cross-posted from: https://lemmy.ca/post/653849
I’m trying to follow conventional wisdom and have more and more of our portfolio as straight up VGRO but want some more US exposure (though I am aware there are arguments in favour of a home-country bias). I was also interested in picking a USD fund as not only do they tend to have a lower MER but also get an extra boost from witholding tax exemption if I hold them in an RRSP.
An S&P 500 fund seems the way to go, but it seems awfully slanted towards giant tech megacaps. Apple alone is over 7% of VOO. With a P/E over 31 it’s hard for me to feel like there’s not extra risk with the concentration here–is it really such a safe bet to think the largest company in the world has that much more growth ahead of it? And VGRO already has a solid chunk of cap-weighted exposure.
And so, after my inexpert research failed to dissuade me, I’m probably going to use an equal-weight ETF like RSP or EUSA for this portion—there are no penny stocks on the S&P 500 and it doesn’t seem to perform much worse (and indeed better depending how far back you test). At this point I’m more comfortable with either of those than VOO and will probably do this just for the irrational psychology, but I do wish there was something that combines an equal weighting with a screen for quality (something like SPHQ) as a big drawback seems like for as much concentration risk as it avoids it also keeps rebalancing more and more into failing companies as they crash and burn.
Anyone else subscribe to a similar reasoning and incorporate an equal weight fund into the passive portion of your portfolio? Which one did you go with?
You can have imperfect simplicity, or something overly complex that meets your requirements.
You can buy a pre-existing ETF (imperfect but simple), or you can buy all of the equities individually to manage the equal-weight balance (overly complex). You’ll likely spend more in fees doing the latter, even if you do spend the time and effort to manage 500 equities all by yourself – and it’s not really clear that you’ll come out ahead in terms of stability or gains.
Heh, I think that’s a bit of a false dichotomy. What about the option I refer to above eg. two ETFs: VGRO and RSP ie. at no point did I ever contemplate balancing 500 equities:
It’s everything after the part you just quoted that made me suggest managing all the stocks individually. :)
Why would you buy individual equities when there’s multiple cheap equal-weight S&P 500 ETFs on the market?