Which core ETF should I pick?

Many people like to have a core+satellite approach with their portfolio.

A popular choice for a core ETF is either:

1. MSCI global index ETF (SWDA)
2. MSCI global Quality index ETF (XDEQ)
3. S&P 500 index ETF (VUAA or VNRA)

For the past 5 years, the S&P 500 has shown much better returns than the MSCI global index (SWDA) however.

If we look at the performance over the last 5 years, the S&P 500 ETF VUAA has consistently performed better than SWDA or XDEQ.

But a global core holding would have less dependency on the USA.

XDEQ is a quality world ETF with a similar USA weighting to SWDA, but the Vanguard FTSE All-World ETF (VWRA) has 10% less USA exposure than SWDA.

So perhaps a good core ETF would be SWDA and then you could buy satellite ETFs within the S&P 500 such as IITU, IUCM and IUFS.

SWDA has beaten the Vanguard FTSE All World over 1, 3 and 5 years.

Four possible different example portfolios (choose one):

1. 50% XDEQ + 50% VUAA (MSCI global + S&P500)
2. 50% XDEQ + 50% EQQQ (MSCI global + NASDAQ)
3. 50% VWRA + 50% VUAA (FTSE All World + S&P500)
4. 40% SWDA + 20% IITU + 20% IUCM + 20% IUFS (global + S&P500 tech, comms, finance)

I prefer no. 4 in this list because I can add funds into one or more ETFs each month depending on market trends and the price at the time.

A higher risk S&P500 portfolio might be VUAA+IITU+IUCM+IUFS. This would have shown amazing returns over the last 5 years (+130%), but would also be volatile and very risky.

VNRA is Vanguard's North America fund and has slightly outperformed VUAA - it is more diversified and has more holdings although the top ten holdings are the same as VUAA.

For an ultra-simple portfolio, just VUAA or VNRA alone would give you excellent returns (see below). It would be very dependent on the USA however.

You can use the detailed comparison feature in justetf.com to see what the top ten holdings in each of these ETFs are, and if you use Invest Engine, you can see a summary of all the company holdings that your whole portfolio contains - a very useful feature.

Fisher Investments

Ken Fisher of Fisher Investments will invest in 100% equity for you. It is an actively managed account and they have an approx. 1.5% management charge. They are one of the leading wealth management organisations and have an excellent reputation. They only take on accounts of £250k or larger.

Their chief fund is Purisima Global Equity Fund B. We can compare the performance of this fund with a North American ETF such as Vanguard's VUAA...

VUAA has marginally outperformed Fisher Investment in the last 5, 3 and 1 years, probably due to the higher charges of the Purisima fund (but Purisima has done better in the last 3 and 1 month period). Of course, as Fisher's Purisima is an actively managed fund, if/when USA performance dips or there is a recession, etc., Purisima should then perform better than VUAA and you would not have to worry yourself. This may well be worth the slight difference in performance to you - both will have doubled your investment within a period of under 5 years!

What are your main core ETFs and main satellite ETFs?

Note: This is not financial advice. Please do your own research.