Pinned straw:
@Stannis while not an ETF, Washington Soul Patternson is diversified market beating LIC. Looking at the results yesterday made me consider that SOL should be a cornerstone core holding which at the moment I would only put the A200 and NDQ ETFs in that bucket. SOL has a long record of beating the market and increasing dividends.
Hold in RL.
Over the last 10-20-30-40yrs Australian Banks (Big 4-5) and Commodities (Big 3-4) have been some of the most successful companies in Australia. Unless your investment personal thesis sees a collapse in banking and resources, the other alternative is to question if there really is a problem with our current market being so concentrated? The same could be said about the US market being driven by the big 7. Each market worldwide will have particular companies that drive that particular geographical area. Personally, at the moment I don’t have any direct ETF investments. However, I am invested in companies in the banking and mining industry through my super (I would guess a lot of Australians are). These companies continue to be a core driver of growth in my super. I guess my question is unless you believe the Aus government is going to stop propping up Australian housing and the world is going to stop needing our resources to what extent is it a LT risk? Apart from a concentration issue, which potentially opens you up to ST and MT volatility, what do you see are investment risks? I think this is important because even if you reduce or avoid these companies you might find your portfolio returns are likely driven by a small group of shares thus, bring a different concentration issue/risk?
PS: I have no vested interest either way and this is not investment advice. I just thought I would bring up an alternative consideration to the notion it’s a risk to be too concentrated in those main Australian drivers within VAS.
I think you make a great point @NewbieHK. I'm quite mindful of my bias here, re banks and miners. And I guess the whole point of being passive is to try and avoid any value judgments and just back the index.
Still, I do wonder how much of a tailwind these entities have enjoyed historically and whether that can be sustained (housing bubble for banks and the insatiable Chinese demand for iron from the big miners).
Even excluding any reversal of fortune on those fronts, the last 10 years has been relatively ordinary for most of these stocks:
It'd be obviously better with dividends, but for most still in the single digits in terms of total CAGR.
The hard thing is if there were any prolonged struggles in Aussie property or bulk commodity mining, the rest of the economy would be far from immune. Whether we like it or not, we've hitched our wagon to houses and holes!
So I can definitely see the sense in going with just a straight up vanilla ASX ETF, although i do like the suggestions from @Chagsy and @Dominator too.
I have owned EX20 which removes the largest 20 of the top 200 which includes many of the big miners and banks. This creates a more diversified index in terms of sector weightings. Also looked at equal weight ETFs. I came back to A200/VAS option because the long term performance was basically the same and with the very low fees of A200/VAS that gives them enough of an edge that they have a higher probability of outperforming.
An alternative would be to buy an equal weighted asx 200 tracker such as
https://www.spglobal.com/spdji/en/indices/equity/sp-asx-200-equal-weight-index/#overview
van eck do one as well.
there may be occasions you would be glad of exposure to financials and commodities. Just not quite so much as an unweighted one.
I don’t currently own one of these but if I was just starting out that is exactly what I would do.
best of luck