The simplest (and probably most proper) way to passive investing

Forget about thinking about how best to structure your portfolio of ETFs. The truth is, buying ETFs does not mean that you are investing passively. If you have heard of the sector rotation theory, you would probably know that people are investing into sector ETFs at different times of the year.

What passive investing is meant to be

In the true spirit of passive investing, you should be continually investing into the same portfolio, and not selling it. In the same token, your portfolio should be also be truly diversified over every sector, every country, and every market, market capitalisation weighted.

In that sense, you should just buy the ETF that just buys every stock in the world, market capitalisation weighted. For myself, I put into the Vanguard All-World UCITS ETF (VWRL), but this is not a fund recommendation for you.

Note: the ticker has been changed from VWRD to VWRL.

A good explanation of passive investing

I read this article by Lionel, and watched the videos by Lars Kroijer (an ex-hedge fund manager) mentioned in the article. Here are the videos that I strongly encourage you to watch too. If you want to skip the videos, I have posted my own takeaways below.

Part 1: Intro Overview

Part 2: You can't beat the markets

Part 3: Only buy cheap world index trackers

Park 4: The simple portfolio to suit your risk

Part 5: Implementing the portfolio

My key takeaways and conclusion

Part 1: Really just an introduction
Part 2: It is impossible to beat the markets over the long term (read this for fun too: a parable)
Part 3: Buy an index fund that buys all the stocks in the world
Part 4: Have a portfolio of only the world index fund and a high-grade bond, altering the allocation depending on your risk appetite; go for a higher allocation of the world index fund if you are more risk loving and vice-versa
Part 5: Practical advice to doing it

If you have been reading my posts, you would know that I love simplicity but it must be proper. To me, this method of passive investing is correct, because you have the correct amount exposure to all equities in the world. Also, it is very simple to implement and you do not even have to think about portfolio rebalancing.
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