ETF Portfolio Allocation Percentages

Just take a look on this (currency is EUR, but USD or GBP will have similar diferences between the ETFs):

image

Source: justETF

BlackRock iShares ETFs have lower TER and higher returns than Vanguard.
It seems that EM drag down all ETFs that have EM. So why bother with them?

Bottom-line, iShares MSCI World beats all, by some distance.

1 Like

I moved from an all-world/country ETF to a developed world one a few years back.

As it’s a core holding, I don’t want the added short-term volatility and risk of emerging markets.

Plus, I like an active approach to emerging markets as there’s more scope to outperform.

1 Like

Even a more active approach (the best one for non-efficient markets, I think it’s better to cherry pick the potential winners), wouldn’t save the EM, or at least the major player, China.

As China has axed the mega cap companies (Techs). China is the EM big gorilla, but China has the highest political risk (not counting the other smaller EM with authoritarian/deficient political regimes), it restrict/control their companies direct or indirectly and US + western partners are sanctioning Chinese companies. Also their economy is slowing down.

A probably better alternative to China, would be India.

1 Like

That’s exactly why I like to have finer-grained control of emerging markets, so I can manage my China exposure. I like to overweight countries like India, Indonesia and Vietnam as compared with the index.

1 Like

I tend to agree with you, topher.

Very helpful, RLX! I was looking at something similar on that website.

Because with emerging markets you are more diversified.

By the same logic, why bother with developed markets? The USA has better performance and all others just drag it down.


My conclusion: Developed and emerging markets outperform each other in turns. The last decade was much better for developed markets. Nobody knows about the next one, so I prefer to have both. I don’t overweight EM though, just hold it in market cap weights.

1 Like

I agree with some, but most developed countries companies, specially the mega and large caps, have already exposure to EM, e.g. Apple and Tesla are present in almost all countries.

For me, we can tweak EM as whole, and choose careful some countries, e.g. India or some ASEAN countries.

History isn’t a good performance indicator for the future, specially in long time periods, the more older they are, the more they can be off from reality, e.g. 5 years data is more near to reality than 40 years ago, and even those aren’t perfect. Example, Japan were 40 yeas ago, a major economic powerhouse, now not so much. China had in past, high rates of economic growth and now it’s slowing.

@Dougal1984 and I were talking about trusts in another forum. Any thoughts about your preference between ETFs and Trusts? For example: Ashoka India Equity Investment Ord, Foreign & Colonial Investment Trust, JPMorgan American Ord, etc.

1 Like

In the past 20 years, DM was still up; however, DM & EM were just a touch above IWDA.
However, it Interesting to see that in the last 10 years the picture is completely upside down.

1 Like

How do you feel to get a core (between 50-70%) with a US tracker such as the S&P 500 Leaders, followed by an MSCI ACWI and lastly an India focused ETF? Basically a three-ETF portfolio with a strong US bias (core), exposure to Europe and Greater Asia. I can also be spiced up with a semiconductor ETF…

I hold two of those three. JAM and AIE have a record of outperforming the US and India indices respectively. Compared to many active investments, they are relatively cheap.

I like to hold both ETFs and ITs.

A core in passive ETFs guarantees me at least the same return as the market for a big portion of my portfolio, but I don’t want to 100% settle for average returns so I use ITs as satellite holdings.

Over the long term, the added leverage should boost my returns. :crossed_fingers:

1 Like

I ran a few simulations, and I think I might have found either a 3-ETF or a 4-ETF portfolio that might offer a relatively solid core with a couple of spiced-up satellites. I guess with a 70-80% core, the remaining 20-30% satellites could be managed accordingly. The only thing I am not entirely convinced is wether to add something to cover for Europe or not bother since it might just dilute the overall performance. By the way, the portfolio would be 100% equity as I am not a fan of bonds ETFs.

A today’s article about investing in China, the following quote is showing ETF allocation accordingly:

The key benchmark for emerging market investors — the MSCI Emerging Markets index — has been heavily weighted towards China, meaning that every dollar managed passively would have an important part invested in China. But MSCI’s EM index that excludes China, launched in 2017, is gaining increased attention recently from investors. The assets held by the iShares MSCI Emerging Markets ex-China ETF have risen to more than $10bn from just $120mn at the end of 2020. At the same time, the governing boards of a growing number of active institutional investors, including US pension funds, have mandated “ex-China” approaches.

1 Like

So far, I have been keeping China outside of my portfolio (I am betting on India), mainly because of the lack of internal visibility. However, I tend to agree that China could be used a short-term trade which would mitigate the risk exposure a long-term investor would have to deal with. However, like everything else, this is totally subjective and based on individuals’ knowledge and risk adversity.

1 Like

Information including personal knowledge and literacy is most important, even more than risk apetite. People could know and invest according to their risk adversity but information can disrupt it all.
That why I think that information is most valued commodity. I tend to invest more in enriching myself with information (general and specific), including in personal knowledge.

1 Like

I am also tempted to avoid getting an “All World” or “European” ETF simply because it looks like that when the US economy sneezes Europe and the rest catch a cold. I am leaning towards focusing on a US core, sticking a semiconductor ETF next to it and then focusing on a major growing economy such as India.
I know it might seem too simple; however, I have learnt that simplicity pays off and this still might be the case.

2 Likes

I’ve never been a fan of thematic ETFs but, as they go, semiconductors are likely a good bet.

This article by John Bogle on the proliferation of ETFs might be of interest:

2 Likes

This sounds more complicated, not simpler to me.

The USA and India are among the most expensive markets by the way.

1 Like

Apologies; however, I don’t see how this could be more complicated than having a portfolio with several ETFs. Are we talking across purposes?