[non-US] 7/8 VWRD + 1/8 WSML = VT

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galeno
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Joined: Fri Dec 21, 2007 12:06 pm

[non-US] 7/8 VWRD + 1/8 WSML = VT

Post by galeno » Thu Dec 06, 2018 10:25 am

I love the portfolio of USA Vanguard's VT. It is the FTSE all world ALL CAP equity index.

As USA-NRAs we use Ireland Vanguard's VWRD which is FTSE all world equity index. It's weak on small caps.

However If I mix 87.5% VWRD + 12.5% WSML I get an almost identical capitalization mix as VT.

VWRD: 52% Giant + 34% Large + 14% MC + 0% SC + 0% Micro

VT: 46% Giant + 31% Large + 18% MC + 5% SC + 0% Micro

Should I use the VWRD + WSML mix instead of just 100% VWRD?

WSML is a developed world equity index. It does not have any mid- small cap EM equity. VWRD has 9.3% in EM equities. 87.5% VWRD would lower our EM equity exposure to 8.1%.

I'm sacrificing simplicity and about 1% in EM equity to gain 5% SC exposure.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.82%. Term = 33 yr. FI Duration = 6.0 yr. Portfolio survival probability = 95%.

andrew99999
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Joined: Fri Jul 13, 2018 8:14 pm

Re: [non-US] 7/8 VWRD + 1/8 WSML = VT

Post by andrew99999 » Thu Dec 06, 2018 12:13 pm

I don't think it matters much either way. I like to completeness of including it, but you are pretty damn well diversified with VWRL if you can't be bothered with small caps.
The bigger problem is if you flip back and forth, adding it after it has performed well and chucking it out after it has performed badly, so just do whatever you will stick with.

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galeno
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Re: [non-US] 7/8 VWRD + 1/8 WSML = VT

Post by galeno » Thu Dec 06, 2018 1:30 pm

It's an equivalent value swap. I like the concept of mirroring VT. WSML would be 5% of port (12.5% or 1/8th of the 40% equity allocation).

VWRD 3 yr CAGR = 8.2% vs WSML 3 yr CAGR = 6.9%. VWRD went down less YTD vs WSML.

VWRD PE = 14.6 vs WSML PE = 14.7. Pretty even here.

Do I REALLY want to do this owing to the fact that it's just 5% of port? It would increase our SC allocation from 0% to 2% of port.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.82%. Term = 33 yr. FI Duration = 6.0 yr. Portfolio survival probability = 95%.

megabad
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Joined: Fri Jun 01, 2018 4:00 pm

Re: [non-US] 7/8 VWRD + 1/8 WSML = VT

Post by megabad » Thu Dec 06, 2018 2:28 pm

VT - Vanguard Total World Stock ETF
VWRD - Vanguard FTSE All World ETF
WSML - iShares MSCI World Small Cap ETF

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