I have a 4-fund index investment strategy:
1. 75% stocks, which itself is 75% US VTSAX and 25% International VTIAX
2. 20% bonds, which is also 75% US VBTLX and 25% International VTABX
3. 5% cash
I am considering shifting my stock allocation to Vanguard's Environmental, Social and Governance (ESG) ETFs:
https://investornews.vanguard/explore-e ... C:POS01:XX
I don't really want to debate whether Socially Responsible Investing itself is a good or bad idea or need help on my portfolio allocation, but I'd like others' feedback on comparing the pros and cons of the current funds to the ETFs:
1. VTSAX to ESGV: https://www.morningstar.com/etfs/bats/esgv/portfolio
2. VTIAX to VSGX https://www.morningstar.com/etfs/bats/vsgx/quote
- The ETFs are based on a smaller list of companies (about half for each), but still thousands.
- I'm lowering Energy, Utilities and Industrial investments and increasing Financial, Communication, Healthcare and Technology.
- Dividends are slightly lower because of this trade.
- Both of these would tend to increase my volatility, but they (a) have similar stock style weightings (the Morningstar box - small/medium/large vs. value/blend/aggressive) and (b) for the admittedly short history, they have tracked each other closely.
- Will the hit on dividends in theory be made up for in general returns?
- Is there a way to measure the increased volatility given the short history of the ETFs?
- Is this a big change to my investments or am I'm still playing on the margins given the indexing nature of both across thousands of companies?
- Any chance I can avoid Capital Gains with a conversion like this article mentions?
- What's different about a mutual fund vs. an ETF for long-term investing and retirement?
- Other things I haven't thought about?