How does Selma select investment products?
Note that, although this is a nice read, you don't have to understand these details to invest with Selma 🙂
Selma looks through all available investment products and picks the best ones – from different providers.
Selma has a strict no kickback policy. This means that we are unbiased and independent in our product choices.
Selma selects investment products (especially ETFs) based on the following criteria
Hard Facts – Quantitative Factors
Over many years, little differences in costs can snowball into large missed gains, due to the compounding effect. There are recurring costs (by the ETF provider), measured with TER (Total Expense Ratio), and there are trading costs (differences in prices for buying and selling the same product).
Selma favours large AuM (Assets under Management) and multiple market makers, to make it possible for you to enter and exit your investments very quickly and at low costs.
- Low price per share
In order to make rebalancing easier and more efficient, Selma prefers ETFs with low share prices.
- Return-risk profile
Does the ETF's return and risk so far match the desired profile?
- Tracking error
The closer the ETF is tracking the index, the more transparent the return and risk outlook.
International investments naturally require buying foreign currencies. For company share indexes, Selma prefers to keep the foreign currency. However, investments in loans to companies and countries are usually "hedged back to Swiss francs" (converting the investment into Swiss francs), because the currency risk would be disproportionately large for an otherwise rather stable investment.
- Index coverage
How well does the index of the ETF cover the region or asset class? Selma aims to spread your investments as much as possible globally and across asset classes, in order to give you better returns at lower risk.
- Replication policy
ETF providers can either own each company of the index that the ETF is tracking (so-called "full physical replication"), or they can use fewer companies and model the rest of the index through a process called "synthetic replication".
Selma prefers full physical replication to give you undiluted full exposure to all companies in an index.
- Tax treatment
Does the ETF have negative tax consequences? The ETF's country of registration can make a significant difference in how much company dividends it passes on to you. In some countries a large part of the dividends may be lost due to withholding taxes.
- Distribution policy
Selma favours ETFs where company dividends are automatically re-invested into the company shares. Over the long run, this should improve returns and save trading costs.
- Counterparty risk
Selma invests only in products that are UCITS-regulated (Undertakings for Collective Investment in Transferable Securities Directive 2009). This ensures transparent investment reporting standards and clear risk management rules.