Im new to investing and have been doing my fair share of research and information gathering. My portfolio will be long term, this will be like a 20-30 year type of thing. My main question being. If you had to choose one. Which is your preferred ETF the VUSA or a global ETF like VWRL? (I wont be just investing in 1 ETF) it was more so opinions on the two of these.
New to this forum
Thank you.
Neither I would go with VWRP. None of us have a crystal ball so the general view is to invest worldwide to maintain and grow your global buying power.
Thank you…i prefer the look of the VWRP to be honest. May add this and maybe some VHYL into the portfolio.
So far, MSCI World (iShares)/FTSE Developed World (Vanguard) beats MSCI ACWI (iShares)/FTSE All-World(Vanguard).
As an example, with EUR Returns (as 2 Vanguard Acc ETFs are relative new, use the Dist ETF as proxy for 5Y Returns) :
Source: JustETF
I believe that is because MSCI World and Vanguard Developed World are missing EM.
Yes, MSCI World and FTSE Developed World don’t include EM and FM.
MSCI ACWI include both DM and EM.
I prefer to invest in an ETF that includes Emerging Markets, even if they are only 10-15% and the ETFs have slightly higher costs as EMs provide further diversification and they have lower valuations.
excuse my ignorance, but what would be the benefit of accumulated v’s distributed ETF’s
Would you also invest in a Frontier Markets (FM) ETF for the sake of diversification? And also in a crypto ETP (single asset or basket) for diversification?
The questions are to find out where to draw the line.
Btw, most developed countries companies are multinationals that have revenues in both DM and EM (and perhaps in some FM). Just see Apple or Microsoft or Coca-Cola (probably the most universal brand) in China or India, for example.
Maybe a simple explanation (JustETF site has several articles about ETFs):
Distributing or accumulating?
Your decision depends on your goals:
- Option 1 - You want to generate regular income from your portfolio. Go for distributing ETFs. They transfer cash straight to your investment account where you can withdraw it to spend on the good things in life.
- Option 2 - You want to maximise your future investment returns. Accumulating ETFs are the best choice as they automatically reinvest your income back into the fund at no extra expense. This compounds your returns, saves you time and spares you dealing fees.
It’s important to make the right decision as income is a vital part of any investment strategy, whether you need it now or can save it for later.
Chinese stocks made up 24.7% of the MSCI Emerging Markets index by capitalization, down from 40% three years ago. Meanwhile, India’s weight has doubled…
I cover diversification available for equities, at the moment I don’t include other asset classes such as commodities.
I think Frontier Markets would also be interesting however their cost does not make it worthwhile to explicitly target them except for those already included in typically MSCI ACWI or FTSE All-World ETFs.
Also the complexity of adding ETFs for very small weightings is a factor to consider.
But yes, different people will have different preferences in terms of diversification.
Market cap weighting is the easiest to implement and follow, however there are other options.
For example, for Europe and the USA we can use the SPDR Value Weighted UCITS ETFs, which consider fundamental factors.
They have lower Price to Book and Price to Earnings than market cap weighted ETFs whilst still having large diversification.
I prefer a developed world ETF like VEVE or SWLD and active funds for other things, such as emerging markets and small caps.
Besides Value Weighted, Equal Weighted indexing is also used in ETFs (some studies mentioned that it had better performance than the Market Weighted US indexes, after some analysis it seems correct during some time, but not all time).
Other less known indexing construction is Risk Weighted, used in “Low Volatility” ETFs.
I’ve only heard of equal weighted S&P 500, are there any others?
Maybe NASDAQ100 also?
The S&P 500 is the common Equal Weight index (with a couple of variations). According to JustETF (Germany), using “Equal Weight” search words, we have 21 equity indexes (23 ETFs); 2 commodity indexes (2 ETFs) and 2 crypto indexes (2 ETNs):
Without the “Equal Weight” search words there could be more indexes/ETFs (they could have their names without that words).
