MSCI World High Dividend Yield Index (USD) -> Gone for some Green crap?

[Zaiga]

Hey guys!

I like the following index very much:
MSCI World High Dividend Yield Index (USD)

It's the only index which outperforms the MSCI World in the long run.
And in our environment, especially bcs. I don't like growth stocks (which won't growth if we have a prolonged stagnation - and even if - I won't lose either), I prefer exactly this index.

There was/is an ETF from IShares:
https://www.ishares.com/uk/individu...fund?switchLocale=y&siteEntryPassthrough=true
And now they simply replaced the underlying index of the ETF
From: MSCI World High Dividend Yield Index (USD)
To: MSCI World High Dividend Yield ESG Reduced Carbon Target Select Index

Literally wtf, so much about "safety" of ETFs.

And there ain't any other ETFs on this Index, at least I can't find any?
How can it be?

Thank you!

 

[backpacker]

And now they simply replaced the underlying index of the ETF
From: MSCI World High Dividend Yield Index (USD)
To: MSCI World High Dividend Yield ESG Reduced Carbon Target Select Index

That's a trend. This ESG nonsense doesn't perform well. Still, Westerners love it.

And there ain't any other ETFs on this Index, at least I can't find any?

There are. Some are just tracker certificates, meaning they are synthetic.

 

[Zaiga]

That's a trend. This ESG nonsense doesn't perform well. Still, Westerners love it.


There are. Some are just tracker certificates, meaning they are synthetic.

Literally, they fucked up the best performing index (worldwide) of the last 30 years (if I remember correctly the timeframe).
Synthetic is unfortunately another risk layer for higher amounts.

So basically you "had" a great index and now you aren't able to invest into it.
WTF

 

[backpacker]

Literally, they fucked up the best performing index (worldwide) of the last 30 years (if I remember correctly the timeframe).
Synthetic is unfortunately another risk layer for higher amounts.

So basically you "had" a great index and now you aren't able to invest into it.
WTF

MSCI, FTSE, S&P.... these indices are marketing tools. The companies who produce them do what the public demands: Currently it is ESG, maybe in a few years it is a LGBTQ+ index. All this is unproductive nonsense.

Try to rely on stock picking. You can build your own index with a few super-large-cap stocks - tax optimized in a way no ETF will ever be able to offer you.
Go for global companies in the consumer staples sector, a globally operating bank, a globally operating mining company, a (hated) tobacco company, an oil producer and you are fine. Choose between the highest dividend payers of each group. Look them up on the LSE or take a US 80/20 company for tax optimization due to no or -in the case of a US 80/20 company- very little withholding tax on dividends.
If you do not like to settle (and receive your dividends) in GBP, choose the ADR equivalent of the LSE-stock and buy instead on the NYSE.

The above approach might be a bit more time consuming and complicated but it save you a lot of money due to the ETF fees. More important, you do not wake up one morning to read that they transformed your index into a gender equality and LGBTQ+ compliant index that now only invests in stocks/companies who are supportive of the annual SFO Folsom Street Fair.

 

[Jerry1911]

globally operating bank

Would $JPM fit the bill? I prefer ETFs since my country doesn't have a double tax treaty with the US, that way I save 15% on dividends instead of buying stocks directly...

 

[backpacker]

Would $JPM fit the bill? I prefer ETFs since my country doesn't have a double tax treaty with the US, that way I save 15% on dividends instead of buying stocks directly...

JPM is not exactly "globally operating". And, as you already noticed, you will be charged with 30% withholding tax.
To stay with taxes, HSBC would certainly fit the bill: Listed on LSE, globally operating, can be bought as an ADR on the NYSE if you prefer USD to be the settlement currency.
These are just examples.

You are too much focused on US stocks. If that doesn't fit for you taxwise due to this annoying withholding tax, look for for countries that do not charge it. There are plenty of them with 0% withholding tax!
Avoiding US stocks will also save trouble with US estate taxes, should that case arise one-day.

 

[Zaiga]

MSCI, FTSE, S&P.... these indices are marketing tools. The companies who produce them do what the public demands: Currently it is ESG, maybe in a few years it is a LGBTQ+ index. All this is unproductive nonsense.

Try to rely on stock picking. You can build your own index with a few super-large-cap stocks - tax optimized in a way no ETF will ever be able to offer you.
Go for global companies in the consumer staples sector, a globally operating bank, a globally operating mining company, a (hated) tobacco company, an oil producer and you are fine. Choose between the highest dividend payers of each group. Look them up on the LSE or take a US 80/20 company for tax optimization due to no or -in the case of a US 80/20 company- very little withholding tax on dividends.
If you do not like to settle (and receive your dividends) in GBP, choose the ADR equivalent of the LSE-stock and buy instead on the NYSE.

The above approach might be a bit more time consuming and complicated but it save you a lot of money due to the ETF fees. More important, you do not wake up one morning to read that they transformed your index into a gender equality and LGBTQ+ compliant index that now only invests in stocks/companies who are supportive of the annual SFO Folsom Street Fair.

I have no problem investing time, thank you for your reply.

But almost all managed funds are never beating the market in the long run.
And I am far away from a fund manager, I just want to have a worldwide diversified portfolio.
ETFs seem in the first place to be a good "choice", but still. At least with a part of my capital I don't wanna make any bets just worldwide.
Do you have any tips how it's to realize such a diversified portfolio ?

 

[JohnnyDoe]

I have no problem investing time, thank you for your reply.

But almost all managed funds are never beating the market in the long run.
And I am far away from a fund manager, I just want to have a worldwide diversified portfolio.
ETFs seem in the first place to be a good "choice", but still. At least with a part of my capital I don't wanna make any bets just worldwide.
Do you have any tips how it's to realize such a diversified portfolio ?

You could setup an API that places automatic orders on IBKR, for building and rebalancing your portfolio (or use any other platform that allows automated trading). It would probably cost you a couple of thousand $ on Upwork.

 

[backpacker]

I just want to have a worldwide diversified portfolio.

That is why I suggested to invest in a few truly global companies: Unilever, GSK/Astra, HSBC, Rio/BHP/Vale, BAT, Shell. These will cover the world economy quite well - and all of them pay high dividends without withholding tax.
As already mentioned in post #6, these stocks are not recommendations - they are merely examples in the context of this thread.

If you really want to go the ETF route by avoiding this ESG nonsense, a regional approach could be an option: Something like large cap ETF's for Asia-Pacific, Europe, America's with a focus on high dividends.
However, the global MSCI/FTSE/S&P index route I would dismiss because all of them concentrate now on ESG. It means that the most profitable companies (tobacco, mining, energy) are excluded.
Or you wait for what's coming from Strive (and others) Anti-ESG movement spawns new fund in battle against ETF giants . However, that might easily be another marketing gag from the ETF industry.

You could setup an API that places automatic orders on IBKR, for building and rebalancing your portfolio (or use any other platform that allows automated trading). It would probably cost you a couple of thousand $ on Upwork.

The fixed upfront costs + overall fees for rebalancing are too high for the amount he intends to invest.

 

[Zaiga]

You could setup an API that places automatic orders on IBKR, for building and rebalancing your portfolio (or use any other platform that allows automated trading). It would probably cost you a couple of thousand $ on Upwork.

Thank you that sounds actually quite interesting.
The main question is still, who picks the stocks which should outperform the MSCI World.
Or are there some type of automation options for "following XY" index scenario and so on. For example feeding the porfolio with % value of stocks and the automation does the rest.

FThat is why I suggested to invest in a few truly global companies: Unilever, GSK/Astra, HSBC, Rio/BHP/Vale, BAT, Shell. These will cover the world economy quite well - and all of them pay high dividends without withholding tax.
As already mentioned in post #6, these stocks are not recommendations - they are merely examples in the context of this thread.

If you really want to go the ETF route by avoiding this ESG nonsense, a regional approach could be an option: Something like large cap ETF's for Asia-Pacific, Europe, America's with a focus on high dividends.
However, the global MSCI/FTSE/S&P index route I would dismiss because all of them concentrate now on ESG. It means that the most profitable companies (tobacco, mining, energy) are excluded.
Or you wait for what's coming from Strive (and others) Anti-ESG movement spawns new fund in battle against ETF giants . However, that might easily be another marketing gag from the ETF industry.

The fixed upfront costs + overall fees for rebalancing are too high for the amount he intends to invest.

Maybe thats a good approach with regional ETF high dividend yields. The thing is I simply would like to have some historical data which makes the decision process easier. So I am sure I am not investing time / money into something which underperfoms the MSCI World LGBTQ+ index during the next 10 years.

The intended investment vol. is significant.

 

[JohnnyDoe]

Thank you that sounds actually quite interesting.
The main question is still, who picks the stocks which should outperform the MSCI World.
Or are there some type of automation options for "following XY" index scenario and so on. For example feeding the porfolio with % value of stocks and the automation does the rest.



Maybe thats a good approach with regional ETF high dividend yields. The thing is I simply would like to have some historical data which makes the decision process easier. So I am sure I am not investing time / money into something which underperfoms the MSCI World LGBTQ+ index during the next 10 years.

The intended investment vol. is significant.

All what you need to know about building an investment portfolio is here: Investing Demystified: How To Invest Without Speculation And Sleepless Nights (Financial Times Series): Amazon.co.uk: Kroijer, Lars: 9781292156125: Books

 

[Zaiga]

All what you need to know about building an investment portfolio is here: Investing Demystified: How To Invest Without Speculation And Sleepless Nights (Financial Times Series): Amazon.co.uk: Kroijer, Lars: 9781292156125: Books

Thank you for the suggested book. I've read books like this but I will read this one too and come back here if the question ain't answered.

But for keeping the discussion here alive, I will just summarize my points:
Buying stupidly the MSCI ACWI will historically provide over 8%, I am almost 98% sure that I won't be able to outperform the index by picking companies. One of the companies (in a portfolio) needs to go south and the entire ROI is gone.
https://backtest.curvo.eu/market-index/msci-acwi

 

[JohnnyDoe]

But for keeping the discussion here alive, I will just summarize my points:
Buying stupidly the MSCI ACWI will historically provide over 8%, I am almost 98% sure that I won't be able to outperform the index by picking companies. One of the companies (in a portfolio) needs to go south and the entire ROI is gone.
https://backtest.curvo.eu/market-index/msci-acwi

I would say 99.9% sure you will not outperform the index, like the professional fund managers out there.
If you know the exact rules of the index you can replicate it yourself automatically, I don’t think that the fees will be much higher than those of an ETF if you choose the right broker.

 

[backpacker]

Maybe thats a good approach with regional ETF high dividend yields. The thing is I simply would like to have some historical data which makes the decision process easier.

It depends on balancing the regions. Not so much on picking a specific ETF.
Check the well known ETF providers, pay attention to management fees and then decide. For Asia and Latin America it can make sense to additionally check mutual funds (SICAV).

The intended investment vol. is significant.

If that's the case you can also evaluate what @JohnnyDoe suggested.

 

[Zaiga]

I would say 99.9% sure you will not outperform the index, like the professional fund managers out there.
If you know the exact rules of the index you can replicate it yourself automatically, I don’t think that the fees will be much higher than those of an ETF if you choose the right broker.

Thank you for the answer! Always appreciate your posts here.

To come back to the initial post:
1.) MSCI World High Dividend Yield Index (USD)
outpeformed over the last 30y of existence the
2.) MSCI World

High dividend stocks (value) perform better during long term stagnation periods. We might see another 10y of stagnation like during the 70s,
the MSCI World High Dividend Yield is a great index, also outpeforms the FTSE ALL World High Dividend index or STOXX Global select dividend.

So logically, if it outperforms the MSCI World and all other indices. It's the perfect pick especially if we might see a stagnation period. But they destroyed the index ETFs by following now the ESG index (IShares). But for replicating the Index one would need the composition which costs $$$ and most likely will lower the yield to such an extent where it's cheaper to simply go for another index. (As long as you invest less than I guess 10mio +)

 

[Jerry1911]

to such an extent where it's cheaper to simply go for another index.

And that index would be?

 

[Zaiga]

It depends on balancing the regions. Not so much on picking a specific ETF.
Check the well known ETF providers, pay attention to management fees and then decide. For Asia and Latin America it can make sense to additionally check mutual funds (SICAV).

If that's the case you can also evaluate what @JohnnyDoe suggested.

The problem is, you don't know the composition of the index. You would need to pay (alot) extra $$$ for the MSCI data.

And that index would be?

You could go for the FTSE All-World High Dividend Yield Index
But now you have the problem that it underperforms the MSCI World in the long run.
And now you make a bet that value will outperform growth stocks -> or you could simply stick to MSCI World and get a better yield.

I will try to gather the historical data of smaller regional ETFs with high dividend yields as backapacker suggested. But here you have the problme that you don't have historical data (no 30y+) and it becomes again a bet without sufficient historical data.

 

[JohnnyDoe]

Index methodology: https://www.msci.com/eqb/methodology/meth_docs/MSCI_High_Dividend_Yield_Indexes_Methodology_2015.pdf
Fact sheet: https://www.msci.com/documents/10199/74fe7e16-759e-405c-96aa-8350623fae65
It seems to me that the standard MSCI world is better.

 

[Zaiga]

Index methodology: https://www.msci.com/eqb/methodology/meth_docs/MSCI_High_Dividend_Yield_Indexes_Methodology_2015.pdf
Fact sheet: https://www.msci.com/documents/10199/74fe7e16-759e-405c-96aa-8350623fae65
It seems to me that the standard MSCI world is better.

If you take into account the divides by both indices, the Dividend one outperforms the former.
(Dividends which are reinvested)

 

[JohnnyDoe]

If you take into account the divides by both indices, the Dividend one outperforms the former.
(Dividends which are reinvested)

I’m too lazy to read the methodology: so they are not total return indexes?

I’m too lazy to read the methodology: so they are not total return indexes?

I found the answer: The MSCI World Index has been calculated since 1969,[4] in various forms: without dividends(Price Index), with net or with gross dividends reinvested (Net and Gross Index), in US dollars, Euro and local currencies.