in the industrialized country ETF automatically with the right weighting for you to continue to benefit from Samsung & Co.

This only works in the presence of a governing system. It’s just like soccer: Everyone has to know his or her place. When it comes to ETFs, the index plays the role a trainer does in soccer. The index determines what position an ETF plays in. A Europe ETF will never include Coca-Cola, while an S&P 500 will not be buying in Argentina. Companies like MSCI and FTSE have spent decades developing index toolkits. These indices are the Lego blocks with which you construct your portfolio house.


The field of ETFs is like the yogurt aisle. Everyone develops products non-stop, just to spread out as much as possible. Most ETF innovations taste as good as dairy products with “salt-pistachio” flavor.

You only need these indices:

  1. Industrialized countries: MSCI or FTSE World indices
  2. Emerging economies: MSCI or FTSE emerging markets
  3. A combination of both: MSCI ACWI or FTSE All-World30
  4. Europe: MSCI or STOXX 600 Europe
  5. North America: MSCI North America or USA, S&P 500
  6. Pacific Region: MSCI Pacific or MSCI Japan

This leads to the following portfolios:

  1. One ETF: MSCI ACWI or FTSE All-World. Very simple to operate, even at low savings rates.
  2. Two ETFs: 70% industrialized countries, 30% emerging economies. Roughly GDP-weighted, easy to save for through any broker.
  3. Three ETFs: 50% industrialized countries, 20% Europe, and 30% emerging economies. GDP-weighted for any European wishing to give more weight to Europe.
  4. Four ETFs: 30% North America, 30% Europe, 10% Pacific, 30% emerging economies. GDP-weighted, complete regional concept and thus the possibility of freely customizing weightings. Not suitable for portfolios under €100,000 due to the operating effort.

All portfolios follow the three criteria listed above. The weighted cost ratio is between 0.2 – 0.5 percent. An unrivaled price/diversification ratio.


Which ETF specifically?

It does not matter. They are all basically the same. Choose an ETF that you like best.

The selection of an ETF accounts for only 5% of the investment’s success (Source: Steinbeis Research Center for Financial Services, Munich). We live in a society of excess. Anyone who does not advertise dies out. It is not surprising therefore that product selection is overrated while strategy is easily overlooked.


  1. Choose an ETF combination that suits you.
  2. Stay stubborn. No redistribution, no depot optimizations.
  3. No selling. Resist the cash prophets.
  4. Save regularly and consistently. Rebalance once a year.
  5. Use your time for more important things than stock market gimmicks.



About the author:

Who am I? My name is Albert Warnecke, born 1966, engineer, hailing from the Rhine area, beer over wine, married for nearly 25 years, three children, many interests, and active on the stock market for 20 years. I may not have a degree in business or training as a banker; however, I possess a lot of life experience and have had many a mishap in financial matters. I have been managing my family’s finances successfully for the past ten years and want to share my knowledge with you. It all started in early 2014 with my blog Der Finanzwesir. In November of 2015, fellow blogger Daniel Korth and I published the first episode of our podcast Der Finanzwesir rockt. My contributions are also in demand outside of my blog. For the last two years, I have been writing regularly for ZEIT's finance magazine and ZEIT Online. I am also quoted as a "money expert" in the magazine STERN.

Status as of 22.02.2018 17:18



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