Question:
What are your views on total world exchange traded funds (ETFs): have they run their course for now or are they still a go-to in a tax-free savings account? I’m heavily weighted to the US, so that’s my concern over the next decade or so.
— A Fat Wallet Facebook community member
Answer:
You’re right about the amazing run in US stocks over the past decade, and historically the returns in the years after such a strong run are lower as valuations return to more normalised levels.
We saw this happen in the first decade of the 2000s. During those 10 years the US indices had pretty much a zero return after a blistering run in the late 1990s. The main concern is timing the market — the same comment could have been made a year or two ago, and yet US markets have continued higher. You also have to time when you want to increase your US exposure again. It’s hard to get it absolutely right.
Further, the global ETFs will to a degree autocorrect, reducing US exposure when that market starts to lag. But if you’re set on reducing US exposure you could look for a global ETF that is less focused on tech (and so the US), such as the Dividend Aristocrats from 10X Investments. Maybe rather than exiting the existing holding, just put new money into the less US-focused ETF.
— Simon Brown, Just One Lap
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