The Best and Worst ETFs of 2021

Bryce: [00:01:10] Welcome to get started investing in this podcast, we cover all the basics that you need to start your investing journey. Are you joining us for the very first time? Is this the very start of your investing journey? Well, before you dive into this episode with us, our faith is designed to go from the very beginning so that we strongly recommend that you scroll up and start at episode one. However, if you are feeling brave, then of course, don't let us stop you diving in here at JSC, we unpack all the jargon and the confusing bits. We hear your investing stories with the goal of making investing less intimidating. And of course, we like to have a good time along the way. My name is Bryce and as always, I'm joined by my equity buddy Ren. How are you going?

Alec: [00:01:50] I'm very good. Bryce very excited for this episode. We found some very interesting data on ETFs, some of the most loved and most hated ETFs of the last year, so we thought we would talk. We would share that data and then throw out some wild speculation as to why we think they're loved and loved and not hated, but just less a lot less low.

Bryce: [00:02:14] Haven't got as much of a love.

Alec: [00:02:15] Yeah, yeah. There's still there's still plenty of love to go around in the ETF space.

Bryce: [00:02:20] I wonder if we own any of the unloved ones which we'll get to later in this episode.

Alec: [00:02:25] Yeah, good question. Yeah.

Bryce: [00:02:28] So before we jump into that, I'm really looking forward to this episode. Five of the most loved in a few of the least loved. We have some really exciting news and Ren that is that we are about to IPO.

Alec: [00:02:39] Yes, we have done it. Everyone can go to the website and subscribe. We are appealing.

Bryce: [00:02:48] That's it. It is our initial party offering. We're not going public just yet, but Equity Mates fin fest is coming and we are calling all bulls, bears and party animals to to come and trade ideas with us at Australia's biggest investing festival. And that is Fin Fest. There's going to be expert speakers and guests, deejays, booths. It's going to be inspiring, empowering and it's for any level of investor. We have felt for a while that finance events around Australia have often been a little bit boring and uninspiring, and we're here to change that. Save the date 15th of October 2022 here in Sydney and head to Equity Mates dot com slash fin fest. It's going to be in the show notes to register your interest, and we will make sure that we let you know when early bird tickets are on sale. But it's going to be an awesome event, something that Australia has never really seen before. We're bringing the atmosphere of a festival with the, I guess, education and inspiring content of the Equity Mates community and podcasts to help you on your investing journey. So it's going to be epic. We can't

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Bryce: [00:04:01] Party with us. Come and learn with us. The market will be closed, the bars will be open and it's just going to be a great great Saturday. So we look forward to seeing you then. We're going to let you know plenty of information over the next few months as we get guest speakers. We've got an awesome venue that we'll be announcing soon. So, yeah, Equity Mates dot com slash fin fest to register your interest and subscribe to that initial party offering. We're really, really pumped. OK, so we've got some data.

Alec: [00:04:28] Yeah, let's do it. And let's start with without the most loved and most hated, as is becoming a tradition for Get Started Investing feed. I put some poles up on our Instagram, and one data point really surprised me. So I want to ask you, I don't know if you've seen the responses to the polls. Great. Otherwise, this bill would really fall flat on its face. The first question I asked, Do you own an ETF in your portfolio? What do you reckon the response was?

Bryce: [00:04:57] Overwhelmingly yes.

Alec: [00:04:58] Well, yeah, yeah, yeah.

Bryce: [00:05:00] But you want you want a percentage?

Alec: [00:05:02] Well, yeah, OK.

Bryce: [00:05:03] At least 85 per cent of respondents said

Alec: [00:05:06] that they own an OK, you've kind of nailed. Eighty six percent said yes. 14 percent no. But for me, the 14 percent surprised me those days because it feels like ETFs are just such a staple of our investing experience that investors of any level, even professional investors like you look at Ray Dalio's portfolio and it's just the number one holdings and ETF. The total holdings are all eight. Yes. Yeah, yeah, it's it's just like such as because they're easy to access and they're liquid. And, you know, all of the reasons that we love ETFs, I would have actually assumed I kind of felt silly putting that question up because I thought it would be 100 percent. So that has really interest me. Yeah.

Bryce: [00:05:46] Well, I wonder what at what stage of the investing journey of those people may be and if the first thing that they've bought is a single stock and they haven't bought anything else yet? Yeah, potentially. Yeah, yeah. But yeah, I agree. It feels that if you don't have an ETF in your portfolio, then you're missing a trick.

Alec: [00:06:01] Yeah, we are obviously talking about ETFs today because every year more and more ETFs come onto the market, I think. What about 250 listed in Australia at the moment, at least? I think there's over a thousand listed in the US way more, probably way more.

Bryce: [00:06:18] Yeah, I'm pretty sure it gets more and more heavy. I think it was a thousand a couple of years ago,

Alec: [00:06:22] directed by the end of this decade, there'll be more exchange traded products than there are, like listed security. Exactly.

Bryce: [00:06:29] Overwhelming and huge overlap.

Alec: [00:06:31] Way too much. Yeah. Yeah. But with so much choice, obviously, money moves around a lot. There's ETFs that people are buying more of where money flows to those ETFs that's called inflows. And then there's ETFs that people are pulling their money out of. And when people pull their money out of ETFs, that's outflows. And so for the past year, for 2021, we have found data of the ETFs with the most inflows and those with the most outflows net of, you know, the two. So headline there are five Australian ETFs that have had over 800 million net inflow, so 800 million more going in than coming out and four that have had over one million net outflow. Sorry, 100 million net outflows.

Bryce: [00:07:20] One million net outflows.

Alec: [00:07:22] So we're calling these the most loved and the least loved, and we want to talk about what we can learn from this data. And obviously, this is Australian data. But I think a lot of what we talk about will be married in countries around the world, of course.

Bryce: [00:07:39] Yeah, yeah. Although America does have a lot more ETFs that are thematic based, I think I think they have a obviously much more choice.

Alec: [00:07:50] But let's talk about thematic ETFs because the top five most loved and will ride the list out in a second. No thematic ETFs. No. Would you say global sustainability leaders? I guess. Well, so

Bryce: [00:08:03] it's coming in at number five.

Alec: [00:08:05] Yeah. Number five, eight hundred and two million net inflow.

Bryce: [00:08:09] And this is the iShares global sustainability leaders.

Alec: [00:08:12] Would you call that thematic?

Bryce: [00:08:14] Yes. Yeah. Yeah, that's a thematic ETF.

Alec: [00:08:16] Yeah. So I asked the Equity Mates community how many of them are in thematic ETFs, how many are just indexes only and then. How many just don't own ETFs at all? How many do you think are informatics, what do you reckon the split is the

Bryce: [00:08:33] thematic versus index? Yeah, I would say the split still weights towards index 60 40 close.

Alec: [00:08:44] It's 60 40 the other way.

Bryce: [00:08:46] All right. Yeah. Okay. For me, that's not the case. I don't think I think majority of miner index.

Alec: [00:08:53] No, no. Sorry, it's how many people own thematics. And then, oh OK.

Bryce: [00:08:57] Not like split of your portfolio. Got you got you got. Yeah, yeah, OK. So they think the ticker for this is. I'm pretty sure for the ASX one. So that's $800 million inflow. So very, very popular. The next one Ren fourth on the list of Vanguard diversified high growth Vadi, H.J. 808 million inflow very popular in the Equity Mates community.

Alec: [00:09:21] Well, very popular in Australia, given its fourth on the list.

Bryce: [00:09:26] Coming in at number three was the BetaShares Nasdaq 100. Q It's been a favourite of mine for a while.

Alec: [00:09:34] I think it was one of the first ETFs I bought.

Bryce: [00:09:36] Yeah, yeah. It tracks the top 100 tech stocks on the Nasdaq 828 million. Going into that last year, no surprises there. The second on the list, Vanguard MSCI International shares Vegas very, very, very popular.

Alec: [00:09:54] One billion net inflow, very popular, especially with the fire movement. Yes, that one and the Vanguard diversified high growth got a lot of love.

Bryce: [00:10:05] They do get a lot of love. It really tracks the MSCI World Ex Australia. It's worth pointing out is VGS. So if you are buying into that, make sure you look under the hood because you won't be getting exposure to the Aussie stock share market, which

Alec: [00:10:22] leads us nicely to number one the the crowned 2021 champion of loved ETFs. We'll have to come up with a better title, but Vanguard as well. Vanguard Australian shares ticker VHS. $2 billion net inflows double the second place. Also, Vanguard ETF tracks the ASX 300 index number one number one.

Bryce: [00:10:50] Yeah, I mean, I talk about home country bias.

Alec: [00:10:53] Any surprises in there for you VIX being number one? Yeah, because because it's Australia.

Bryce: [00:11:00] Yeah, because it's the Aussie Aussie share market. Yeah, but we all know, as I said, home country Bryce big, big sort of cognitive bias for investors based on how the community speak about ETFs and what we hear, I'm not surprised with any of those.

Alec: [00:11:14] My big thing was, if you think about the ETFs that launched last year, you know, there were some that got a lot of fanfare. The crypto ones were towards the end of the year, so they didn't have a full run up the year against some of these ones. But throughout the year, you know, we saw electric vehicle ETFs, we saw lithium ion battery ETFs, we saw semiconductor ETFs, we saw hydrogen ETFs, some of the biggest like hot themes of the moment, but none of them, even though they launched. So we so they were getting all new money, they didn't even compete with these sort of more established Nasdaq 100 Vanguard International Vanguard Australia. So even though those like these hot themes that are being captured by these new ETFs, they're not beating the more conservative, more long term, I guess just dollar cost averaging set and forget ETFs. Yeah, which I think is a really pleasing sign.

Bryce: [00:12:13] Yeah, well, I mean, there's also probably a lot of superannuation money in all sorts of bits and pieces.

Alec: [00:12:16] Well, that's great. Super funds are investing sensibly. Yeah, that's not something to be upset about.

Bryce: [00:12:21] No, no, I'm not upset about it, but I think it explains it. But two billion into Aussie shares, it's I'm I'm surprised it's there's such a gap there, a billion dollars between the next biggest inflow, but that's pretty massive.

Alec: [00:12:33] Yeah. So we will unpack some of these because the interesting thing is, you know, Vanguard Australia number one, there are a number of ETFs that track the same index or very similar indexes. So it's interesting to think about why the Vanguard one is so much loved than the other the betashares, the iShares, the state street, because it's not like Vanguard do a lot of marketing.

Bryce: [00:12:59] Funny, you say that I actually saw them on TV the other day. Yeah, and I was like, This is interesting. They're really going through the personal investor targeting you and I. Right.

Alec: [00:13:09] Okay, well, I take that back. Maybe it is their marketing, but we'll we'll we'll we'll unpack why we think these ETFs are the most loved in a little bit. Yeah, but let's not keep people in suspense. Well, quick

Bryce: [00:13:20] question of those. Five, How many do you have?

Alec: [00:13:23] One. Yes. Is it the same one?

Bryce: [00:13:26] And take care, yeah, yeah, yeah, yeah. All right, well, let's go to the least love now. I want to preface here that when we say least love, we're not saying these are bad ETFs. These are just ETFs that haven't had as much love.

Alec: [00:13:39] And also we're not saying anything. Yeah, where the market is saying this and we are merely reflections of the market's data.

Bryce: [00:13:48] So number four is the self wealth self-managed super fund leaders. ASX ticker is self. Yeah, I must say I've never heard of it.

Alec: [00:14:00] Do you want some information on it?

Bryce: [00:14:01] I think it sounds pretty boring, but sure.

Alec: [00:14:04] Well, no, not well. Some may say everything we talk about in investing is boring, so it's that's subjective. But what is it? So the because I never heard of it before self-willed SMSF leaders. ASX tech itself is trucks are concentrated Australian equity portfolio with a maximum of 75 stocks constructed using the top self-managed super fund portfolios from a poll of over 80000. The portfolio is equal, weighted and rebalanced quarterly, so they find the best performing self-managed super funds and then reflect their holdings. Based platform only Australian. No, it's not. It does. I was trying to figure out, is it on their platform? But I think it's from like another data source. Or maybe it is from that right now. Got a bit lost. It wasn't clear, but yeah, strange ETF.

Bryce: [00:14:59] So we've got self, ASX self, that's number four. Ren. Coming in at number three is the Vanguard Australian Fixed Interest ETF VHF.

Alec: [00:15:07] Yeah, lost net one hundred and sixteen million.

Bryce: [00:15:11] If you're not sure what that is, they invest in and have a portfolio of fixed interest products. So government and corporate bonds and all those sorts of products

Alec: [00:15:19] that they invest interest, invest in debt that pay interest.

Bryce: [00:15:23] So not a lot of love they're coming in. Second was the iShares S&P 500 Australian Dollars hedged? This is interesting. I wouldn't be expecting that, but the ticker is I.H v $157 an outflow. And then coming in at number one is the iShares Core Cash ASX ticker bill. Net 200 million outflow. That is not surprising for me. No, no. Given what's going on with inflation and cash not being king, having all your money in a cash ETF?

Alec: [00:15:59] Not great. Yeah. Now I've pulled the the performance of that ETF so we can talk about that. But let's take a quick break and then talk about some of our key headline takeaways and then maybe get under the hood and talk about some of especially the unloved ones, because there's some interesting stuff to unpack there.

Bryce: [00:16:19] Alright, Ren, well, let's quickly whip around the room and get some key headline takeaways from those nine ETFs that we just went through. So what have you got?

Alec: [00:16:28] My number one investor tastes are traditional. There were two ETFs that hit the billion dollar club. This Vanguard Australian shares Vegas Vanguard International shares. They're two of the most boring ETFs on the market. Vanguard as an investing brand is boring, and that's not pejorative. That is as positive as you can be, but like, that is their brand. Yeah. And then the most vanilla indexes they're following as well. Yeah, but that investor tastes, that is where investor money is going. Yeah, and that's in the ETF game. That's what matters.

Bryce: [00:17:04] And you love to say it. Another one we speak of Vanguard. And obviously Brand does matter, it seems, because it's dominated by beta shares in Vanguard. But Vanguard seem to have the upper hand when it comes to ETFs. Three of the four top funds Vanguard. In fact, across all ASX ETFs in 2021, Vanguard drew in 30 per cent of net inflows. So I remember that with the brand that I knew first off the bat when we started in investing, they certainly were the ones that everyone spoke about low cost index, and they continue to to be what seems to be market leader globally in that space.

Alec: [00:17:42] So when I went out to the Equity Mates community to ask these questions, one of the ones I asked was What's your favourite ETF provider? Just like, forget what ETFs just tell me other of the major brands. So said Vanguard BetaShares BlackRock, which is iShares or I spread the love, you know, like, I don't care. Yeah, my response would probably be that I don't really like to. I love them all, but I care about the product more than the brand. Me too. Who do you think was number one in the poll?

Bryce: [00:18:12] Well, it's got to be between these two Vanguard and beta shows. Yeah, but

Alec: [00:18:16] who do you think was number one? Vanguard, yeah. Vanguard 45 percent Vanguard 32 percent Data shows. Wow. Six percent iShares. There you go. Sorry, sorry, sorry. BlackRock. But yeah, Vanguard loved by not reflected.

Bryce: [00:18:31] That's not reflected in my portfolio. I think I only have one Vanguard Share Property Property ETF.

Alec: [00:18:36] Yeah, right. Okay. Yeah, I've got a couple of Vanguard Few Beta shares. I spread the love, you know?

Bryce: [00:18:44] And then third, take away cash is trash. We know that no surprise that the least love ETF is cash, as we said in the era of inflation. And if you're wondering what inflation is and the impact that it has on your cash, we did an episode a couple of weeks ago, so make sure you can listen to that to try and understand all the basics there is to know with inflation.

Alec: [00:19:04] So let's unpack this ETF, though, because you say cash is trash and it was the most unloved ETF the iShares Core Cash ASX ticker bill. And so what it does? It employs a passive investment strategy that aims to provide investors with the performance of the S&P ASX Bank Bill Index. And basically, what that means is it gets whatever interest it can get on cash. And if you think about your savings account at the moment, empty. Not much. Oh yeah, you're just not a very good saver. That's why it's empty. I've got a

Bryce: [00:19:43] wedding coming up.

Alec: [00:19:46] This ATF gets interest on only but only instruments that can be sold that day that are, like, really, truly liquid. So basically, if you think you know, in our savings account, we can access that money that day, but we get what's what interest rate to get on your savings account, that sort, I think [

Bryce: [00:20:03] it's barely a percent. [00:20:03][0.6]

Alec: [00:20:04] I think I get a bonus interest rate of like zero point five percent, if I like, don't take any money out and stuff. And then, you know, if you put if you lock your money up in a term deposit, yeah, you get a little bit better value. This ETF isn't even doing. Term deposits, it's saying only only instruments that I can pull. I can sell and pull the money out that day. So like the lowest interest rates basically since inception in 2017. Do you wanna guess what the fund is returned?

Bryce: [00:20:32] Oh, it's come in more than economy, more than what's in what we'd get in. The bank accounts are coming more than one and a half percent.

Alec: [00:20:40] Yeah. So since 2017, and so obviously interest rates have gone down in the five years it's been operating, it's returned one point eighty two percent a year. Yeah.

Bryce: [00:20:50] So it's just this is the big question for me with this is if you're going to be investing in this ETF, why not just put your money in a bank account? Yeah.

Alec: [00:21:00] But now I want to defend this ETF, OK, because this is an ETF that is that is operating exactly as it's designed to operate. It is true to label it tells investors what it is doing and it does that. Yeah, and that's great

Bryce: [00:21:16] because when you think most ETFs don't do that.

Alec: [00:21:19] No, no, no. But I think like we can't we can't rubbish this ETF because it's only got one point two percent a year because that's what it isn't designed to do. It is incredibly like low risk, low return. But when you're constructing a portfolio and you want to have some holding in cash, and maybe this is an easy way to get some interest on that cash, but give yourself optionality if you then you know the market falls and you want to sell it and then do something else with it. So like from a portfolio construction point of view, having options like this available is great. Yes. Yeah. But even on BlackRock's website on the iShares website, it says this product is likely involved to be appropriate for a consumer seeking capital preservation with low risk return profile. This product is unlikely in bulk to be appropriate for a consumer as a whole. Portfolio solution. Yeah. So even BlackRock alike

Bryce: [00:22:18] can't go all in. Don't go all in on it.

Alec: [00:22:22] So I think you know where we're laughing at this because it's the most unloved. It had the most money pulled out last year up its return one percent a year, but in its defence, it is exactly operating exactly as it's intended to do. But it's just important to recognise that it's not intended to be a whole portfolio. Yeah, of course.

Bryce: [00:22:40] Yeah, yeah, not one that is going to be found in my portfolio, that's for sure Ren. But I can certainly see how it could be used in portfolio construction.

Alec: [00:22:49] Yeah. Now do you think there's other cash ETFs out there?

Bryce: [00:22:53] I know BetaShares have one. Yeah, but other than that, I'm not. I'm never clicking on the cash high interest options. When I'm looking for when

Alec: [00:23:02] I'm looking, you can say yes. You can say high interest ETFs have low interest. You have Bryce: [00:23:06] very low. No interest to me.

Alec: [00:23:08] No interest. Yeah. So there were a few, but a lot of them have closed. So UBS had one. The shot May 2020 Pinnacle had one shot in June 2020. Perennial had one that shut in July 2020. One I'd be shutting down. But obviously this one we're talking about BlackRock iShares have one. And you're right, beta shares have one. I think I found a second one from iShares as well enhanced cash. So there's a couple out there. But yeah, if I was an ETF provider, I wouldn't be rushing to make the next one.

Bryce: [00:23:38] Nah. Well, not not in this environment, anyway, that's for sure.

Alec: [00:23:41] Yeah, I just feel like better shows BlackRock. You've got this Covid.

Bryce: [00:23:44] Yeah. Well, let's stick on unpacking some of the unloved ones we did mentioned self, the self wealth smart, self-managed super fund leaders, ASX, ticker self. Let's get into that a bit. You mentioned Ren concentrated Australian equity portfolio with a maximum of 75 stocks constructed using the top performing self-managed super fund portfolios from a pool of over 80000. To unpack that, as I understand it, they're looking. Somehow they've got data of they so 80000 self-managed super funds.

Alec: [00:24:20] So Beiji L is Australia's largest self-managed super fund software administration platform. OK? And so AGL have the 80000 portfolios. They provide that data to self wealth and then self wealth use their quote proprietary ranking system to rank the portfolios and then build an index out of the portfolios.

Bryce: [00:24:43] Okay. And so to be clear, self-managed super funds. So my mum and dad might have their data on this by AGL if

Alec: [00:24:50] they use the

Bryce: [00:24:51] USPTO and it'll be in that pool of 80000. Yeah, and should they have one of the top performing

Alec: [00:24:56] funds, Mr and Mrs Lasky returning one hundred and fifty per cent a year long oil and iron ore? Yeah, a so cash, that's for sure. So well, the local well and sales guys not killing it. What's in the water in Wagga? Because this investing

Bryce: [00:25:11] mecca? And so then of those, they're taking such stocks from the portfolios or they're just tracking the performance of eighty seventy five portfolios?

Alec: [00:25:21] No, no. They're taking the stocks from the portfolios and then they equal-weight up to seventy five of the stocks. And so don't pay, Piper said. Yeah. Well, I mean, we're going to get there, we're going to get there. So if we look at the top holdings, you know, they're obviously equal weighted every quarter and then some stocks go up, some stocks go down. But the biggest holdings as of the 9th of March Woodside Petroleum, South32, Northstar Resources, Beach Energy, Newcrest Mining, Evolution Mining, Santos, Rio Tinto. You hear that. Is there a thing that

Bryce: [00:25:58] the retirees are into mining and energy?

Alec: [00:26:02] Well, and to be fair, that's because mining and energy have done really well since it was last rebalanced. But having a look at the full holdings is basically like seventy five of the ASX three hundred seventy five stocks of the ASX trade. Yeah, just big, big Australian companies. You know, there's clearly cochlea. Holes in devil group, BHP, Woolworths, Boral, Westpac, AGL, JB Hi-Fi, A2, Milk, Crown Resources. I mean, like some great companies, ResMed, but it's. It would get very close to tracking the Just

Bryce: [00:26:37] Travel 300, but you're also just relying on a strategy built by people who run self-managed super funds

Alec: [00:26:44] with a the self-help overlay

Bryce: [00:26:47] like it's just

Alec: [00:26:48] we're talking ourselves out of any self-worth sponsorship. But hey, that's okay. I think it's worth us asking these questions because I didn't know this super fund existed. Sorry, this ETF existed, and I do have a question about whether it needs.

Bryce: [00:27:03] Yeah, it doesn't. Well, how's it performed?

Alec: [00:27:05] Well, that's a great question. Bryce The since the self-managed Super Fund Leaders ETF launched, the ASX 200 has returned six point eight per cent per annum. This ETF has returned two point sixty six percent per annum

Bryce: [00:27:22] now, guys.

Alec: [00:27:26] Yeah, so I guess in my note in the notes here, I wrote in italics. Is this something people want a mix and match of a bunch of self-managed super fund portfolios that have all been constructed with different time horizons in mind? Who thought this would be a good idea? Maybe that's a bit harsh, but I guess for me that that time horizon thing is confusing because Mr. and Mrs. Lawsky might have a 10 year, 20 year time horizon. But if I'm managing my self-managed super fund, I might have a 50 year time horizon, and I wonder how that gets integrated into the platform, because in theory, I my portfolio will be high risk, but it will probably return better than your folks. Your folks will probably get a good dividend and be less volatile. I don't know. It just it feels like we're trying to trying to squash things together that don't need to be squashed

Bryce: [00:28:16] together, trying to be a bit clever for something that doesn't need to exist.

Alec: [00:28:21] Yeah. Now we should say right of reply to self wealth. If they want to, they want to defend it.

Bryce: [00:28:28] Tough to defend when there's a hundred million coming out of it. But yeah, sure. So should we have a look at some of the a couple of them all love? Well, let's go.

Alec: [00:28:38] Yeah, let's be Paul.

Bryce: [00:28:39] Let's win. Let's finish on a positive. Yeah. So the Vanguard Australian shares the biggest, biggest inflow $2 billion. It tracks the ASX 300. I'm sure many of you have it in your portfolio. It's straightforward index. There's no there's no mixed match equal weighting. It's just ASX 300.

Alec: [00:28:59] Yeah, market cap weighted. Yeah. On Reddit, when I was just doing some research before this ep, a lot of people were asking why this ETF vice get slightly different returns to A200, which is the BetaShares ASX 200 ETF. The impact forward? Well, I think, you know the question was being asked on Reddit. So it's it's a question that people are asking. The ASX 300 and ASX 200 have massive overlap because if you own the ASX 300, you have the all 200 of the ASX 200 stocks and then the next 100 largest. So there's massive overlap, but the weightings are different. So that's that's why the performance will be a little bit different. It will move very in-line, but the 200 means that you're a little bit more concentrated. And so there'll be a, you know, a few percentage points different over a long period of time.

Bryce: [00:29:57] For me, I'd be questioning why you would go 300 over 200, just given the weighting of the top 10 stocks in the 200 and that the performance impacts that it has those those companies have. Does that makes sense?

Alec: [00:30:14] Yeah. But I mean, you could flip it the other way and say, Look, it's not going to make a massive difference either way. No, like you just have you have slightly more of the 200.

Bryce: [00:30:26] Yeah, I guess. Yeah, the reason I would question I would always take him personally. I'd take a more concentrated. If I had two options that are very similar,

Alec: [00:30:36] I would love to say some research on like, does it make a difference?

Bryce: [00:30:41] Probably. Probably doesn't, because the bottom 100 barely make an impact.

Alec: [00:30:44] So like in America, we all invest in the S&P 500. Yeah. If you had the option for the S&P 300, you would prefer that. I think so. Yeah. I mean, how far do you extend that logic? Like what if it was where

Bryce: [00:30:56] you could go this Isaac ASX 50 and probably get very similar result to ASX 200? Yeah, ASX 10. Yeah, it's just the way that the markets are at the moment with such huge concentration of very small companies at the top that that point over a long period of time, over a long period of time when know that 0.1 percent here and there, I

Alec: [00:31:19] think I think the logic. So right now we're living in an era where in America, it's like Apple and Amazon and Microsoft, who are the biggest companies, but also are the best performers. And in Australia, you know, BHP and Rio, they continue to do incredibly well. The banks are having a bit of a moment. I think if we look back historically, the reason that you go for like the three hundred rather than the 200 is it's a lot of those like smaller names like the mid caps in the the lower down the list that are the ones that are faster growing, whereas like the the names at the top of the list, the cone banks and the, you know, the the boring companies that the top generally grow slower. So that's why you want the exposure to the lower end of the list.

Bryce: [00:32:02] Yeah, yeah. Yeah, that's a very long term.

Alec: [00:32:06] Yeah. But are we going to invest very,

Bryce: [00:32:09] very long term?

Alec: [00:32:10] But I mean, I give I give that at this point in time, that doesn't seem to be holding. [ Bryce: [00:32:14] No. Yeah. And I think the Aussie market's. A bit different as well, like it's been banking and mining for a very, very long time. Yeah. No surprises that the vast is the number one.

Alec: [00:32:27] Yeah. And for me, if I was owning the ASX 200 or the ASX 300, I wouldn't lose an ounce of sleep over, should I only.

Bryce: [00:32:35] No, no, no, no to Vanguard MSCI Index International shares. Now be careful, as we said, international, this is ex Australia. So if you did one Aussie exposure, you'd need to buy vast or a 200. It had a billion inflow for me. These one's biggest call out whenever you're looking, Oh, I'm going to take a global approach, look under the hood because I'm pretty sure I would be confident in saying that 75 80 percent of the weighting of these stocks are going to be in the US stock market. Yeah, that's definitely not a bad thing by any stretch of the imagination. The US stock market biggest stock market in the world, so it's not surprising some of the biggest companies in the world not surprising. But if you're going in thinking I'm going to get 25 percent European exposure, twenty five percent Asian exposure, twenty five percent US exposure. Think again, you might need to be a bit more selective in how you build a portfolio of ETFs.

Alec: [00:33:33] Well, how much she reckons in some of this one. How much jerkins in North America. So just the United States, not even Canada, just to the United States,

Bryce: [00:33:41] I reckon at least 75 percent.

Alec: [00:33:43] Seventy point one percent. Yeah. Then the next biggest is Japan at six point four. Yeah, there you go. And so then if you look at the companies that we're talking about, not even Europe, well, Europe is in a country.

Bryce: [00:33:59] The play on

Alec: [00:34:01] the third biggest is the United Kingdom, four percent, Canada three and a half. France 3.3. Switzerland 2.9. Germany 2.6. So Europe gets a run, but but yeah, pretty insignificant. The biggest holdings in this ETF Apple, Microsoft, Amazon, Alphabet, Tesla, Alphabet, Facebook, Nvidia, Johnson and Johnson UnitedHealth Group.

Bryce: [00:34:25] S&P 500.

Alec: [00:34:27] Yeah, yeah. So if you if you own this ETF, this yes. And you also own like a Nasdaq 100 or an S&P 500. You just have to be aware that a lot of the biggest names in both of those ETFs are the same. Yeah, yeah.

Bryce: [00:34:45] The way that I think about this is if you truly want international exposure, go out and find the ETFs that will give you direct exposure to those countries or continents and then build a portfolio around that, i.e., yeah, like European ETF that invests in the European, let's say, European, but the London Stock Exchange?

Alec: [00:35:09] Yeah, sure, you

Bryce: [00:35:10] can go and find an ETF that invests in the Japanese Stock Exchange stock market.

Alec: [00:35:15] If if you hear in the news that Europe is going to do a lot better than America over the next decade and you're like, great, I own the Vanguard MSCI International Shares Index ETF.

Bryce: [00:35:26] You barely notice it.

Alec: [00:35:27] Yeah. America will be the driver of those returns. Exactly, yeah. So yeah, I think that's important to keep in mind. There's a lot of chat in our Facebook group about ETF overlap. Mark Monfort big shout out to him. He does a lot of good work on that space.

Bryce: [00:35:42] So you have track accommodate you.

Alec: [00:35:44] Yeah. So you can jump into our Facebook group and join the conversation there if you want to, I guess, really understand overlap. My concluding thought on overlap, though, is always I would much rather it's much better to have two ETFs with a bit of overlap the no ETFs at all.

Bryce: [00:36:01] Oh, of course it's don't.

Alec: [00:36:02] Yeah, the don't let perfection be the enemy of the

Bryce: [00:36:04] yeah, exactly exactly. But don't have five ETFs that all track the same thing.

Alec: [00:36:08] Better to have five zero

Bryce: [00:36:10] short, anyway. Yes, that's going to be your answer to it is. Well, look, that does bring us to the end bit of a longer episode.

Alec: [00:36:19] I know it's a long episode, but there's one more question I want to ask. Okay. So of the top four ETF, so Vanguard Diversified High Growth BetaShares Nasdaq 100 Vanguard International shares Vanguard Vanguard Australian shares the four most loved ETFs of the past year or so. Of those four, I went out to the Equity Mates community to take that to ask them which they would prefer for the next decade. What do you think was the most popular

Bryce: [00:36:48] and AQ

Alec: [00:36:49] second most popular and

Bryce: [00:36:51] high growth?

Alec: [00:36:53] Yeah. Vanguard diversified high growth. So it actually was the exact opposite of the order that they came in in this market.

Bryce: [00:37:01] I have a theory with this and it's let's not go down a rabbit hole, but it's like it's just like clickbait title. It's branded. Yeah, you put you put high growth in stocks, but also like

Alec: [00:37:10] diversified high growth because it's like it's diversified. That's safe and but it's high growth.

Bryce: [00:37:14] But if you look under the hood of this ETF, there's no AQ, I think has more high growth opportunity.

Alec: [00:37:21] Anyway, that's a whole other comment.

Bryce: [00:37:22] Anyway, let's leave it there. It's been a great episode. A reminder check in your show notes because there's going to be a link to sign up to find first Equity Mates dot com slash vinfast. Awesome. It's going to be an awesome event. We're going to have a lot more information coming out over the next few months, but it is definitely not going to be one that you want to miss. Please rate and review the show when you have an opportunity as well. It goes a long way to helping us grow the show and get it in front of other new beginner investors. And of course, please share the show with friends and family who you think would benefit from listening and starting their investing journey. Equally, we've got to get started investing book that is available for you to buy. That goes into a lot more detail around taking that next step and getting you started on your investing journey. But as always, Ren, it's been a pleasure to chat stocks, and we'll pick it up next week. Sounds good!