Building an ETF portfolio to beat MSCI AC World index building, average, numbers, product

sgupta0827

I've been thinking, and looking at the numbers of the Goldman, UBS, JP Morgan, Global Equity SMA vehicles and there performance is average at best. If you wanted to construct a 5 etf portfolio to beat this how would you go about it? I'm thinking of building one for a retail product. Could just be as simple as a US SP 500 etf, Small cap etf, EAFE, and then just weight according to what you think will perform the best.

giants2010

Thanks for pushing down your work on unsuspecting AFers. I am NOT falling for this one again.

zephyranalyst

Sweep the leg,

That's what I tried this year, and have been absolutely annihilated. I guess mids, smalls and emerging markets will come back eventually, but man I timed this horribly.

strikethree

Check out DFA. That little cult seems to think they have it down. Yes, I'm aware they don't use ETFs, but similar philosophy.

The thing about tactically managing a portfolio of ETFs is you're entirely top-down, and essentially market timing. Two things very few people are good at, and hardly anyone is good at both.

Limiting yourself to just category ETFs instead of industry and sector ETFs would be even more difficult. That said, if you want to beat the world index over time, just overweight emerging markets and small cap. On a risk-adjusted basis you'd probably get creamed, but on an absolute basis, I'd bet over 10 years you'd beat the index easily.

Good luck with that.