Tuesday 16 April 2013

Personalised index fund

PIF, how to make index fund

In the last couple of weeks I have been thinking extensively about creating my own personal index fund. The reason for this is that I do not like the concept of ETF and in many cases the classical index funds are charging too high fees. No fond is allowed to cost more than 0.5% per annum! I did however read an article that claimed that some funds in the US have now taken up the battle against the ETFs and were charging fees in the same region. If so then I would always pick one of those index funds.

Since I live in Germany I will use DAX as starting point for my personal fund. What I want to do is to create a weight of the fund which is contrarian and each half year or maybe once per year the fund would be re-balanced meaning that the "favoured" stocks will be sold off to buy more of the "non favoured" stocks. So there are several question marks that needs to be solved:
  • Finding a good weight
  • Create already a start equilibrium.
  • Decide on a %-age border for buy and sell (need to watch out for too high fees!) or
  • 3-5 top ones sold in favour of 3-5 bottom ones

Either way I need to figure this out and start to run an imaginative portfolio as soon as possible to build the experience of how it will work out because maybe it will be a better option than buying an index fund and allow someone else to do it.

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