Question 1: I have the Vanguard ETFs VTS (US total market) and VGAD (International Shares) in my portfolio. VGAD has a 65% exposure to the US. Upon drilling into their fact sheets, I notice 9 of the 10 top holdings are the same for each fund. So this isn’t giving me the diversity I thought I was getting. Apart from doing a fund-by-fund analysis, is there any other way to gauge overlap?
Answer: The biggest companies in the world are based in the USA (Microsoft, Apple, Alphabet, Amazon etc) so that’s why the top 10 stocks of VTS (Vanguard’s US Total Market ETF) and VGAD (Vanguard’s International Shares’ Index Fund) are the same. The latter ETF only looks at developed markets.
If you want more diversity, you could look at a fund/ETF that tracks emerging markets, such as Vanguard’s VGE, or a fund/ETF that tracks all other markets excluding the USA – such as Vanguard’s VEU (Vanguard’s All World Ex US Shares).
In regard to your question, there is no other way than to do a fund by fund comparison.
Question 2: After reading your article re listed investment companies (LICs) trading at higher prices than their NTA (net tangible asset value), I would like your thoughts on internationally invested LICs, such as MGG (Magellan Global Trust).
Answer: MGG (Magellan Global Trust) is trading at a premium to its NTA. Magellan excels in keeping investors informed, and publishes a daily NTA and real-time indicative NTA. When I looked, MGG was trading on the ASX at $2.13 compared to its NTA of just over $2.04 – a premium of 4.4%.
My thoughts? I just don’t buy LICs/LITS at any material premium. Full stop. I don’t understand why you would pay $1.04 for something that is worth $1.00. MGG’s performance is OK, but you can also access essentially this strategy through their quoted managed fund (MGE). Although I am conflicted (I am a Director), have a look at WQG, which has outperformed Magellan over the last one and two years, yet is trading at a discount.
Question 3: My husband and I have 2,615 NAB shares, some inherited, some purchased. We have no other bank shares, and wonder, following the bank Royal Commission and the resulting shakeup, should we sell some or all of these shares, or should we keep them for the present?
Answer: NAB (pus ANZ and Westpac) are cheap, relative to the market, and relative to the Commonwealth Bank. If they are your only bank shares and this holding doesn’t make you overweight the sector (about 30%), and holding bank shares is consistent with your investment strategy/personal situation/financial needs, I would hang on.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.
