I’m always on the lookout for a long-term exchange-traded fund (ETF) to buy and hold. It’s an investment that I can use to try and to reduce the stress of buying and selling shares on a regular basis. The ‘set and forget’ ETF that I’m looking at for 2022 is Xtrackers MSCI World Value Factor UCITS ETF (LSE: XDEV).
A ‘set and forget’ ETF
This fund tracks the MSCI World Enhanced Value Index. The index follows medium- and large-sized firms in the developed world. The companies are selected based on three variables: price-to-book value, price-to-forward earnings, and enterprise value-to-cash flow from operations.
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I like ETFs as they offer me diversification through owning a single share and this is no exception. Rather than pick individual shares on an ongoing basis, this fund covers a wider variety of countries, firms, and sectors. It also rebalances twice a year meaning that it’s constantly updated. In that respect, the ETF does the heavy lifting for me in terms of buying and selling single stocks.
This ETF is well diversified across sectors and countries. The US accounts for the largest percentage of companies at over 40% of Xtrackers MSCI World Value Factor UCITS ETF. Japan represents the second-largest proportion at just under 25%. Firms from the UK constitute about 10% of the fund. Sectors covered include technology, financial services, and healthcare to name but a few. Companies in the fund include well-known names like Intel, Toyota, and International Business Machines (IBM).
The performance has been mixed. Year-to-date, the ETF’s share price is down by almost 4%. Also at the time of writing, it’s about 6% off its high this year. However, over the last 12 months it has increased by over 15%.
One drawback of a ‘set it and forget it’ ETF is that I do not get to choose the individual companies myself. Nor when to buy and sell the individual firm’s shares. At the back of my mind, I think that perhaps if I bought and sold the stocks myself, I might outperform this fund.
For example, I’ve been looking at oil and gas stocks for some time now. It’s possible that if I had invested in companies from that sector at the beginning of the year, I would already have a healthy return.
That said, nothing is certain in investing and even if I could time the buying and selling of individual stocks to perfection, there are the transaction costs, which would have chipped away at any return.
All things considered, I think that this really is a ‘set and forget’ ETF. This year seems to be full of uncertainty so far and in such an environment I’m not so confident about timing the market myself. Therefore, for my own holdings, I would be happy to include Xtrackers MSCI World Value Factor UCITS ETF as part of a balanced portfolio.