My entire financial education comes solely from YouTube. Among the various channels I have explored, I particularly admire the academic rigour of Ben Felix. The reasoning and decisions I make regarding capital allocation—for instance, as in Asset Allocation Oct. 2024—stem partly from personal intuition but primarily from the education provided by various channels, some of which I now consider less valuable to follow. Based on Ben Felix’s advice, there are two main changes I need to make to my asset allocation.
First, I intend to drastically reduce, if not eliminate, my investments in individual stocks and instead allocate most or all of my capital to index funds. Following these guidelines would suggest investing in diversified ETFs with exposure to small-value stocks, such as AVWS or, as a more cost-effective alternative, a combination of ZPRV in the USA and ZPRX, which have a 0.30% TER instead of 0.39% and allow for a personalised allocation among Western countries. However, I consider current U.S. valuations to be high and do not feel comfortable deploying most of my capital under these conditions. On the other hand, I am much more confident investing in a Chinese index, like ICGA (balanced perhaps with 84X0, where valuations appear significantly more attractive. In this regard, I may still diverge from the more informed stance of Ben Felix, who acknowledges the inverse correlation between high valuations and expected future returns but does not propose an actionable strategy. Given this perspective, I anticipate that my portfolio composition will remain flexible, potentially undergoing adjustments similar to those I previously made with TLT (see Personal Finance (old)).
Another key component in my pursuit of higher returns—previously sought through inadequate diversification—is leveraged investing. My primary reference for this strategy is Ben Felix: Investing with Leverage. However, implementing leverage is more complex than simply selecting an ETF. There are two main options: obtaining a loan or investing in leveraged ETFs. Both are viable approaches. Leveraged ETFs are more cost-efficient but offer a much narrower selection, while loans are more expensive but provide greater investment flexibility and avoid negative correlation with volatility. For now, I will defer this decision until I have more time to consider it properly (see Last Steps to Finish the MoL in one Year). A loan option I might explore is ISP.On a different note, I should also acknowledge that taking a loan for investing will increase my personal risk and may therefore be influenced by the potential realisation of other financial plans, such as Cleaning Services for Rental Margin, which affect my personal savings. This may not be the case for larger projects like Private Insured Student Loans.