ETF Portfolio | Raw materials and technology extremes

The ETF portfolio has not recovered from the downturn in the stock market. However, spread across different categories ensures that the loss remains relatively limited.

The ETF portfolio has been in negative territory most of the year, and currently the loss since January 1 is around 9%. It’s very annoying, but it’s not catastrophic. It is better than many large stock indices, which are often 15% or more in the red. The portfolio is spread over a number of different asset classes: stocks, of course, but also bonds, real estate, commodities (including precious metals) and also some cash. Not all categories are hit equally hard. In an excellent climate, this often means a somewhat lower return, but in bad times, the loss is also relatively limited. I do a short tour of the different categories and then check if there is a need for intervention.


It is the two technology ETFs that will be hardest hit. This should not come as a surprise: In rising markets, it is usually technology stocks that are rising the fastest and vice versa. The technology sector as a whole has a major advantage for investors: the sector has many areas where average or above-average growth can be expected.

An example is the automation of work. Many companies have recently struggled with staff shortages. Labor costs are also rising sharply as a result of inflation. It is therefore not surprising to expect that companies in such a climate will be more willing to invest in automation. It should be beneficial for many technology companies. List the companies in the iShares Automation & Robotics ETF (ISIN code: IE00BYZK4552). This ETF is dangling at the bottom of the portfolio this year, losing about 25%. It can not be ruled out that this decline will be even greater, but because automation is the future of many companies, this ETF can more than compensate for the loss in the long run.


Due to rapidly rising interest rates, bond ETFs are not doing well this year. As a result, they do not act as a counterweight in times of declining stock markets. It’s a shame, but the possibility that it could happen has been a major reason for keeping the bond weight in the portfolio low. High inflation is combated by raising interest rates. As long as it continues, the bond market will remain difficult. If inflation falls sharply, possibly due to declining economic activity (recession), the climate may improve.


Rising interest rates are also not good for real estate stocks. Future rental income will be relatively less valuable due to a higher interest rate (discount at a higher interest rate gives a lower amount). But also loans taken out for the purchase and maintenance of real estate cost more. A possible recession in Europe is also a risk for the European real estate ETF in the portfolio (EasyETF FTSE EPRA Eurozone ETF, LU0192223062). But there is not all bad news: Higher inflation can also mean higher rents in the future and a higher value of the property in the various funds. It takes some time before the effects of this are visible in the results of real estate funds.

Raw material

Commodities are a positive note in the portfolio. Two of the three ETFs related to commodities are showing positive returns for this year. Silver is on a small minus It is striking that the precious metals do not really benefit from the damage in the stock markets. This may be due, for example, to investors selling positions in precious metals to offset losses elsewhere. It is also possible that cash is valued more in turbulent times. This does not mean that precious metals can not rise. With continued high inflation, the price may be pushed up by buyers who fear the value of their savings. The fact that the price development of raw materials differs from that of the shares proves in any case that the dispersal effect actually works.


There is still a lot of cash in the portfolio. Purchases were made earlier this year, which means that the percentage is already lower than at the beginning of this year. The remaining amount now acts as a brake on losses, and is useful when potential new purchases have become very attractive. The question, of course, is when that point is reached.

No adjustments

That stock prices have fallen so much is no reason to bet extra money. A market that may decline for some time to come must be taken into account. If the US goes into a recession, the downturn in the stock market may continue for a while. In that case, the extra cash can be used for new purchases. It even makes sense now to target the portfolio for a further decline: the more risky stock ETFs out there, like real estate and holding a lot of cash. Such a drastic change will work if the current climate actually lasts for a long time. But it is also possible that the bottom will soon be reached. In that case, the strategy with a lot of cash will prove to be wrong and it will have to be bought back at higher prices, thereby deteriorating the portfolio in balance.

Trying to time the waves in the markets with buying and selling usually backfires. It is very difficult to buy and sell at just the right time. Dropouts can lead to the return ultimately being lower than if the entire trip had just been completed. The portfolio is quite balanced. If the decline continues, there will be cash to make additional purchases at very low prices. If the recovery is imminent, the other positions will benefit from the price increase. This portfolio is focused on the long term. Then small trade is usually best.

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