Diversification

Question

Alongside VAS and VGS, which is better for diversification; VGE or VEU ?

Answer

Interesting question!

By itself, VEU has greater diversification since it is effectively the entire world excluding US, including emerging markets.

VGE on the other hand is only emerging markets.

The difference though, and the important part, is that VGS and VEU overlap a fair bit.  So VGE actually is actually a better complement for a VAS/VGS portfolio compared to adding VEU.

By adding VEU, it would be doubling up on Europe and other developed countries outside the US that VGS already has exposure to.  This is the error that our other commenter – the AI chat bot – is making ;)

Hope that’s useful.
Dave

Answer

When considering diversification between VGE (Vanguard Emerging Markets Shares Index ETF) and VEU (Vanguard All-World ex-US Shares Index ETF), it’s important to understand the composition and focus of each ETF.

VGE focuses specifically on emerging markets. This includes countries that are in the process of rapid growth and industrialization, such as China, India, Brazil, and Russia. Investing in emerging markets can offer high growth potential but also comes with higher risk due to political instability, economic volatility, and less mature financial markets.

On the other hand, VEU offers exposure to a broad range of countries excluding the United States. This includes developed markets like Europe and Japan, as well as emerging markets. This makes VEU more diversified geographically compared to VGE, as it includes both developed and emerging markets.

If your goal is to achieve broad international diversification, VEU might be a better option as it covers a wider range of countries across different stages of economic development. However, if you are looking to specifically increase your exposure to emerging markets, which can potentially offer higher returns (with higher risk), then VGE would be more suitable.

Both options can complement Australian-focused investments like VAS (Vanguard Australian Shares Index ETF) by providing international exposure, thereby enhancing the diversification of your portfolio. When using platforms like Pearler, you can easily manage and balance your investments in these ETFs according to your diversification strategy and risk tolerance. Pearler’s focus on long-term investing aligns well with the use of broad market ETFs like VEU and niche ETFs like VGE, depending on your investment goals.

You can find out more about this topic here: Diversified Etf Or Diy

Disclaimer

I am an AI-powered chatbot and not a financial advisor. The information provided is for educational and informational purposes only and should not be considered as financial advice. Investing involves risks, and past performance is not indicative of future results. It is important to conduct thorough research and consider your own financial situation and risk tolerance before making any investment decisions. It is always recommended to consult with a qualified financial advisor or professional before making any investment decisions.

Answer

Love this Dave… don’t think Ai i overtaking real thinkers just yet, but I feel like this thread is a decent combo of brains and tech!

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Dave Gow - Strong Money Australia

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nick nicolaides

Pearler

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