I’ve been investing in VT for many years now (thanks MP!!) and after having reached $600k invested in it I am considering investing into a new Total world Stock ETF. My only rationale for doing so is to diversify any very minimal yet potentially annoying situation when Vanguard goes bankrupt and it might take some years to get back my portfolio. Therefore I came across SPGM (TER: 0.09%) which is very similar to VT in terms of investment approach and would provide the desired asset manager diversification.
What do you think? Any thoughts? Thanks a lot everyone!
Just that the fund seems to use optimized sampling, instead of full replication. But should not be that much of an impact.
AUM with almost a billion is sufficient enough, but could result in a bit higher spreads than VT. Not meaningful though.
Performance is almost 1:1 that of VT. Reputable provider. US domiciled, so same tax treatment. Investible market is basically the same as well. So whole world + EM.
I can’t really see a reason why not … but I also can’t really see a reason why?
If Vanguard was going backrupt, like suddenly, leaving you no time to move out of VT … Vanguard managing about US$ 8 trillion (2022)* would IMO mean that the US government, the Fed, etc, would move in so swiftly you wouldn’t even notice that Vanguard was on the edge of going bankrupt.
This is even before all the contracts saying that you own the assets that Vanguard manages for you.
Totally out of my depth here, but I would even wager that if Vanguard were in that situation, and the market knows/learns, and the entities mentioned above didn’t intervene, virtually all other ETF providers (well, let’s be generous: most other financial institutions), including all Spider funds** would tank essentially just like VT.
Maybe there’s better doomday experts on this forum that can weigh in.***
Personally, I’d just stick with VT if I believed in the FTSE All Cap Index being my best investment vehicle, and worry about other things first than Vanguard going cold blank bankrupt on me.
* For comparison: the US GDP is about US$ 25 trillion in 2022.
** Full disclosure: proud owner of an about full position in State Street.
*** Bitcoin aficionados, gold bugs, this is your hour to shill shine!
(Well, VanGuard will go bust because they denied the existence of Bitcoin…)
Yep, VT → VT-like diversification makes no sense.
VT → BTC diversification does.
Thanks a lot for your messages! From the first reactions it seems that my excessive caution is unwarranted. Curious to read what other have to say before I make up my mind
The Risk is not bancrupcy but Cyber Attacke and politics. You best move away from ETF that hold their Shared with the Same Provider and Jurisdiction. The second ETF won‘t help.
Meiningen that you either go IE, LUX or Even CH Domicile. Clearly only after 600k+
In my view , there is no need to overthink. If you want another ETF, just go ahead
However think about what is your actual concern. Are you trying to protect yourself against
bankruptcy of Vanguard
US domicile funds
US broker
If it’s #1, then SPGM is fine and you have really nothing to lose except 0.02 % TER which is not a big deal. Intact for last 5 years SPGM had a slightly better return over VT for whatever reason.
If it’s #2 then perhaps IE / CH domicile funds might be needed
If it’s #3 , then you might need to select ETF accordingly depending on which broker you decide to have
Point being, it doesn’t matter if your worry is due to paranoia or realistic. Peace of mind is very important. It’s very individual
For me I diversify everything
fund domicile
Broker
Fund provider
Not because I am very sure of something going wrong, but I just don’t like to have everything in one place.
I agree that taking another US ETF instead of VT is a diversification against one type of risk only. If you really want to go into that direction, why not do it consistently: European broker, UCITS ETF with Irish domicile, European fund management company.
Alternatively, rebuild your portfolio to invest via US ETF(s) at IB into US market only, the rest of the world via European ETFs as I have described before.
I was re-reading your post and have a question on the sentence “Alternatively, rebuild your portfolio to invest via US ETF(s) at IB into US market only, the rest of the world via European ETFs as I have described before.”
Do I understand correctly that this setup would be more tax efficient than investing only in VT? Shouldn’t MP update this page accordingly then?
Jokes aside, if my understanding of the assumption above is correct then I could invest into ITOT/SCHB to cover the US. However I would not know in which UCITS ETF to invest into to cover the non-US portion of the global stock markets.
There are multiple layers of expenses, including taxes. Ideally you should consider them all.
Probably not. If you can get back the US withholding tax completely, VT is very efficient. However you were not asking about the cheapest solution, but about diversification options.
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