Asset Allocation

Our approach to Passive Investment

Passive management or broadly speaking Indexation refers to the type of investment where the investor acquires a fund which replicates an Index or ETFs. In other words, the investor is not choosing a specific share but it is investing in all the companies included in the Index /ETF 

The main advantages of passive investment over the active one are:

  • Lower fees (around 0.3% vs 1.5%)
  • Less time consumption
  • Minimize taxes (in the case of index funds, not ETFs)
  • Higher diversification (As an index contain a large number of companies)
  • Results are quite similar over a long period

Main disadvantages from Index Funds:

  • It is not possible to beat the market as you are investing in the market as a whole
  • It has a high degree of volatility (at the end, you are investing in stocks)

The most famous index funds are Vanguard, Fidelity, Blackrock and Amundi.

In the UK and the US, investors can directly buy the funds on the Vanguard/Fidelity/Amundi website. Nevertheless, investors in Spain have to buy them through a broker. Myinvestor.com is a digital bank where you can buy shares of Vanguard, Blackrock and Amundi funds.

(Free invitation to avoid maintenance charges: https://myinvestor.page.link/gfKjw6UH84bC4R1Z9)

Currently, MORAM is investing in 3 index funds:

  • iShares Developed Real Estate Index Fund (€) – IE00B83YJG36
  • Vanguard Global Small-Cap Index Fund (€) – IE00B42W3S00
  • Vanguard Emerging Markets Stock Index Fund (€) – IE0031786142

Our mindset for the Index funds is to cover those regions where we don’t have enough expertise to analyse and pick up individual stocks. 

Comments about the index funds MORAM is invested in:

Emerging Markets (Asia) – Looking for higher returns and diversification

Consequently, one fund is Emerging markets. This fund covers Asia (75% of the fund, plus a little exposition to emerging Europe and LatAm. Our rationale is that we see in Asia the highest development in the next 10-15 years, and we want to have exposure there. The main sector in the fund is Technology (20%) due to the steady growth for the last years.

Real Estate – A good moment to increase our exposition

Another fund is the Real Estate one. We saw a big opportunity here due to the crash in prices of REITs due to COVID-19. Moreover, because of our thoughts about high inflation, we want to have an exposition to Real Estate as it usually performs well in this type of situations. The fund mainly invests in the US and developed Asia. And it owns companies in several REITs segments such as Residential, Retail, Warehouses, …

Small Caps – The best player of our portfolio

The last one is Global Small Caps, these are our favourite stocks as historically, its performance has been the best of all stocks. The active management part of the portfolio mainly is focused in small caps, but only in specific sectors (Infrastructure, Renewable Energy and Technology at this moment) and regions (Europe and the US – permanently) so we want to have a global fund which covers small caps in other sectors. 

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