What are the best ETF funds in fidelity

With these 5 mistakes you are guaranteed to screw up your ETF portfolio

Lack of diversification

Is only one ETF enough on the DAX? Hardly likely. Although you are much more diversified with this investment than if you only invest in SAP shares, the diversification effect is by no means sufficient. Germans tend very strongly to overweight their own market. This so-called "home bias" is triggered by the fact that we trust the domestic market more. We hear about most companies every day in the newspaper.

However, a robust ETF portfolio is also broadly diversified regionally - across several countries, ideally you cover the entire world. This will make you less dependent on regional special effects and benefit from the economic development in different national economies.

The branch distribution should also be checked at all times. Many portfolios have an overweight position in finance and technology. Especially in times of crisis, ETFs that also invest in the healthcare and pharmaceuticals industries performed better. Spread widely across regions, asset classes and industries.

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Day trading with ETFs

Day trading is basically doomed to failure. Some people achieve high returns in the short term, but things look different after ten years. And the associated stress is anything but healthy. Be it a single share or an ETF - think long-term.

A look at the MSCI World index reveals why this is so important. Anyone who has invested at least 15 years since its inception - regardless of when it was started - has always left the market with a positive return. Frequent back and forth increases the risk of missing the best trading days. If you had missed the 15 best days at MSCI-World in the past 30 years, your return today would be slightly above the zero line.

Remember: ETFs are a very effective way to diversify. A long-term investment horizon usually leads to the best investment results. Stay true to your investments and only act when your portfolio requires rebalancing.

Too many funds in the ETF portfolio

The more ETFs, the better? No way. Five ETFs alone are enough to build a robust portfolio model. It often happens that different ETFs still contain similar markets, sectors and individual stocks. This increases the cluster risk in your ETF portfolio and the correlations.

In any case, what can't do any harm is to add emerging markets and certain crisis-proof industry ETFs to an MSCI World. Due to the high US focus and companies in the financial services and technology industries, this definitely makes sense.

The more ETFs you have, the higher your average transaction costs. It can be particularly expensive at the end of the year, especially with the depot check. In addition, the overview often suffers with complex portfolios.

Sole focus on the total expense ratio

The total expense ratio shows the costs a fund incurs each year. These should of course be low, as costs can be one of the biggest return killers. For most of the “well-known” indices, this averages between 0.07 percent and 0.20 percent. The TER can be higher for "more specific" ETFs with a focus on ESG investments or industry ETFs.

In addition to the TER, you should always be looking at the Tracking Difference (TD). This shows the real deviation of the ETF from the reference index. The smaller the value, the better the ETF performs. Often it can happen that an ETF with a higher TER still achieves a lower TD - in this case, a focus on the TER alone puts you at a disadvantage.

The question of whether an ETF is replicated synthetically or physically and whether it is accumulating or distributing its income also plays a decisive role when it comes to taxes. So if you only focus on one key figure, you have to accept high losses in terms of return in case of doubt.

Blindly following expert tips

Be careful with supposed "expert tips". Many private investors blindly trust the opinion of stock market gurus or allow themselves to be influenced by media noise in their investment decisions. However, with such decisions you always run the risk of missing your investment goals.

As a result, your ETF portfolio may have a completely distorted structure that absolutely does not fit your long-term investment goals. It is important that you do your research. When choosing your sources, however, always ensure that the platform in question is highly reputable and, before each purchase, ask yourself critically whether your decisions really suit you.