The Cheapest ETF Portfolio In London

You can now build an institutional-quality, diversified ETF portfolio in London essentially for free.  

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Reviewed by: Matt Hougan
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Edited by: Matt Hougan

You can now build an institutional-quality, diversified ETF portfolio in London essentially for free.

OK, free is an exaggeration. But the costs are coming down fast.

For the past six years, I’ve been tracking “The World’s Cheapest ETF Portfolio” on the U.S.-version of ETF.com.  It’s composed of the lowest cost ETF in six major areas of the markets: U.S. stocks, international stocks, emerging market stocks, bonds, REITs and commodities.

When I started tracking this portfolio, the best you could do was a blended fee of 0.16 percent per year, or $16 for every $10,000 invested.  I thought that was pretty great. But now, thanks to cost competition, that fee has been slashed in half and now stands at just 0.08% percent per year.

That’s amazing!  For just 0.08 percent per year, you get exposure to more than 4,000 stocks in 40 different countries, thousands of bonds, and a diversified basket of commodities.

What About Europe?

I’m pleased today to bring this concept for Europe.

Last week, I attended the 5th Annual Inside ETFs Europe Conference.  If you didn’t go, you missed something special.  More than 400 people (including 120+ IFAs from the UK alone) enjoyed an amazing three days of informative panels, interesting keynotes and fantastic parties.

Jim Wiandt and I kicked off the event with an opening keynote speech on the future of the ETF industry in Europe, and we used it to reveal “The Cheapest ETF Portfolio In London”.  Like its U.S. counterpart, the London portfolio is aggressive: 60 percent stocks, 30 percent bonds, 5 percent commodities and 5 percent gold.

It’s slightly different than the U.S. portfolio because the UK market is a different beast. The overall thought, however, is the same: How do you get the cheapest possible exposure to an institutionally diversified portfolio?

Here it is, using all LSE-listed ETFs.

THE CHEAPEST ETF PORTFOLIO IN LONDON

Asset Class

Weighting

ETF Name

Ticker

Expense Ratio

Eurozone Equity

30%

Db X-trackers EURO STOXX 50

XESX

0.09%

U.S. Equity

25%

iShares Core S&P 500

CSPX

0.07%

Emerging Markets Equity

5%

iShares Core MSCI Emerging Markets IMI

EIMI

0.25%

Fixed Income - Sovereign

25%

Vanguard UK Gov’t Bond

VGOV

0.12%

Fixed Income - Corporate

5%

iShares Core £ Corporate Bond UCITS ETF

SLXX

0.20%

Commodities

5%

Lyxor Commodities Thomson/Reuters Jefferies CRB TR

CRBL

0.35%

Gold

5%

iShares Physical Gold

SGLN

0.25%

BLENDED TOTAL

0.127%

 

12.7 basis points!

In other words, for just £12.70 per year for every £10,000 invested, you gain exposure to thousands of stocks in more than 40 different countries, a diversified portfolio of bonds, blended commodity exposure and the unmatched inflation protection of gold.

It’s the kind of portfolio that any institutional investor would be proud to hold, and it’s fantastically cheap. For reference, the total fee on this portfolio is less than 1/10th the average fee for a simple, actively managed equity mutual fund.

Is “The Cheapest ETF Portfolio In London” the right portfolio for everyone?  Of course not.  But as a starting point it’s pretty fantastic.

Matt Hougan is CEO of Inside ETFs, a division of Informa PLC. He spearheads the world's largest ETF conferences and webinars. Hougan is a three-time member of the Barron's ETF Roundtable and co-author of the CFA Institute’s monograph, "A Comprehensive Guide to Exchange-Trade Funds."