My Complete ETF Strategy in 5 Simple Steps

Welcome to Financial Fluency - your weekly guide to mastering financial English, learning how money works, and making confident financial choices.

In this issue:

• A Look at the Markets: Vanguard FTSE All-World ETF (Acc)

• My Complete ETF Strategy in 5 Simple Steps

• Quote of the Day: Ken Fisher

• We value your feedback

• Word of the Day: Passive Investing

• Test Your Knowledge

• Whenever you are ready, here is how I can help you

A Look at the Markets: Vanguard FTSE All-World ETF

This chart shows the performance of the Vanguard FTSE All-World UCITS ETF (Accumulating) since its launch in July 2019. The ETF has roughly doubled over a little more than six years, rising from around 70 to approximately 140.

This corresponds to an average annual return of about 12%. As the standard financial disclaimer notes, past performance is not a reliable indicator of future results.

My Complete ETF Strategy in 5 Simple Steps

How I simplified investing for the majority of my portfolio

Seven weeks ago, we examined my mother's risky portfolio of ten UK stocks.

Today, you have everything needed to build a diversified global investment strategy that requires minimal maintenance and reduces the emotion in investing. It took me years to realise that simple beats complex. These five decisions now drive the majority of my portfolio. I still keep a small "fun portfolio" for individual stocks and speculation, but that's entirely optional.

This core strategy is complete on its own.

Step 1: Accept That ETFs Are Enough

My mother was lucky with her ICI investment, but she was taking unnecessary risk.

Her portfolio never exceeded ten UK companies. If British Leyland had been one of her choices instead of ICI, she'd have lost everything in that position. ETFs changed the game completely: one purchase gives you exposure to hundreds or thousands of companies. When you buy a global ETF, you're buying a slice of approximately 3,600 companies across the world.

You don't need to pick the next Amazon because it's already in there, getting a bigger share of the index as it grows.

Step 2: Decide Your Asset Mix

For most people, this decision is simpler than the financial industry suggests.

Equity ETFs form the foundation of most long-term portfolios. Depending on your age and risk tolerance, you might add bond ETFs for stability. Remember though, bond ETFs can lose value just like stock ETFs, especially when interest rates rise. During low-interest periods, individual government bonds or even cash might serve you better.

Alternative assets like REITs, gold, or crypto ETFs are other options for those wanting additional diversification, but these remain optional.

Step 3: Choose Your Geographic Region

This was my biggest change from my parents' approach.

They invested exclusively in UK companies. I choose global exposure through a FTSE All-World ETF. With one ETF, I own companies from Silicon Valley to Shanghai, from London to São Paulo. The index automatically adjusts as regions rise and fall. When US tech boomed, my allocation shifted accordingly without me touching anything.

The key question: where are you already financially exposed? For example, if you work for a UK company and own a UK house, adding a UK-focused ETF actually concentrates your risk.

Step 4: Keep It Passive

Star fund managers make great headlines but add potential risk for most investors.

I learned this watching Cathie Wood's ARKK fund soar 520% then crash 80%. Meanwhile, boring passive ETFs tracking indices just kept grinding out returns year after year. For my core portfolio, I choose passive ETFs with fees below 0.25% annually. They won't make me rich overnight, but they won't make me poor either.

Active funds belong in the speculation portion, if anywhere.

Step 5: Automate Your Implementation

The final step reduces the enemy of all investing: emotion.

I invest monthly into my global ETF. The transaction happens on the same day each month (or the next working day if a weekend), whether markets are up or down. This dollar cost averaging means I buy more units when prices drop and fewer when they rise. If I have a lump sum, I usually invest 25% immediately, and a further 25% every three months after that.

Rather than worrying about when to invest, I simply stick to my system.

Your Next Action

Use these five steps as your starting point.

You don't need to monitor markets daily, research individual companies, or time your entries and exits. You need to make these five decisions once, set up your automatic investment, and then focus on earning rather than managing. Next week, we'll examine the practical side: choosing the platform where you'll actually implement this strategy.

For now, ask yourself: what's really stopping you from starting?

As always, none of this is financial advice. Everyone should invest according to their personal circumstances, risk tolerance and financial goals.

Quote of the Day: Ken Fisher

This quote captures the essence of our entire five-step strategy. Rather than agonising over the perfect moment to invest or trying to predict market movements, we automate monthly investments and let decades of compounding do the work. Step 5's automation ensures we're always in the market, benefiting from time rather than wasting energy on timing.

We Value Your Feedback!

Your opinion helps us improve and lets you suggest topics or ask Business English questions for future issues.

Word of the Day: Passive Investing

Passive Investing - noun phrase - an investment strategy that tracks a market index rather than trying to beat it through active stock selection; involves buying and holding a diversified portfolio with minimal trading and management.

Context and Usage: Passive investing is the opposite of active investing, where fund managers try to outperform the market through stock selection and market timing. Passive strategies simply match market returns by tracking an index like the S&P 500 or FTSE All-World. This approach typically costs less, requires less time, and often produces better long-term results than active management.

Note: The term "passive" doesn't mean inactive or lazy—it means the strategy passively follows an index rather than actively trying to beat it. Research shows that most active fund managers fail to outperform their benchmark indices over long periods, making passive investing an effective default strategy for most investors.

Common Collocations:

Passive investing strategy - the approach of tracking indices rather than picking stocks
A passive investing strategy through global ETFs removes the need to research individual companies or predict market movements.

Passive investing approach - the methodology of index-following investment
Their passive investing approach meant they spent five minutes per month on their portfolio rather than hours researching stocks.

Benefits of passive investing - advantages of index-tracking strategies
The benefits of passive investing include lower fees, reduced emotional stress, and consistent market-matching returns over decades.

Passive vs active investing - comparison between index-tracking and stock-picking strategies
The passive vs active investing debate largely ended when research showed that 80-90% of active managers underperform their benchmarks over 15 years.

Business Example:
The pension fund shifted from active to passive investing after decades of paying high fees for returns that consistently lagged the market index.

Investment Context: Passive investing gained prominence through Jack Bogle's creation of the first index fund in 1976 and has grown dramatically with the rise of low-cost ETFs. Warren Buffett famously recommends passive index investing for most people, even betting $1 million that a passive S&P 500 fund would outperform hedge funds over a decade—a bet he won easily.

Interactive Quiz

Whenever you are ready, here is how I can help you:

We provide Business English lessons and Cambridge and IELTS preparation courses.

You can book a free 20-minute consultation with Iain over Zoom here:

Why not subscribe to our sister Business Fluency newsletter? It helps English students master essential business terms and provides practical strategies to boost your career prospects.

Disclaimer:

This newsletter is for informational and educational purposes only and should not be construed as financial advice. The information contained herein is generic and does not take into account your individual financial circumstances. You should always consult with a qualified financial professional before making any investment or financial decisions.

Additionally, the authors and/or publishers of this newsletter may hold investments in securities or other financial instruments mentioned herein. These are included for illustrative purposes only and should not be taken as a recommendation to buy or sell such securities or financial instruments.