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Taurus1

ETF Portfolio advice

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Hi

 

This is my current Portfolio of ETF's.  The Y/N indicates a monthy Debit Order Investment.  

 

Do I have too many ETF's  in my portfolio?  Is there any changes that I can make to the portfolio for better growth?  

 

Any suggestions welcome.

 

Thanks

 

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Edited by Taurus1
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Hi Taurus and welcome to the forum.

 

Disclaimer - I'm not a financial adviser - just a forum member with a few years of self-study and experience who invests and trades on the JSE, and the following discussion is based merely on my own observations and opinions.

 

Yes, you have too many ETFs. It's not so much the number though, but rather that you have some that track exactly the same index/companies which duplicates your costs and skews your perceived exposure.

 

A few observations:

 

1.  A massive chunk of your investment is indirectly invested in a single company - namely Naspers. The Satrix Indi, Top 40 and RAFI are basically all investing in exactly the same few companies, but in differing percentages. The Indi is largely Naspers, which has historically performed exceptionally well, but now that the fundamentals of TenCent (of which Naspers owns 30%) has changed, the future may not be anywhere as near as attractive. I'd definitely be nervous with such a big percentage of my portfolio in Indi (plus, it's never a good idea to have such a big chunk of a portfolio in a single sector). If it were me, I'd combine all three of these into Satrix 40.

 

2. The Satrix S&P 500 and the Sygnia Itrix MSCI World are pretty much the same thing with a tiny bit of extra emerging market exposure in the MSCI world ETF. This is duplication and skews your exposure.

 

3. If you're looking for diversification in property, I'd go at least 20% property (10% local property (PTXTEN) and 10% offshore property (GLPROP)), since it's a different asset class and doesn't necessarily correlate to stocks. If the stock market crashes, these may very well shine. In fact, in the long term, property has always done well.

 

4. Ashburton Government bonds - a different asset class which is good for diversification but in the long run doesn't do as well as equities. Having these in your portfolio depends on your risk tolerance - these are much safer than stocks, but underperform in the long run (longer than 10 years). If you want diversification with bonds, go at least 10% bonds. Otherwise, it just doesn't add any value to your portfolio, because at 2% of your portfolio, the purpose of this asset class (risk reduction) simply isn't significant and you may as well put it in something higher risk with better potential returns.

 

5. Sygnia Japan and Eurostoxx: These are already covered in MSCI world. The combination of S&P500, Japan and Euro is pretty much what MSCI world has done for you anyway - you're just duplicating the Sygnia MSCI world ETF and splitting it up into it's components. All you get by having all of these is more costs and a skewed sense of diversification. Why not just combine all of these into MSCI world?

 

6. Nasdaq and Sygnia 4IR: I personally like tech shares and I think these will do well. Personally, I'd buy more than your 2% in tech - maybe 5-10%.

 

7. Satrix Quality: I love this ETF. The companies in this portfolio are fantastic with amazing fundamentals. The dividends from this ETF are also extremely attractive.

 

8. Satrix Fini: This sector is already very well represented in the top 40. Just more exposure to the same thing.

 

NB: Your current exposure to the local Top 40 is 68% of your portfolio (26.14% Indi + 20.32% T40 + 12.03% RAFI + 9.07% Fini, which all have the same companies, especially Naspers, which is more than 20% in your case) This is the whole point - you think you're diversifying, but you're not!

 

If it were up to me, and you asked me to re-balance your portfolio using your selection of ETFs, I'd sell INDI, RAFI, FINI, S&P500, Japan, EuroStox, and combine a whole lot of your ETFs to buy:

 

60 % Core Shares (Local and Global):

STX40 - 20%

STXQUA - 10%

SYGWD - 20%

GLODIV - 10%

 

20% Property (Local and Global):

PTXTEN - 10%

GLPROP - 10%

 

10% High-risk but high potential tech shares:

STXNDQ and/or SYG4IR - 10%

 

10% bonds (If your proposed investment period is less than 10 years)

or better still, buy 10% in emerging markets (STXEMG) instead.

ASHWGB - 10%

(Alternatively, rather than bonds, I'd use this 10% to buy emerging markets in the form of STXEMG, which has exposure to China, Brics countries etc. - lots and lots of long term potential).


 

 

 

Edited by SaurusDNA
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Yes, there is duplication.  I would definitely re-balance my portfolio.

 

Thanks a stack SaurusDNA.  Thanks for taking the time in providing me your advice.  It is much appreciated :)

 

 

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I would wait. The market is at a 52 week low and INDI, for example, is down 25%. I'd hang on to what I have for now, and start balancing it out by only buying those that you have too little of.

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