PAggressive investing using world trackers has served me pretty much. It quietly told me to place each my enthusiasm and my fears aside, find the most cost effective fund, and let the world move on.
they said.
So I did it. I put a blind man behind the wheel (well, the MSCI World Index) and mostly sat back and watched.
And through a mixture of favorable return sequencing and a few lockdown-enabled savings, the previous few years of very passive investing have laid the inspiration, if not for FIRE, then for living expenses when work dries up.
Perhaps this explains why I’m starting to comprehend that the great ship Half Decent Retirement has morphed from a well-diversified basket of stocks in developed world markets into something that’s beginning to resemble a technology-driven US momentum fund.
Technology eats the world
Just nine corporations account for around 28% of the worth of my current MSCI World Tracker (SWLD):
- Nvidia
- Apple
- Microsoft
- Amazon,
- Alphabet (in two share classes)
- Broadcom
- Meta
- Tesla
- micron
That’s concerning the same percentage as all non-US stocks within the developed world included in the identical index!
What’s more, as I write, is SpaceX Inclusion within the indicesThis triggered an automatic allocation of billions to quite a lot of funds and increased technology concentration within the US.
However, when you look back only a decade, you possibly can still find energy, finance, telecommunications and industrials in the highest ten. How quaint…
Around 18% of the fund is within the “Magnificent 7” alone. And about 72% of the allocation is within the US.
Certainly the US stays an outstanding capital growth engine. But from AI foam to, for instance, declining governance standards, it seems slightly fragile.
Don’t bet against American exceptionalism, people say. Fine. But I’d relatively not bet 70% or more on it in its current state.
What are my possibilities MU/DO/UR?
We can then add to this that corporations represent about 30% of the index rely largely on AI.
I don’t claim to know the very complex, true and long-term impact of AI on the economy or the person components of the MSCI World Index.
But it seems unlikely to me that the present winners within the age of AI can guarantee their position over something faster, higher – or simply cheaper – from a competitor.
The ability to make a make the most of selling AI will likely proceed to be challenged by other AI models which are still emerging.
Disturbances are rarely clear or contained.
Weights and measures
I didn’t join for this type of concentration through a world tracker.
When you add all of it up, it’s almost enough to make you need to quit the sport and secure the comforting polyester blanket of a pension.
Seeing myself as obese in each tech and American, I complained a couple of tracker doing what it was alleged to do.
Right?
But I spotted that I do not actually need to own the market because it exists today.
Is an equal weight global market tracker the reply then? Everything, but carefully?
Equal weight is the indexing method that loves all its children equally, no matter how they behave. A various mixture of corporations and no big poppies. The quantized blind stock picker.
So yes, equal weight appears to be the antidote to my problem. This will reduce dependence on the USA to around 50% and drastically reduce technology concentration.
But well, it just seems boring.
Equal weight appears like you are leaving money on the table while your team of ever-vigilant fund managers quietly and diligently work day and night to fastidiously steer your funds away from the very best value corporations as quickly as possible.
More inertia investment than momentum.
For me, the reply was neither to simply accept the forced mediocrity of equal-weighted indices nor to desert index investing altogether and as a substitute turn to stock picking based by myself guesses.
Instead, I searched for other indices that trend in a distinct direction – the relative stability of high dividend yield corporations.
I am unable to do it technically anymore
The VanEck Morningstar Developed Markets Dividend Leaders ETF (ticker: TDGB) is now considered one of my major holdings. The tech share is lower than 1% and about 75% is outside the US.
Let’s briefly compare the MSCI World to my dividend-focused escape plan, using the MSCI World ETF (ticker: SWLD) and TDGB as proxies for the 2 indices.
In terms of the variety of holdings, the TDGB has an enormous concentration of risk in comparison with an MSCI World Tracker. This reduces the variety of individual corporations from 1,294 to only 101.
And considering that TDGB only owns a fraction of the variety of corporations that a World Tracker does, it is not surprising that its top ten holdings account for a hefty 36% of its value.
However, the highest group of dividend payers consists of a various mixture of energy, pharmaceuticals, consumer goods, communications and finance. Exactly the form of corporations which have fallen out of the highest ranks of the MSCI World Index.
In terms of total investments the chance is concentrated, but by way of sectors, regions and foam risk it’s more attractive to me.
return mail
It’s perhaps a surprise to see that the Dividend Leaders ETF’s return because the end of 2019 is roughly the identical because the World Tracker (the furthest back data source shows the 2 ETFs):
Source: Fiscal AI
Although we take a better take a look at last yr’s returns…:
Source: Fiscal AI
…you possibly can see that TDGB has experienced quite a growth spurt in 2026.
However, my reasons for shifting assets into this fund were solely resulting from my concerns about being so heavily exposed to this US market and never the pursuit of returns.
Divided in another way
My entire portfolio now consists of lower than 30% from the USA. I still own an MSCI World Tracker ETF, but despite the fact that it was my largest investment and dominated my retirement savings, it now only makes up 15% of my holdings.
This is a really personal decision. This is in response to increasing unease over the composition of worldwide tracker funds.
The original appeal of a capitalization-weighted tracker for developed markets was growth, with risk spread across many sectors, markets and corporations.
No wonder the dominance of a single sector made me take one other look.
I may very well be improper. US technology could dominate for one more decade. But I’m happier owning a portfolio whose risks I understand and may live with than one which makes me increasingly uncomfortable.
