How To Keep & Grow Your Money #4

In this letter we analyse the iShares MSCI ACWI UCITS ETF USD (Acc) ETF

Ticker: SSAC | Price: $85.12 | Market Cap: $13.2B | Average 10-Year Annual Return: 8.31%

What is it (short): The ETF tracker of the global economy.

What is it (long): The iShares MSCI ACWI UCITS ETF USD (Acc) is an exchange-traded fund (ETF) that aims to track the performance of the MSCI All Country World Index (ACWI). This index includes large and mid-cap stocks from 23 developed markets and 24 emerging markets, providing broad global exposure.

Here’s a beginner-friendly breakdown:

• Diversification: This ETF invests in a wide range of companies globally, offering diversification across different regions and sectors.

• Accumulation: The ETF is an accumulation fund, meaning it reinvests dividends instead of paying them out, potentially increasing the investment value over time.

• Expense Ratio: The fund has a total expense ratio of 0.20%, which is relatively low and helps in keeping costs down for investors.

Our thoughts: This ETF is suitable for investors looking to achieve global diversification in their portfolio with a single investment. It's designed to benefit from the growth potential of companies across both developed and emerging markets. Keeps things simple. Which is awesome.

Do your own research and if you would like to take our free course to learn how to invest into ETFs and Index Funds at Index Institution™ go here.

Madrid's New Tax Break to Attract Foreign Investors

The Community of Madrid has approved a new tax incentive called the "Mbappé Law" to attract foreign investments and talent. Here are the key points:

Here are the key points:

1. ax Deduction: The law offers a 20% deduction on investments in public debt, company shares, and contributions to limited companies for new taxpayers who establish residence in Madrid.

2. Investment and Residence Requirement: To qualify, individuals must maintain their investments and tax residence in Madrid for at least six years. This includes not being a resident of Spain for the five years prior to moving to Madrid.

3. Target: The initiative aims to boost economic activity by attracting high-net-worth individuals, professionals, and foreign capital to the region.

4. Implementation Date: The regulation will be effective from January 1, 2024.

This law is part of Madrid's broader strategy to lower personal income tax rates and enhance its attractiveness as a destination for international investors and professionals​ (Navascusi)​​ (Gentile Law)​​ (Comunidad de Madrid)​​ (Comunidad de Madrid)​.

Read more on this here and if you would like to explore legally paying less taxes and maximizing your freedom check out Global Optimizer™ or click here.

Financial concept to learn in this edition: (P/E) ratio

What Is a (P/E) ratio?

The price-to-earnings (P/E) ratio is a tool used by investors to determine the relative value of a company's stock. It shows how much investors are willing to pay for each dollar of earnings. Here’s a simple explanation:

Formula and Calculation

The P/E ratio is calculated by dividing the current share price of the company by its earnings per share (EPS).

Purpose

It helps investors assess whether a stock is overvalued or undervalued compared to its earnings. It’s useful for comparing the valuation of different companies, particularly within the same industry.

Types of P/E Ratios

• Trailing P/E: Based on earnings from the past 12 months.

• Forward P/E: Based on projected earnings for the next 12 months.

Key Takeaways

1. Understanding Value: A high P/E ratio may indicate that a stock is overvalued or that investors expect high growth rates in the future. Conversely, a low P/E might suggest that the stock is undervalued.

2. Comparisons: The P/E ratio is particularly valuable when comparing companies within the same industry or assessing a single company's performance over time.

3. Earnings Impact: Companies with no earnings or negative earnings do not have a P/E ratio because there are no earnings to measure against the price.

4. Historical Context: Long-term investors might look at P/E ratios averaged over many years (like P/E 10 or P/E 30) to understand valuation trends across business cycles.

Example

Let's say you are interested in investing in Company ABC. Here’s how you can use the P/E ratio:

• Current Share Price: $100

• Earnings Per Share (EPS): $5

To calculate the P/E ratio, you would use the formula:

This means that investors are willing to pay $20 for every $1 of earnings that Company ABC generates.

Comparing P/E Ratios:

• Company ABC (P/E 20): This tells you the market expects higher growth or believes the company is a good investment compared to its earnings.

• Industry Average (P/E 15): If the industry average is 15, Company ABC's higher P/E ratio might indicate that it is overvalued relative to its peers, or it might suggest that the market expects ABC to grow faster than other companies in the industry.

By comparing Company ABC’s P/E ratio to its industry average and to its historical P/E ratios, you can make a more informed decision about whether to invest in the company.

The P/E ratio provides a snapshot of how much investors are willing to pay today for a dollar of earnings, helping to make informed investment decisions.

To learn more about P/E Ratios read more on Investopedia here.