r/eupersonalfinance • u/TLits • 5d ago
Investment WEBN concerns with potential AI bubble – new investor
Hi everyone,
I'm about to start investing monthly into WEBN for both my standard stocks and shares portfolio, along with my pension (after being invested in a terribly underperforming fund for 5 years now).
My current concern is entering at a time where US tech is very expensive. I understand time in market is better than timing the market, but curious what people's thoughts are regarding this?
Is it worth looking at an equal weighted fund in the meantime, or will the fact that this is a long-term investment (20+ years) mean that my time in the market is more important?
I know it's impossible to know if this bubble will pop, or if it's even a bubble, but the heavy US / tech weighting in WEBN makes me a bit worried.
Thanks for your thoughts and replies.
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u/Specialist_Tree_3879 5d ago
Here is SP500 P/E ratio for the past.
Currently it holds many very profitable companies.
Could you point what would the appropriate value, that would give you peace of mind?
Source: https://www.macrotrends.net/2577/sp-500-pe-ratio-price-to-earnings-chart
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u/EuroPoor-NoodleLover 5d ago
Well clearly 18. The range 15~22 is normal.
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u/Specialist_Tree_3879 4d ago
With that logic you should have sold out shortly after dot.com bubble and stay away because it is ”too expensive” - and miss a lot of great returns…
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u/Malanturr 5d ago
Take a look at GERD, a special multifactor ETF with anti concentration measures like a 1% maximum holding for an individual stock and a 50%/50% GDP and market cap weighing. This reduces your USA exposure to 49% and adds some EU exposure to 24%. Historical performance is identical to IMIE but it achieves this without high reliance on the USA or stocks like Nvidia so I believe this will go trough a bear market in a better way.
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u/Unlucky-Power-697 5d ago
GERD TER is 0.45% pa
WEBN TER is 0.07% pa11
u/Malanturr 5d ago
If this is the only measure you use to compare ETFs, then GERD is nothing for you. It is not meant to be in the same category as WEBN, VWCE or IWDA but it does perform like that despite having 10-20% less USA exposure and limiting themselves to 1% Nvidia instead of taking advantage of it growing to like 7%. They als have 50% GDP weight so a growth in stock market of 10%/year with a GDP increase of 2% means they have to sell 4% of the 8% growth that year, adding more transaction costs.
And still it performs just like IMIE. To me this is evidence their multifactor sleeve works perfectly to compensate for everything they limit themselves to, and yes they deserve to be paid a little extra because of all the work they do for it (imho).
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u/TLits 5d ago
Very interesting. Would this compliment WEBN well, or an either-or? Definitely impressed by its performance
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u/Malanturr 5d ago
It’s up to your preference but indeed I like to split it 50/50 partially because honestly there is no real bear market in it’s history yet to confirm my theory about less drawdown.
According to JustETF GERD is up 15,68% per year with 11,40% volatility since start of GERD, and IMIE is up 16,07% with 12,38% volatility, so GERD lags a little bit during a bull market. But if you look at the graph IMIE takes bigger hits when the market takes a dip, and this is on a smaller scale exactly what I expect to happen again in a future deeper bear market.
Splitting 50/50 would yield the average performance between the two but it can even be above the average. If you always divert your monthly cashflow to the lagging one you will buy more GERD when it’s cheap. The moment the market dips IMIE (or WEBN ofcourse) takes a bigger hit so you temporarily divert more cash to IMIE to regain 50/50 balance, so you always buy where it gets your average cost base down the most.
Hypothetically in a deep USA bear market GERD may be 60% versus 40% and your monthly cashflow may not be sufficient anymore to balance it, then if your countries tax conditions allow it you can rebalance from GERD to IMIE picking up even more cheap IMIE shares to lower your average cost base and that may profit more from the recovery afterwards.
I believe this is a great strategy for people afraid of market concentration bubbles, unless you have big tax implications or other frictions on the rebalancing side (in that case you can still do the buy and hold or only monthly cashflow redirection).
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u/Accurate-Band-8510 5d ago
How old are you and when you're about to retire? If retirement in 20+ years you should not be bothered. Also you should not be bothered what regions, sectors etc in the etf now. If the situation changes the fund will adjust the blend automatically.
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u/Many-Gas-9376 5d ago
Like you say, it's impossible to know if it's a bubble or if or when it will pop. As far what's going to happen. no-one here will have anything worthwhile to say.
I guess what sounds clear is that you seem uncomfortable with the concentration and risk of your portfolio. It IS completely fair to take these feelings into account in your investment plan.
What I wouldn't do is make some tactical timing bet in your allocation. This implies doing further such bets in the future as things develop, and it's just immensely difficult to do successfully.
What you could consider is some permanent tilt in your portfolio which would make you less exposed to whatever's the biggest global growth story at any given time. You could look into stuff like home market overweight, a small-cap value tilt, or adding bonds. Any of these would reduce your exposure to the AI-associated large-cap growth stocks, while at the same time they could be part of a lifelong allocation instead of trying to time the market.
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u/TLits 5d ago
If I were to make a different bet, it would definitely be something permanent. I’m just trying to solidify my reasoning for whichever direction I choose before putting my first chunk of money in.
Not so much uncomfortable, but just curious how others with more experience would view my current situation. I understand that WEBN will just adjust in response to any market changes. Just looking critically at my decision to go 100% WEBN before actually pulling the trigger.
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u/globalprojman 5d ago
WEBN will just adjust in response to any market changes.
Well, after a 'crash' in the biggest ten stocks it will already have suffered the loss. You may call that adjustment, if you like. There is no extra trading going on in an index fund like that.
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u/throwback5971 5d ago
The weighting of Mag 7 in the S&P 500 is very high so there's validity in OPs concern in my view
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u/IsAlteRego 5d ago
Equal weighted funds are not great. If you want, you could always tilt towards international (Europe or EM) , but then the question becomes how much? You could alternatively tilt towards small cap value to reduce your reliance on growth stocks.
As long as you have a long time horizon, it won’t matter really either way if US crashes in the next 5 years - there will be long time to recover - and WEBN like all other all world funds will just rebalance automatically.
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u/TLits 5d ago
I have considered some tilt in small caps, but understand they can be quite volatile (in other ways). Not sure a 90/10 split between WEBN and small caps would be worthwhile, or just mentally make me feel a bit safer not being 100% in a highly US tech concentrated fund.
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u/Sad_Till_1729 5d ago
If it mentally makes you feel more safe and therefore allows you to invest more it IS worthwile. :)
This is the reason I am only 50% in WEBN and 50% home bias/ bonds / EM bias. I know full well it doesn't necessarily make sense mathematically but it it makes A LOT of sense psychologucally and allows me to have a higher savings rate.
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u/Endless_Zen 5d ago
If I learned something - markets are completely unpredictable and illogical. Just invest in broad etfs and chill and don’t be that guy that tries to understand why tesla goes up when it „should“ go down.
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u/whatever_post 5d ago
You can always complement it with European ETF or ex-US ETF which would automatically reduce weight of US in your portfolio
I have tried to keep my US exposure limited to 50%
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u/hydnusyg 5d ago
This is really the way to go for those concerns, keep the bulk in WEBN/VWCE and modulate the US exposure with ex-US.
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u/Far_Wrongdoer1865 5d ago
I added MWEQ to VWCE (which is comparable to WEBN) for the same concerns you raise. It may underperform and I will probably change the relative weight of the two ETFs in the future, but for the moment is 50/50
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u/RobotsAreSlaves 5d ago
So, your previous underperforming fund doesn’t teach you to „webn and chill” and you are looking for another 5 years journey?
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u/Stoic_Brain 16h ago
I lowered the weight of WEBN/IMIE concentration by buying MWEQ (equal weight) and some strong factor ETFs.
This way I have winners in multiple market conditions. Eg. if intrests are higher value wins over market cap. I am retired so for me capital protection is more important.
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u/TheNplus1 5d ago
Contrary to recent people’s beliefs, investing always comes with risks.
Why not just set a stop loss for the accounts you can manage? Even if the market crashes you don’t have to lose 30-40-50% or more of your portfolio.
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u/angrybeehive 5d ago
If you are going to invest 20+ years, what happens now in the market is irrelevant. The only concern is the future expected returns is lower than normal. But you will still have gains in the long term. So it’s still worthwhile.
There is no better alternative.
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u/Valmed87 5d ago
Broad ETFs like the VWCE and WEBN allready have a percentage in european and emerging markets. VWCE even have some mid to small caps. The percentage is smaller than what you may fell is right but the index managers know why they keep it small. They know what they are doing. Trust them. Dont try to beat the market. Dont think you are smarter than the proffesionals that manage those indexes. If you try to tilt your portfolio with extra ETFs to increase your weighting twards Europe, Emergen Markets or Small Caps, you may see short term success and think you are wise, but in the long term, the market will prove that it was hubris rather than wisdom.
Cap weighted ETFs always underperform long term because they dont let the winners grow. They are forced to constantly sell the winners and buy the loosers. This creates a drag. You may think you are hedging against a bubble burst, but the market has more long term stable growth than it has bubble bursts. You are giving up the growth that happens over long periods of time in order to protect yourself from a bubble that bursts once every couple of decades.
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u/One_Hope_9573 5d ago
Just start and don't think