The basic idea of ​​passive investment is that investors with index funds such as ETFs do not need to form an opinion on the market.

Instead of looking for a needle in a haystack, you should rather buy the whole haystack, John Bogle, founder of the provider Vanguard, once recommended when he created the investment form and said: Instead of tediously looking for individual stocks that could, should be promising investors simply invest in the entire market using an index fund.

Tim Kanning

Editor in Business.

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However, many investors have now moved away from this basic strategy.

Above all, the long road to success of technology stocks has driven many of them into growth strategies in recent years.

Such an overweight of similar stocks in the portfolio has taken its toll this year, as a look at the price development of some ETFs over the course of a year shows.

The iShares Nasdaq 100 (WKN A0YEDL), which contains many growth stocks, lost a quarter of its value during this period.

The Deka Stoxx Europe Strong Growth (ETFL03), which is made up of only 20 so-called growth stocks, even lost a third.

Investors who, on the other hand, invested via the SPDR MSCI World (A2N6CW) in the world stock index, which comprises 1,600 stocks and is oriented across many countries and sectors, got off much lighter with a minus of 11 percent.

Diversify, but do it right

So diversification works: Spreading the risk across as many and as different stocks as possible has proven itself in many respects, even in the wild stock market year of 2022.

Investors should take this to heart if they want to plan their ETF portfolio for the coming year.

However, more than two-thirds of the MSCI World consists of American stocks, which critics also consider to be poorly diversified.

However, Ali Masarwah, ETF specialist at the Envestor fund platform, has to admit: "Reality once again proved the MSCI World right." The United States, which is now home to the world's largest stock market, has also proven to be more resilient in this crisis than many other markets and thus also stabilized the world stock index.

An index fund on the MSCI World or the similarly aligned FTSE Developed World should therefore form the basis of every ETF portfolio.

Since such an ETF is already broadly diversified, it can make up 60 to 70 percent of the portfolio.

Investors who want to mitigate the American overweight can do so by investing in other regions as an admixture.

The classic here is an emerging market ETF such as the Xtrackers MSCI Emerging Markets (A12GVR) from DWS, which invests in 1400 stocks from countries such as China, India, Taiwan and South Korea.

Europe could also be worthwhile as an additional investment.

The European stock markets have underperformed since the financial crisis.

In addition, the war in Ukraine and the high energy costs are affecting European companies in particular.

But that could be a good starting position for decent returns in the future.

However, Masarwah advises against the Euro Stoxx 50.

This includes only 50 individual values, many of which are also southern European financial institutions.

He rather recommends an ETF on the MSCI Europe or the Stoxx Europe 600.

Dare more democracy

After Vladimir Putin shot Russia completely off the investable scene this year with his war of aggression against Ukraine, many investors also became more skeptical about other emerging markets.

Above all, how things will continue with China seems to many investors more and more unpredictable.

While the Middle Kingdom was the preferred single market for European ETF investors for many years, the majority of them have been withdrawing their money from such index funds since August.

However, many emerging market ETFs consist of 25 percent or more shares of Chinese companies, which depend to a greater or lesser extent on the goodwill of the Beijing government.