Thoughts on [mostly] investing in ETFs

freilona wrote: ↑ Read a nice article recently about small caps not really outperforming large caps unless bought at opportune moments, so not concerned with not having “total markets” ETFs. But some might suggest VCN & VUN for “more companies for the same MER”. Was your reason to go with VCE and VFV based on their performance, MER or?..

MrMikeDD wrote: ↑Same with, should I just go all in VEQT or should I do those other 4 (VCE/FVF/VE/VA) so I can control how much goes where. But really, the allocation in VEQT are pretty close to what I would want anyways.

MrMikeDD wrote: ↑ Hi everyone. I'm thinking of streamlining my investments to mostly ETFs while keeping a few companies I like and I wanted to get other peoples thoughts on the matter.

For my TFSAs, I made a list of the ETFs I like from Vanguard:

• VCE - Canadian Market - 36%
• VFV - US Market 50%
• VE - European Market 7%
• VA - Asia Pacific Market 7%

For FRESP or RDSP where I have a smaller amount of money to work with, I would use VEQT - Mostly North America, some Global.

If I ever want higher dividends, I would go with VDY - Canadian dividend paying companies.

Other Investment Companies
I looked at iShares, TD and BMO ETFs but I feel like Vanguard had mostly what I want.

Example, BMO has a China ETF but I rather use VA for exposure to more Asian markets.
Or, TD has TGGR but I could just use VDY above.

Your Input
Going forward I would like to invest in:

• Mostly Equity/Growth ETFs
• A few specific companies I like

So my questions to you are:

• What do you think of those 6 Vanguard ETFs?
• Are there other ETFs I'm not thinking about?
• Are there ETFs you use from the other 3 (or anywhere else) that you like?

Thanks everyone.

craftsman wrote: ↑ The 'issue' I see with most of these large index funds is that they are almost always market cap-weighted - ie the company with the largest market cap in that index has the largest weighting. Therefore, the vast majority of your holdings are in large, if not, mega cap, companies. For example, VFV is an S&P500 index fund which means that 27.4% (according to Vanguard) of the fund is in Information Technology with the vast majority of that 27.4% in a handful of names like Microsoft, Google, and Apple... Even on a sector level, the Information Technology sector accounts for more than 6 of the 11 sectors combined. In other words, using the VFV overweights one sector and a handful of large mega-cap stocks. If you are OKAY with that and know that going in, then that's fine. But don't assume that the portfolio will be balanced.

A slightly better option would be the VUN which is the US Total market fund that includes all stocks in the US but still at a market weight. Yes, you will still be tilted towards a few big companies in one sector but at least you will have some smaller cap plays as well.

To get better diversification, you can look for an equal weighted fund (each stock has the same allocation in the fund) rather than a market weighted one and/or you can also throw in something that invest in the Russell 2000 whcih increases exposure to the mid and small cap areas. BTW> Historically, mid and small cap companies have seen a better return than large caps over time.

daverobev wrote: ↑ It'd be nice if there was an index that capped the larger entries at a reasonable percentage. But then it isn't cap weighting. Does seem.... unfortunate to have an ETF with 7000 stocks, but 20% is in the top 10.

You're right, going for the 'next index down' is one solution. There is a TSX completion index (so, excludes the TSX 60). There is the FTSE 250 for the UK. And so on.

craftsman wrote: ↑ The 'issue' I see with most of these large index funds is that they are almost always market cap-weighted - ie the company with the largest market cap in that index has the largest weighting. Therefore, the vast majority of your holdings are in large, if not, mega cap, companies. For example, VFV is an S&P500 index fund which means that 27.4% (according to Vanguard) of the fund is in Information Technology with the vast majority of that 27.4% in a handful of names like Microsoft, Google, and Apple... Even on a sector level, the Information Technology sector accounts for more than 6 of the 11 sectors combined. In other words, using the VFV overweights one sector and a handful of large mega-cap stocks. If you are OKAY with that and know that going in, then that's fine. But don't assume that the portfolio will be balanced.

A slightly better option would be the VUN which is the US Total market fund that includes all stocks in the US but still at a market weight. Yes, you will still be tilted towards a few big companies in one sector but at least you will have some smaller cap plays as well.

To get better diversification, you can look for an equal weighted fund (each stock has the same allocation in the fund) rather than a market weighted one and/or you can also throw in something that invest in the Russell 2000 whcih increases exposure to the mid and small cap areas. BTW> Historically, mid and small cap companies have seen a better return than large caps over time.

MrMikeDD wrote: ↑ Hi everyone. I'm thinking of streamlining my investments to mostly ETFs while keeping a few companies I like and I wanted to get other peoples thoughts on the matter.

Janus2faced wrote: ↑ is this a 180 turn from your other thread?

https://forums.redflagdeals.com/thought ... o-2472431/

or are you considering a 50/50 or some other weighting?

will888 wrote: ↑ Getting too critical of the index is to say the market is wrong and inefficient. I really like the a straight up S&P 500 index ETF. Keeping it as simple as possible.

craftsman wrote: ↑ Not really critical but rather informing people to know what they are investing in.

Besides, the market really doesn't have too much to do with what is right for the individual investor as each investor is a unique individual with a unique situation. The OP seems to agree with most financial managers when they state that people should have multiple geographical regions represented within a portfolio! The problem is almost all of them have different percent allocations. If you go by the idea of market efficiency, then who/what is right when it comes to geographical region representation?

daverobev wrote: ↑ Well... again the easy answer is just ignore country, and go cap weighted. The top companies are all multinationals anyway - how 'American' is Apple? Well, sure the design, a good chunk of the profit... but there is a hell of a lot that isn't.

And a lot of the ownership as well I'm sure. How much is owned by Canadian ETF-holders? And British? And...? Must be a really solid chunk.

craftsman wrote: ↑ Going cap-weighted means that you are also ignoring sector allocation and better diversification. After all 27+% of the SP500 is info tech and if you include tech stocks that were moved out of the info tech sector in order to 'rebalance' (ie Facebook and Alphabet), tech exposure is actually closer to 50% and that 50% is in a handful of companies. You need other indexes in other countries to help balance out the sectors (ie Canada will fill in the materials, energy, and financial services) in order to diversify.

But hey, if you want to put all of your funds into ONE cap weighted index, go right ahead.

Janus2faced wrote: ↑ is this a 180 turn from your other thread?

thoughts-stock-picks-income-portfolio-2472431/

or are you considering a 50/50 or some other weighting?