VWO

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
drjazz
Posts: 33
Joined: Sun Mar 23, 2014 11:45 am

VWO

Post by drjazz » Thu Jan 16, 2020 10:54 am

I am considering whether I should continue to hold this in my portfolio and am interested in the opinion of others on this. My asset allocation has been 40% equity 60% fixed for the past few years (I am still working part time but preparing for retirement); equity portion of portfolio is 25% VTI 10% VXUS 5%VWO. My concern is that VWO is heavily weighted towards China (35%); I am concerned that valuations of Chinese equities are subject to political manipulation, suspect accounting, etc. On the other hand, my total exposure to China from VWO (35% x 5% = 1.7%) is actually smaller than the exposure from VXUS (8% x 15% = 4%). Should I just stick to the plan? Look for an emerging markets fund that is ex China? (or replace with a frontier market etf) Replace the VWO with more VXUS?

User avatar
watchnerd
Posts: 2694
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: VWO

Post by watchnerd » Thu Jan 16, 2020 11:16 am

drjazz wrote:
Thu Jan 16, 2020 10:54 am
I am considering whether I should continue to hold this in my portfolio and am interested in the opinion of others on this. My asset allocation has been 40% equity 60% fixed for the past few years (I am still working part time but preparing for retirement); equity portion of portfolio is 25% VTI 10% VXUS 5%VWO. My concern is that VWO is heavily weighted towards China (35%); I am concerned that valuations of Chinese equities are subject to political manipulation, suspect accounting, etc. On the other hand, my total exposure to China from VWO (35% x 5% = 1.7%) is actually smaller than the exposure from VXUS (8% x 15% = 4%). Should I just stick to the plan? Look for an emerging markets fund that is ex China? (or replace with a frontier market etf) Replace the VWO with more VXUS?
I hold VWO/VEMAX.

EMXC is an ex-China ETF.

However, if you're going to hold VWO, you shouldn't hold VXUS as VWO and VXUS overlap. Doing so puts you overweight EM of all kinds, not just China.

The correct pairing with VWO is VEA.

As for China being risky.....

That's not a call I'm willing to make one way or the other, so I just hold market weight.
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

Topic Author
drjazz
Posts: 33
Joined: Sun Mar 23, 2014 11:45 am

Re: VWO

Post by drjazz » Thu Jan 16, 2020 1:54 pm

thank you Watchnerd, that makes a lot of sense. I agree with you on holding market weight

stupidkid
Posts: 169
Joined: Wed Oct 12, 2011 7:11 pm

Re: VWO

Post by stupidkid » Thu Jan 16, 2020 9:58 pm

I hold VWO but like you, question if I should continue. My reason is less because of the holdings and more because of complexity. I hold 40% VTI, my international is 10/10/10 VEU/VSS/VWO.

When initially designing my portfolio I read and agreed with the arguments for international holdings and the weighting I chose (note, at the time I started VEU was free to trade in tda and VEA was not - though I believe VEA is the "better" choice).

While I shouldn't let past performance influence my plans it's notable how much better VTI has performed over the last ten years. I haven't really added any funds to VTI but have had to routinely top off my other holdings to keep up. However, my reason for reconsidering is really just simplicity. I'm no longer convinced that the diversification and additional complexity is necessary or in line with my goals. If I miss out on a few % points in gains one year due to international performance it'll probably work itself out the next year. Explaining the tilts to my DW never works, if I just had one fund I think it'd be easier.

Dunno. Maybe I'll make a change this year, but maybe I won't since change is the one thing that seems guaranteed to mess up your portfolio...

User avatar
watchnerd
Posts: 2694
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: VWO

Post by watchnerd » Fri Jan 17, 2020 1:46 am

stupidkid wrote:
Thu Jan 16, 2020 9:58 pm
I hold VWO but like you, question if I should continue. My reason is less because of the holdings and more because of complexity. I hold 40% VTI, my international is 10/10/10 VEU/VSS/VWO.
Hey there....you have a similar situation to the OP.

VEU already has emerging markets in it. VWO overlaps.

VEA is the matching fund for VWO.

If you want to overweight emerging markets, it's complex to do that with VXUS/VEU + VWO because you have to calculate the weighted EM exposure.

It's simpler just to hold VEA + VWO, and you can add more or less VWO according to how much EM weight you want.
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

User avatar
Stef
Posts: 356
Joined: Thu Oct 10, 2019 10:13 am

Re: VWO

Post by Stef » Fri Jan 17, 2020 3:10 am

watchnerd wrote:
Fri Jan 17, 2020 1:46 am
It's simpler just to hold VEA + VWO, and you can add more or less VWO according to how much EM weight you want.
+1

VTI/VEA/VWO for me too.

stupidkid
Posts: 169
Joined: Wed Oct 12, 2011 7:11 pm

Re: VWO

Post by stupidkid » Fri Jan 17, 2020 9:01 am

Stef wrote:
Fri Jan 17, 2020 3:10 am
watchnerd wrote:
Fri Jan 17, 2020 1:46 am
It's simpler just to hold VEA + VWO, and you can add more or less VWO according to how much EM weight you want.
+1

VTI/VEA/VWO for me too.
Yeah, at the time I wrote my ips I thought overweighting emerging might be a good idea, I thought the risk/return was worth it and I didn't worry too much about how precise I overweighted. Now all my funds have gains so I'm hesitant to make changes to the allocation as I don't want to incur taxes. Figure when there's another rbd I'll shift things around.

Post Reply