How to cut through the jargon and build your own ETF portfolio


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Building an investment portfolio can be as simple or as complicated as you want it to be, it is entirely up to you.
Many investment advisers make it seem unnecessarily complex, because they have a vested interest in doing so.
By mystifying the process of investing for a long-term goal such as retirement, it is easier to sell costly and expensive investment schemes, such as notorious 25-year offshore insurance savings plans.
If you keep things simple instead, you can build a broad and balanced spread of investments yourself, at minimum cost. 
An increasingly popular way to build a DIY portfolio is to invest in low-cost exchange traded funds (ETFs), a type of tracker fund that will follow the fortunes of pretty much any market, region, asset or sector you choose.
ETFs are traded quickly and easily like stocks and shares, with no upfront costs aside from your stockbroker's dealing charges, and annual fees typically ranging from as little as 0.05 per cent to 0.5 per cent.
Top ETF managers include Vanguard, BlackRock's iShares, Deutsche Bank AWM X-trackers, Invesco PowerShares and State Street Global Advisors' SPDR.
UAE residents can deal by using online trading services offered by AES International, Interactive Brokers, Saxo Bank, Swissquote and TD Direct Investing, or the stockbroker they used in their home country.
Sam Instone, the managing director of AES International, says ETFs are "passive" funds, because they do nothing except track their chosen index. "By contrast an active fund manager will try to outperform at index using their knowledge and experience, and charge fees of up to 2 per cent a year."
However, most active managers underachieve, he says. "Not only are they more expensive, but extensive evidence suggests active fund managers fail to consistently beat the index."
Mr Instone says that more than 93 per cent of US active funds underperformed the benchmark S&P 500 index of top US stocks over the last year, according to the latest Spiva US Scorecard.
"Over 10 years, an incredible 99 per cent trailed."
Tempted to build your own ETF portfolio but don't know where to start? Here are the building blocks you need.

Fees add up
With almost zero advisory fees and fund charges, you keep nearly all of the investment growth yourself. Over the longer run the benefits are huge.
Say you invest US$1,000 a month in an insurance plan with upfront charges and advisory fees totalling 5 per cent, plus trailing fund and advice charges of 2 per cent every year.
After 20 years, you would have invested a total of $240,000, which would have grown to $315,512, assuming annual growth of 5 per cent a year before costs.
If you invest in an ETF charging 0.2 per cent instead, your $240,000 would be worth $407,155, giving you $91,643 more.
Over 30 years the difference is even more pronounced. You would have invested $360,000, which would be worth $558,631 in the higher charging plan, but an incredible $807,399 with low-cost ETFs, again, assuming the same growth rates. That is an extra $248,768, because all your savings have grown and compounded over the years.
 
Word to the wise 
Not everybody has the confidence and experience to build their own portfolio, but they could do it simply and cheaply by following this suggestion from Steve Cronin, the founder of Wise (wiseuae.com), a non-profit community designed to help UAE residents invest their wealth and avoid rip-offs.
"When it comes to investing in ETFs, less really is more. Simply find the most diversified global fund that you can, at the cheapest possible price, put your money into it and leave it there year after year."
His suggested portfolio is the height of simplicity: for stocks and shares he tips Vanguard FTSE All-World ETF USD, which can be found under the stock market ticker "VWRD", and for exposure to government bonds he recommends the iShares $ Treasury Bond 1-3yr ETF, listed under "CSBGU3".
Vanguard is the world's leading low-cost tracker provider with a total of $4 trillion in assets under management. This $49 billion fund invests in a spread of nearly 3,000 stocks with top holdings including Apple, Microsoft, Johnson & Johnson, Facebook, ExxonMobil and the Google owner Alphabet, and ongoing charges totalling just 0.25 per cent a year.
Just over half the fund is invested in the US with exposure to Japan, the UK, France, Germany, Switzerland, Canada, China, Australia, Korea and many other countries. Its benchmark is the FTSE All-World Index.
Mr Cronin advises putting 80 per cent of your portfolio funds in this ETF and the remaining 20 per cent into the iShares fund, which tracks the performance of an index composed of government bonds issued by the US Treasury and denominated in dollars, with ongoing annual charges of just 0.2 per cent.
Government bonds are lower risk, lower return than stocks and shares, but give you some protection against a market crash. "Splitting your money 80/20 is a reasonable mix if you are under 50 and do not need your savings for at least 10 years. You may want to increase bond exposure as you get older," Mr Cronin adds.
 
Building up
Experienced investors can build a more sophisticated portfolio of ETFs tracking indices across the US, UK, Europe and Japan, emerging and frontier markets, sectors such as property, technology and smaller companies, or even individual commodities such as oil, gold, corn and cocoa. In fact pretty much every asset you have heard of, and many you haven't. 
You can even use ETFs to hedge against currency risk, which could be useful for internationally mobile investors, or against a stock market drop.
Oliver Smith, a portfolio manager at the online trading platform IG, which recently opened offices in Dubai, has drawn up a shortlist of "portfolio building blocks" (see chart) that investors should consider as long-term portfolio holdings.
"In the right weights they give investors almost all the diversification they need."
He also names Vanguard FTSE All-World as his top pick, along with other global funds SPDR MSCI Acwi, iShares Core MSCI World and HSBC MSCI World (as you can see, ETFs do not always have the catchiest of names).
The list also includes ETFs tracking the US, UK, Europe, Asia (excluding Japan), Japan and emerging markets. It also includes a spread of ETFs tracking government bonds, corporate bonds, inflation-linked bonds, high-yield debt and emerging markets debt.
Two specialist funds also make his building blocks list: iShares Physical Gold; and a property fund, HSBC FTSE Epra/Nareit Developed.
Mr Smith says more experienced investors can also use ETFs for income and picks out iShares Asia Pacific Dividend, iShares UK Dividend, SPDR S&P US Dividend Aristocrats and Vanguard FTSE All-World High Dividend.
 "These are not necessarily the highest yielding in the marketplace, but do have a good degree of diversification."
Moving on up
Laith Khalaf, a senior analyst at UK wealth adviser Hargreaves Lansdown, says that once you have built your ETF core portfolio, you can then add some carefully chosen actively managed funds targeting specialist areas. "This is often known as a core and explore investment approach."
The popularity of ETFs has had the beneficial effect of driving down mutual fund charges, as active managers battle to compete. "Many active funds now have no initial charges and annual fees totalling 0.75 per cent a year. However, some remain expensive, so pay close attention to the price tag."
Mr Khalaf says ETFs and other trackers make particular sense when investing in large well-researched markets such as the US S&P 500, the UK's FTSE 100 and government bonds, where it is very difficult for managers to add value and beat the market. 
"In specialist sectors, a handful of select fund managers can still prove their worth."

Company%20Profile
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SPECS
%3Cp%3E%3Cstrong%3EEngine%3A%20%3C%2Fstrong%3E2.4-litre%204-cylinder%20turbo%20hybrid%0D%3Cbr%3E%3Cstrong%3EPower%3A%3C%2Fstrong%3E%20366hp%0D%3Cbr%3E%3Cstrong%3ETorque%3A%20%3C%2Fstrong%3E550Nm%0D%3Cbr%3E%3Cstrong%3ETransmission%3A%20%3C%2Fstrong%3ESix-speed%20auto%0D%3Cbr%3E%3Cstrong%3EPrice%3A%3C%2Fstrong%3E%20From%20Dh360%2C000%0D%3Cbr%3E%3Cstrong%3EAvailable%3A%20%3C%2Fstrong%3ENow%0D%3C%2Fp%3E%0A
SPEC SHEET

Display: 6.8" edge quad-HD  dynamic Amoled 2X, Infinity-O, 3088 x 1440, 500ppi, HDR10 , 120Hz

Processor: 4nm Snapdragon 8 Gen 1/Exynos 2200, 8-core

Memory: 8/12GB RAM

Storage: 128/256/512GB/1TB

Platform: Android 12

Main camera: quad 12MP ultra-wide f/2.2, 108MP wide f/1.8, 10MP telephoto f/4.9, 10MP telephoto 2.4; Space Zoom up to 100x, auto HDR, expert RAW

Video: 8K@24fps, 4K@60fps, full-HD@60fps, HD@30fps, super slo-mo@960fps

Front camera: 40MP f/2.2

Battery: 5000mAh, fast wireless charging 2.0 Wireless PowerShare

Connectivity: 5G, Wi-Fi, Bluetooth 5.2, NFC

I/O: USB-C

SIM: single nano, or nano and SIM, nano and nano, eSIM/nano and nano

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Price: Dh4,699 for 128GB, Dh5,099 for 256GB, Dh5,499 for 512GB; 1TB unavailable in the UAE

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War and the virus
World Series

Game 1: Red Sox 8, Dodgers 4
Game 2: Red Sox 4, Dodgers 2
Game 3: Saturday (UAE)

* if needed

Game 4: Sunday
Game 5: Monday
Game 6: Wednesday
Game 7: Thursday

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The specs

AT4 Ultimate, as tested

Engine: 6.2-litre V8

Power: 420hp

Torque: 623Nm

Transmission: 10-speed automatic

Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)

On sale: Now

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The 15 players selected

Muzzamil Afridi, Rahman Gul, Rizwan Haider (Dezo Devils); Shahbaz Ahmed, Suneth Sampath (Glory Gladiators); Waqas Gohar, Jamshaid Butt, Shadab Ahamed (Ganga Fighters); Ali Abid, Ayaz Butt, Ghulam Farid, JD Mahesh Kumara (Hiranni Heros); Inam Faried, Mausif Khan, Ashok Kumar (Texas Titans

COMPANY PROFILE
Name: HyperSpace
 
Started: 2020
 
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
 
Based: Dubai, UAE
 
Sector: Entertainment 
 
Number of staff: 210 
 
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
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SPECS

Nissan 370z Nismo

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Labour dispute

The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.


- Abdullah Ishnaneh, Partner, BSA Law 

Abu Dhabi traffic facts

Drivers in Abu Dhabi spend 10 per cent longer in congested conditions than they would on a free-flowing road

The highest volume of traffic on the roads is found between 7am and 8am on a Sunday.

Travelling before 7am on a Sunday could save up to four hours per year on a 30-minute commute.

The day was the least congestion in Abu Dhabi in 2019 was Tuesday, August 13.

The highest levels of traffic were found on Sunday, November 10.

Drivers in Abu Dhabi lost 41 hours spent in traffic jams in rush hour during 2019

 

Benefits of first-time home buyers' scheme
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UAE currency: the story behind the money in your pockets
UAE currency: the story behind the money in your pockets
COMPANY%20PROFILE
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Company Profile

Name: Thndr
Started: 2019
Co-founders: Ahmad Hammouda and Seif Amr
Sector: FinTech
Headquarters: Egypt
UAE base: Hub71, Abu Dhabi
Current number of staff: More than 150
Funds raised: $22 million

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MOUNTAINHEAD REVIEW

Starring: Ramy Youssef, Steve Carell, Jason Schwartzman

Director: Jesse Armstrong

Rating: 3.5/5

The specs

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Ronaldo's record at Man Utd

Seasons 2003/04 - 2008/09

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