ETF Advice

Hello All :blush:

I’m after a little advice on the following holdings from some seasoned ETF holders. Im trying to have a little tidy up pre-new year.

I currently have the following ETFS

VWRL
VEUR
VFEM
VJPN
SMT - Scottish Mortgage Trust £SMT
City of London Trust - £CTY

These are currently my top holdings, followed by a lower allocation to individual stock picks.

Can anyone see if there are any major overlaps in these ETFs? I’m aware there may be some with VFUR and CTY - But not a great amount ?

Or any exposure that I may be lacking in ?

Thanks in advance :blush: x @Freetrade_Admin @admins please approve my post! @sampoullain @Viktor @staff

Morning @Investor11

This thread might be of use to you.

I sort the advice of the ETF hive mind last month here and can’t speak highly enough of the reasoned replies.

VWRL is a bit of a beast and cover many of the individual funds you own, what is your plan? You’ll see on the thread that I’ve build a VWRL style global tracker from constituent funds, this give me control and reduces the on going fees.

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@neilb ha @investor11 posted this message twice and I said something similar to you in the other one. Had I seen your reply I wouldn’t have replied …

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Your input is ALWAYS welcome @bitflip

Although I think my post disappeared for a while, I though I lost my mind!

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VWRL will overlap with any other ETF (it is a world ETF). But if you look into it then it is concentrated in the USA.

Your breakdown:
VWRL (all world ETF) - concentrated in the USA (60.1%). Next 4 locations are: Japan (6.4%), China (3.8%), UK (3.8%), France (2.7%).

VEUR (developed Europe) - top 5 locations = UK, France, Switzerland, Germany, Netherlands.

VFEM (emerging markets) - top 5 locations = China, Taiwan, India, Brazil, South Africa.

VJPN (Japan) - 100% Japanese.

You could restructure this into 3 (maybe 4) ETFs.

S&P500 (to cover the USA).
VEUR (to cover Europe).
VFEM (to cover emerging markets, especially East Asia).
Maybe also LTAM (to cover Latin America).

This is not financial advice and is just my opinion

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It is important to realise that for a passive world tracker 60% USA is correct. If someone wants a world tracker it should not only be 60% USA but also it should be the “right 60%”. To be clear that 60% is not set in stone and will change … it could become higher or lower. Simply investing 100% in VWRL is not a bad move. Better to understand what a passive investing world tracker is before unbundling. One might want to bias one’s portfolio - for all sorts of reasons, but be clear that is what is happening.

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This was my final portfolio.

I don’t think the s&p500 is broad enough so opted for VNRG instead.

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Thanks @NeilB I’ll take a look

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Meh, 60% for the USA is far too much I think - China is almost touching the USA and will overtake in the next 10 years. The centre of the world economy is shifting East (India and China will be the largest economies). Yet China and India make up ~5% of this ETF.

The ‘world ETF’ does not reflect the economic make up of the world?

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You are entitled to your opinion about how you want to allocate your money. That is not what is being questioned here.

It is worthwhile to understand what a world passive tracker’s purpose is and what it does. It most certainly is not there to allocate based on future potential or even present GDP: it is a public exchange market capitalisation tracker. It is fair if someone doesn’t like the 60% USA allocation and someone wants to tilt their portfolio. The point is that people should understand what it all means. I think a read of the thread that @NeilB mentions above would go a long way to understanding these things.

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It’s not supposed to reflect the economic make up of the world, it’s supposed to reflect the world public equity markets. If you have a country that had an economy the same size as the USA but 90% of it was driven by private equity, state owned or non-profit organizations then you’d expect it to only make up a small part of an index.

For example Saudi Arabia’s economy didn’t grow 5X in 2019, but it’s market cap did - because of the Aramco IPO (which effectively moved a huge business into the public equity market)

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Thanks for clearing this up @Cameron and @bitflip - it is an interesting discussion.

FYI my largest holding is actually the VWRL (~£2,000), but I am increasingly looking at ETFs tracking East Asia (MSCI India, MSCI China etc).

Appreciate the info and discussion. That is what is good about these forums :smiley:

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I’m over-allocated to EM as well so I agree with the sentiment. I just wanted to make the clarification that a much smaller % of those markets is ‘investable’, so even if their economy was the same size it’s logical that the market cap would be much smaller.

It’s entirely possible that China becomes an even more massive economic power but through further nationalization or delisting actually reduces its public market capitalization, which would mean even smaller allocations in indices.

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@cameroon Same here. I want people to understand what the 60% actually means. And for example having a. 25% -25%-25%-25% USA-Europe-LAM-Far East portfolio is not a balanced portfolio.

Of course the 60% will go down “automatically” if the other markets went up as a percentage of total capitalisation.

If people want total “true” diversification they need to look outside stock markets.

@NeilB how often do you think you would need to alter your investment amounts based upon those ETFs changing their exposure / holdings? Do they change them much?

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How about MCSI India in comparison to Franklin India?

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This is a new plan for me and so I don’t know how often id rebalance them. When dividends some in (because accumulating aren’t available) I’ll probably either evenly weight or overweight as I see fit. I’m not going to be tracking the 0.01% of the global economy.

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@bitflip is my sage on this one.

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@ravi.ramireddy I don’t understand the question. Personally, I would hold one of them not both. But is your question “what is the price of a share?”? At the moment $FRIN is c. £26. There are several different MSCI India ETF’s. You would need to look them up e.g. $IIND is around £5. But share price is a bad way to compare them. You should look at what they track, how they grow, the expense ratios and so on and so forth.

To put it even more simply say you invest £1000. You care about what happens to your £1000. Whether you bought 200 shares at £5 or 40 shares at £25 … is irrelevant.

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In case you’re not aware, these two are investment trusts, not ETFs. They are actively managed. That’s not to say they’re bad or anything, just that they do not passively track the index like those ETFs.

For your info, I hold both too.

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