Scalper1 News
Summary The ETF has a good expense ratio, but investors can get a lower ratio by combining VEU and VOO. Investors need to remember the importance of international diversification even as domestic equity as thoroughly outperformed during the latest bull market. While I support having some international diversification, this fund offers almost 45% of the holdings as international equity. That is a bit too high for me. I see this fund as being maximized by investors that want to add it to their domestic allocations or investors with a long time horizon. The Vanguard Total World Stock ETF (NYSEARCA: VT ) is a great ETF for getting exposure across the world. The holdings are about 55% domestic and around 45% international. Expenses The expense ratio is a .17%. Vanguard regularly sets the bar for creating low fee investment vehicles for investors to gain solid diversification with low costs. My one concern in this area is that investors could use the Vanguard FTSE All-World ex-US ETF (NYSEARCA: VEU ) for international allocations with a .14% expense ratio and the Vanguard S&P 500 ETF (NYSEARCA: VOO ) for domestic equity with an expense ratio of .05%. You could average those in any way you wanted since both parts offer lower expense ratios than the Vanguard Total World Stock ETF. Aside from that potential strategy to lower ratios, this is a very solid fund and a viable option for one stop shopping on equity exposure. Holdings I grabbed the following chart to demonstrate the weight of the top 10 holdings: For a total world ETF, I think investors had to expect Apple (NASDAQ: AAPL ) to be the top weight. The company is simply huge and their sheer size makes it necessary to give them a significant weight in any index attempting to replicate the entire world of equity securities. We have only stock that I think of as an international allocation within the top holdings. That, of course, is Nestle S.A. ( OTCPK:NSRGY ). As an international company, their sales are providing even further diversification as they rely on both developed and emerging markets for growth in sales. Nestle is the kind of dividend machine that SA Author Dividends Are Coming has suggested investors should buy and hold forever . The company is not always considered as a perennial dividend champion by domestic investors because their dividends appear to have suffered in a few years due to the currency exchange impacts. In their domestic currency, they are a great dividend growth company. Sectors (click to enlarge) If I was going to use a single ETF as the primary source of equity for my entire portfolio, I think I would prefer to see a slightly more defensive allocation strategy. For investors willing to go with the more aggressive allocations, such as having around 38% of the portfolio in the cyclical sectors, this is the kind of fund investors should consider for automatic investing. To avoid excess risk, that is a strategy for investors with a long enough time horizon to make up for losses as there should be both bull and bear markets over the next few decades. Region Domestic equities get a heavier weighting than international equities, but the international weights are fairly high. I must admit that as an investor I have a significant home country bias and I would not be comfortable with having even close to 45% of my equity in the form of international investments. For me the limit on international equity is closer to 30% and I prefer to run it closer to 15% to 20% of the total portfolio. I do feel compelled to point out that the allocation to emerging markets is within reason, so my concern would be coming from the strength of the allocations to developed markets. Generally developed markets are going to be less volatile than emerging markets but in this case the allocation to the developed markets is substantially larger and thus it is capable of generating more volatility at the portfolio level because of the weighting. Conclusion This is a solid ETF though the more attractive traders that don’t mind a more complex allocation may want to consider combining VEU and VOO if they really want to chase their expense ratios down to be as low as possible. In my opinion, this ETF should be combined with additional domestic allocations because the international allocations are simply a little too high for my taste. For investors that don’t mind the heavy international allocation and have a long time horizon to recover from any bear markets, this fund should be considered for regular purchasing. Scalper1 News
Scalper1 News