Ditching VEA to double down on VWO?

Investing / Portfolios
1

Currently invested in a mix of VTI+VEA+VWO in my passive portfolio.

VEA dragged down portfolio performance a lot last couple of years. It’s understandable - Europe’s in economic stagnation if not even borderline recession. Looking at fundamentals, VEA compares rather poorly to VWO right now on everything - P/E, ROE, earnings growth, all look bad at least according to Vanguard:

Thinking of ditching it in favor of VWO, or maybe some kind of VWO ex financials ETF. Thoughts? And how are you allocating money between US, developed and emerging markets?

2

the same question has been on my mind for a while. it all depends on which myths / stories you prefer more than other: (1) past-decade-long undervaluation of ex-US developed world or (2) the growth / rising (and consuming) middle class of emerging world (and maybe return of commodity super-cycle) or (3) something else.

If and when the institutional investors / large fund managers move money out of ‘over-valued’ US stocks, which story will they buy into?

For split VTI+VEA+VWO/EIMI, I’m trying to get to one-third in each. Why? because I have no clue and don’t know which story / stories others will buy into.

3

Nope. Poor idea. VEA is dragged down by Japan and the UK while the rest of developed markets is doing rather ok (epecially MSCI Nordic). If you feel lucky you can bet on some of EM countries through separate ETFs, but I’ll have to say overweighting VWO has not really worked for me.

4

It’s just looking at fundamentals - P/E, ROE, growth, VEA is a clear loser between the two. Economy/GDP growth also favors VWO side. So that’s why I’m thinking of at least overweighting VWO at expense of VEA, compared to natural market cap allocation

How much of it is just Nordisk rebound? This index is rather top heavy, top 10 stocks = 36%. At this rate I may just go for stock picking in my active portfolio on fundamentals, I have NVO already there, worked very well.

5

Lot’s of commodity driven markets in the EM space, and the modern investing criteria (ESG etc) are not helping. You can basically sort most of the EM space by resources and their currencies and have a pretty good guess where things are going. Best to do play this with individual country exposure IMHO. And of course load up on China ASAP as it is on discount.

Nordics have Nokia and Ericsson as well, huge 5G plays and it’s only just starting to move. Volvo is not doing that bad either comparing to the rest of the automotive world. Plenty to like in MSCI Nordic actually.

6

So what chinese etfs are you loading up on?

7

I recommend you go with KWEB

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8

Is that what you investing yourself in? I like how it invests mostly in tech (don’t like financial-heavy VWO), but at 0.76% TER isn’t it a little pricey? Top 10 stocks are 60% of their holdings by weight and are all stuff I can easily buy myself on US exchanges (ADRs) or on HK with IB.

9

But that’s already priced in?

10

I think no - VEA spots a higher P/E for a lower ROE and earnings growth.

11

I mentioned in another thread, that I invest in several single stocks that make up KWEB as I already have heavy weight in Tencent and Alibaba through VWO. I’m not enjoying the single stock volatility though and for this reason I would now prefer to just go with KWEB and I’ll probably slowly rebuild my portfolio in this direction.

Investing on HKEX may be tricky as stocks are sold in predefined lots and therefore a minimal purchase of let’s say, Alibaba (HKG:9988) is 100 stocks. This is ~4000 CHF.so you can basically only purchase and rebalance in such steps.

Europe also has some reasonable stuff, for example the Stoxx 600 Tech index (EXV3 on Xetra).although it kinda sucks it’s very heavy with SAP.

12

XSOE ? EM MINUS state owned enterprises. Heavy into IT and consumer discretionary, but the TER isn’t much lower either.

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