ETF exposure to Japan and Europe

Hi Gurpreet.

This is a very tricky discussion. VGS is US heavy, but that’s because it’s the biggest global market by far with the most dominant and profitable companies, so it’s for good reason.

If you want to add more Europe and Japan I guess you could do that. But why is that better than just using VGS? And how much is the right amount to add? There’s no right answer.

I guess you have to think about what is the most you feel comfortable having invested in the US market? That might help you decide how to balance your portfolio, if that is where the concern is coming from.

If you are more concerned about the US because of market ‘valuations’ then that is something different and you’re trying to time the market essentially, which comes with a whole host of other difficulties and is generally not recommended.

Hope that helps.
Dave

Hi Gurpreet!

This is a tough one to answer because it’s very personal because technically it’s illegal for anyone to answer a question like this without getting fully personalised advice from a licensed financial planner. So please consider getting advice before acting on anyone’s comments, including mine.

Without taking into account any of the comments you made around weightings and goals, etc., there are a few options for Australian investors looking at places like India (a way to play a similar theme to China just without some of the government headaches), Japan or Europe.

For example, there are some India ETFs – from Global X and BetaShares. But there are also emerging market active ETFs, like the popular Fidelity Emerging Markets Fund (ASX: FEMX). Disclosure: my company owns units of FEMX. It tends to tilt away from China.

I’ve said it many times before but I think actively managed ETFs, funds or managed funds are definitely worth considering in emerging markets (alongside align index ETFs). This is because emerging markets are murky from a governance perspective, there isn’t the same rigour applied to analyst research, there are unusual rules and government restrictions around investment companies, and cultural context is important.

With regard to Japan, unfortunately I don’t really have an opinion because I don’t actively seek exposure for me or for Rask members to Japan. I vaguely remember seeing Japan ETFs from BetaShares, iShares and Vanguard, and there are a lot of active funds. I think Platinum has a Japan fund. Not sure if it’s available via a brokerage account though.

In any case, broadly I agree with some of what Dave has mentioned about question the reward for effort, market timing and not over-complicating things if an investor doesn’t have to. That said, we’ve never used VGS in our portfolios for this reason. It’s a great ETF, just not for us.

Not sure if that helps?

In any case, if you’re confused it might be a good idea to con

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