[This article originally appeared in our October issue of ETF Report.]
Firm: Ascend Financial Planning LLC
Location: Columbia, SC
AUM: $100 Million
When did you first start using VEA? What drew you to the fund?
I used to use the Vanguard Total International Stock ETF (VXUS | A-99). That’s a great all-in-one fund. The FTSE Global All-Cap ex-US Index is a good index, and I like to keep it simple for my clients.
But recently, as markets have gotten cheaper and I wanted to tilt more toward emerging markets, I decided to break my exposure into two ETFs: the Vanguard FTSE Developed Markets (VEA | A-93) and the Vanguard FTSE Emerging Markets ETF (VWO | B-88).
That was spurred by VEA’s change from the MSCI EAFE Index to the FTSE Developed ex North America Index, and now they’re changing it again to get more small-cap exposure in there. I heard about that change and thought, “Great!”
Why did you like it so much?
It just makes sense. Small-cap will now be about 10% of the overall weight, I think. And if you look at the research, tilting a little bit toward international small-caps is a nice long-term play.
Plus, those are different industries you’re investing in. They’re not multinational corporations. So I think you’re getting some value added in terms of the diversification there.
So this is a fairly recent switch for you.
Yes. Only within the past couple months.
Why go with VEA versus one of its competitors, like the iShares MSCI EAFE ETF (EFA | A-92)?
EFA is so much more expensive, for starters.
I like VEA for so many reasons. It’s large. It’s liquid. It’s cheap. It’s easy to trade. And I like Vanguard too because they’re not a publicly owned company; they don’t have to answer to shareholders. They answer to the investors who invest in their funds. So when they reduce costs, those costs tend to accrue to the benefit of investors. I like that philosophy.
I also feel like they have a good team I can always call on when I need help, and they’ve done a good job of reinforcing that area over the past few years. If there’s ever a question about a change in the index or if there’s ever anything I need, I can go to them for support. They have some very good advisor resources on their site, too.
Over the next few months, VEA will also move to include exposure to Canada. How much of a selling point is that for you?
Very much! I’m a market-cap-weighted gal, and I felt that not having that exposure just didn’t make any sense. I’m glad they’re adding it. I think about 8% of the new index will be Canada.
That’s not insignificant.
Yes. You’ll lose about 2% from Japan and 1% each from France, Germany, the U.K. and Switzerland; so you’re taking some money out of Japan and Western Europe to get that Canadian exposure. Of course that also changes your sector mix a little. You’ll have more in, for example, energy. But I’m comfortable with that.
I’m a big fan of the broadest exposure you can get in the cheapest way. I’m also comfortable with the China A-shares addition to VWO, for example. I’m a passive investor at heart; I’m not particularly tactical.
What would be the trigger for you to get out of VEA?
I guess if Vanguard increased the expense ratio a lot. For me, it’s all about low-cost exposure, so if I saw that was happening, it would make me worry. But if anything, Vanguard tends to decrease its expense ratios, generally speaking. I don’t foresee that happening.