Thoughts on VDHG, DHHF, QUAL?

Question

I'm in my early 20s and my current portfolio is 100% VDHG. I understand the differences between VDHG and DHHF and think DHHF aligns better with my future goals, so I plan to start buying into DHHF without selling my existing VDHG holdings.

I've also been looking into QUAL for its potential long-term growth and would like it as a smaller addition alongside VDHG and DHHF.

Any advice on combining these three? Thoughts on potential overlap, alternatives, and allocation suggestions? Thanks!

Answer

Combining VDHG, DHHF, and QUAL in your investment portfolio can be a strategic way to diversify and target different aspects of the market, aligning with your long-term financial goals. Here’s a breakdown of how these funds can complement each other and some considerations regarding potential overlap and allocation.

Understanding VDHG, DHHF, and QUAL

VDHG (Vanguard Diversified High Growth Index ETF): This fund is designed for capital growth over the long term and includes a mix of asset classes primarily focused on growth investments. It’s a diversified, multi-asset solution that reduces the need to manage and rebalance regularly.

DHHF (BetaShares Diversified All Growth ETF): Similar to VDHG, DHHF is aimed at long-term growth but it is structured as 100% growth assets, with no allocation to defensive assets like bonds. This might align better with someone in their early 20s looking for maximum growth potential over a long investment horizon.

QUAL (VanEck Vectors MSCI World Ex Australia Quality ETF): This ETF focuses on ‘quality’ stocks from developed markets outside Australia, based on high return on equity, stable year-over-year earnings growth, and low financial leverage. It provides exposure to companies that have the potential for stable, long-term growth.

Combining These ETFs

Diversification Benefits: Combining these ETFs can enhance your portfolio’s diversification. VDHG and DHHF, while both growth-oriented, have different compositions and regional exposures. QUAL adds a further layer by focusing specifically on high-quality stocks, which can be resilient during economic downturns.

Overlap Considerations: There is likely to be some overlap between VDHG and DHHF since both are diversified growth ETFs. They may invest in similar assets or markets, particularly in the equity space. QUAL, however, primarily targets quality stocks outside Australia, which might not significantly overlap with the other two.

Allocation Suggestions: Since you’re in your early 20s, a more aggressive allocation could be suitable, given your long investment horizon. However, the exact allocation would depend on your risk tolerance and specific financial goals. A possible approach could be to maintain a higher proportion in DHHF and VDHG, given their broad market exposure and growth orientation, with a smaller but meaningful allocation to QUAL to tap into specific quality stocks internationally.

Final Thoughts

When adjusting your portfolio, consider how each ETF complements your investment objectives and risk tolerance. Regularly review your portfolio to ensure it aligns with your evolving financial goals and market conditions.

Pearler offers tools and features that can help you manage such a diversified portfolio efficiently. With Pearler, you can track your investments’ performance, rebalance your portfolio as needed, and continue to invest systematically in your chosen ETFs. This can be particularly useful as you expand your portfolio to include different assets like VDHG, DHHF, and QUAL.

You can find out more about this topic here: Why Is Vdhg So Popular

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

Hi Ruby.

As you know, DHHF and VDHG are very similar, so the overlap there is large.  This isn’t a problem as such, so keeping one while adding to the other doesn’t really do any harm.

QUAL may be a solid long term performer, we can’t know if it will continue outperforming though, that’s the trouble.

As for adding it alongside a ‘core’ holding like what you already have, this is what people might consider a ‘satellite’ position, even though it’s quite diversified across 300 companies.  But it does overlap quite a bit with the global shares part of DHHF/VDHG.

In terms of allocation, that’s a personal thing, but if I was adding a diversified fund alongside my index holding, I probably wouldn’t bother having it less than 10%, and I wouldn’t feel comfortable with it more than probably 25-30%.  Others may allocate totally differently though, so there’s no general rule.

Happy investing,
Dave

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