Global Portfolio One
Invest anti-cyclically using liquidity reserves
In 5 Minuten lernst du:Invest regularly and anti-cyclically
In Step 2 you made your first investment in the MSCI World Index. Now let’s look at how you can systematically cover the entire global economy.
In addition, you will build up an investment reserve for future financial crises. With this reserve, during crises you inject the economy with countercyclical capital. This increases your returns in the long term and reduces portfolio volatility.
Exactly how and why this strategy works is described in the book “Erfolgreich wissenschaftlich investieren” (in English: “Successful Scientific Investing”) by Dr. Andreas Beck – the book is only available in German unfortunately, but we can describe the key points on this website and integrate them in our investment strategy.
Global Economy Investment & Liquidity Reserves
Invest globally and systematically. Inject liquidity into financial crises. Investing according to the concept of “Global Portfolio One” from the book “Erfolgreich wissenschaftlich investieren”.
A scientifically proven investment strategy for an investment time horizon of 10 years minimum.
Side Note – “Successful Scientific Investing”
This is how Global Portfolio One works.
Part A: “The world economy – World Ltd”: Investment in approx. 7,000 companies worldwide via broadly diversified ETFs (including small and medium-sized companies, industrial and emerging countries). Control the weighting by taking into account company profits and valuations. In this way, you achieve the most comprehensive possible representation of the returns from the global economy in the portfolio.
Part B: “Investment reserve”: Investment in long-term safe government bonds, AA and AAA. This reserve is available as liquidity to be reallocated countercyclically to the world AG during crises.
Different weighting of the parts depending on market cycles
A: Regular
Stock markets in “regular operation” – risk capital costs are at average levels:
80% invested in Global Equities / 20% investment reserve.
B: Crisis
Stock markets decline by at least 20 percent – “Equity shortage” – risk capital costs are significantly elevated:
90% invested in Global Equities / 10% Iiquidity reserve – first installment of the investment reserve is invested.
C: Escalation
Stock markets fall another 25 percent – risk capital costs are sky high:
100% invested in Global Equities – the investment reserve is fully invested in Global Equities.
Active management of the portfolio in crises
In a normal market environment (A), 80% is invested in global Equities and 20% of the capital is held in the investment reserve. In a crisis, this reserve is invested anti-cyclically, therefore exactly when the companies urgently need capital. This results in higher returns when the situation calms down again.
Switch to phase B: Crisis
- Stock market decline by at least 20% from the latest 3-year-high in phase A
- Stock market rises at least by 50% from the latest 3-year-low in phase C.
Switch to phase C: Escalation
We are in phase B and the stock market declined at least 25% since the switch from A to B.
Back to A: Regular
The stock market rises by at least 25% in phase B.
On one hand, this anti-cyclical portfolio management gives you a higher return in the long term and, on the other, the maximum loss of assets in your portfolio is reduced.
For more details, we recommend “Successful Scientific Investing”, which you can download for free from the Global Portfolio One website (German).
How do you implement the concept?
Option 1: Recreate and manage the Global Portfolio One principle yourself
In doing so, the investment strategy of Step 2 is extended by just one additional ETF so as to invest efficiently in the entire global economy. In addition, an investment reserve is held in a current account or in secure government bonds.
Tip: As long as your investment reserve is less than €100,000 you can keep the full amount in your free current account. If this reserve is invested anti-cyclically, the return can be improved and portfolio volatility can also be reduced.
Ultimately, only two ETFs are required for the “World Ltd.”
MSCI All Countries World Index (ISIN: IE00B6R52259) – large and medium-sized companies worldwide.
MSCI World Small Cap Index (ISIN: IE00BF4RFH31) – small companies worldwide.
A deposit-protected current account can be used for the investment reserve. It also makes sense to hedge against rising inflation and invest part of the reserve in inflation-linked euro government bonds. This is of particular interest to those investors whose investment reserve is more than €100,000. The following index can be selected for this:
Bloomberg Barclays Euro Government Inflation Linked Bond Index
Three building blocks for your “ultra-stable” portfolio
Phase Normal
70% MSCI All Countries World Index
10% MSCI World Small Cap Index
20% cash
Phase Crisis
78% MSCI All Countries World Index
12% MSCI World Small Cap Index
10% cash
Phase Escalation
85% MSCI All Countries World Index
15% MSCI World Small Cap Index
10% cash
To maintain this desired weighting, a rebalance takes place after each quarter. The adjustment after a phase change takes place promptly after the decisive daily closing price. This requires active management and monitoring of the financial markets. But don’t worry, we’ll support you for free!
>> Receive necessary rebalance activities by email in a timely manner and free of charge <<
Option 2: The GPO-fund – the complete solution
[Disclaimer: This Option may not be available outside of DACH-region (Germany, Austria and Switzerland.]
You don’t want to waste time on such an active investment strategy? How about a fund that reflects the Global Portfolio One and automatically rebalances according to the current market situation?
On Smartbroker, you can already create a savings plan from €250 per month, which fully automatically invests in the GPO fund for you!
This fund from Dr. Andreas Beck reflects the entire “World Ltd.”, weights the companies based on the fundamental indicators P/E ratio and P/B ratio, and holds the liquidity reserve (according to the market situation) in safe government bonds.
With ongoing costs of 0.7% p.a., this product is a fair solution for those investors who do not want to actively manage their portfolio.
So all you need is one fund in your portfolio!
