VDHG vs Portfolio split

Question

Hi There

When I first started investing I bought shares in VDHG and ETHI just to get some skin in the game. 
After I bought the first few units I decided to go down a different route and now my portfolio is made up of a A200/VGS/VGE split to try diversify my portfolio. (Still holding the initial VDHG and ETHI units)

Is there any benefit to my split compared to VDHG as a whole? I don't think it's necessary to sell anything off at this point and rebalance (Happy to be wrong). I just want to set & forget at this stage while I work my way through things and have a core portfolio that does the majority of the work

Thank-you

Answer

Hi Jamie. Interesting question.If we look broadly at what’s happening with these holdings, the two options are roughly similar…There is exposure to Aussie shares, global shares + emerging markets. So this tells us that there is not a huge difference between the two portfolios. Obviously the VDHG portfolio is simpler as there is only one holding, but the fees are likely to work out a bit higher than the three ETF split (this can add up to quite a bit of money over time, but the benefit is simplicity + less to manage for the investor).You should consider whichever option is preferred out of these two, as the exposures are similar, rather than worry about one being superior to the other. Would you prefer to have the three fund split or just one holding?I actually wrote about some of the pros and cons for this kind of decision in the following article, link below if you’re interested.VDHG &amp; DHHF – Is A One Fund Portfolio All You Need?: https://strongmoneyaustralia.com/dhhf-vdhg-on...Hope that helps.

Answer

G’day Jamie,

Disclaimer first: I work for a company with a general (as opposed to personal) financial advice licence, so I can’t give you personal advice!

So, Vanguard’s Diversified High Growth ETF is insanely popular. And fair enough. The name itself is catnip, and Vanguard is a wonderful organisation. That said, it’s an ETF with an ‘active’, rather than ‘passive’ strategy, so you need to convince yourself that the (extra) fees and that the active strategy is likely to be superior to the passive index. For my 2c, if I’m going ETFs, I’m going low-cost, broadly-diversified, index-based. So, I’d go with the Vanguard ASX 300 ETF (ASX:VAS) over the diversified high growth.

(Remember, if you choose the latter, you’re implicitly making a market ‘call’ — that it’ll be superior to the index. It might be… or not. If I’m ETFing (and I do, as well as picking stocks), I’m going for an index-based one.

Also, fwiw, I’m far from convinced ‘ethical’ investing actually makes more than a tiny, marginal difference (unfortunately) to the planet, and would rather go with a low-fee index-ETF and donate the difference in fees to my favourite cause. I wrote about the reasons here: https://www.fool.com.au/2019/03/10/the-inconv...

I wish I was wrong, by the way. I just don’t think I am.

To the nub of your question: there’s no harm in having all three. Some of it will be overlapping, but that’s okay. If you like all three ETFs, there’s no reason to get out of any of them (you’ll incur costs, perhaps including brokerage and tax, and there’s no real benefit to selling any, unless it’s to move money into something else you have meaningfully higher conviction in).

I hope that’s useful grist for the mill.

Scott Phillips
CIO, The Motley Fool.

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Jamie Martens

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Dave Gow - Strong Money Australia

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