Sunday, January 30, 2011

Portfolio Review #6 - ETFs

I hold positions in several ETFs. ETFs offer diversification benefits without the cost and performance issues associated with actively managed funds (which I will not voluntarily buy any more). That said, the costs of the products available out here are still higher than the ultra low cost products available in the US (which I either cannot buy at all or cannot buy at present due to personal circumstances or which are subject to taxes that negate the lower costs).

In principle I am attracted to ETFs as a means of investing in markets which are either difficult or inconvenient to access directly or where I do not want to spend the time doing the research. They also provide diversification benefits (both from the HK market which is my primary focus, and within their respective markets) at relatively low cost.

All of the ETFs I hold are for emerging markets (except for a commodity ETF to be reviewed in #7). In practice this means that while I have achieved diversification across companies and industries, I would still expect a significant degree of correlation between these investments.

Quite frankly, I do not spend too much time thinking about these investments once I have made them.

I currently hold ETFs investing in:


Hong Kong

China A shares




My positions in Hong Kong and India ETFs are significantly larger than my positions in China A shares, Vietnam, Russia and Taiwan. Of these, India is the only one that I am considering reducing my position. As dynamic and youthful as the Indian economy is, I expect the high levels of volatility to continue and am aware that on trailing fundamentals it is far from cheap - and a high level of future growth is effectively priced in.

The obvious omission of any developed market ETFs is something I should look at - again the objective would be diversification and risk reduction. Hopefully an additional benefit would also be reducing the expected degree of correlation between investments.


JD said...


Are the ETFs that you buy those listed on HK?

traineeinvestor said...


Thanks for dropping by.

Yes, all of them are listed in Hong Kong.