value etf's

[Muddywaters]

I've recently been changing my core holdings from global it's to global etf's.

My portfolio is heavily weighted towards growth stocks and I wanted to diversify with a value based global etf or IT.

I've been looking at both the vanguard world value and I shares world value.

Does anyone have any views on these types of etf? I'm investing for purely growth (20 years plus) so accumulation shares would point towards the ishares etf but from their literature it appears that they apply sector weighting limits. I'm not sure if this should be viewed as a good or bad thing?

Or is this an area where a fund manager could add value to avoid traps?

Thoughts/views welcome

[Lootman]

I've been looking at both the vanguard world value and I shares world value.

Does anyone have any views on these types of etf? I'm investing for purely growth (20 years plus) so accumulation shares would point towards the ishares etf but from their literature it appears that they apply sector weighting limits. I'm not sure if this should be viewed as a good or bad thing?

Or is this an area where a fund manager could add value to avoid traps?

My first thought, since you say you want growth, is why you are targeting value ETFs rather than growth ETFs? Usually growth and value sub-indices are complimentary, meaning that the growth fund typically has the low-yield, high PE names that (it is hoped) will grow faster. Whilst the value funds contain all the other shares in the broad index i.e. those that are more stable, defensive, higher-yielding and so on.

If you really want growth I'd choose a growth ETF. This would have names like Amazon, Alphabet, FaceBook, Amgen and so on.

Personally I don't like accumulating funds as they can be more complex to keep track of for tax purposes but, if you are holding in a tax-sheltered or tax-deferred account, that may not concern you.

The sector limits aren't a matter of the fund manager applying different weights to different sectors. That would be straying far from the cap-weighted mandate. Where the limits would apply is in markets where one sector has a high cap weighting relative to the whole market. This doesn't tend to happen in the US so much because their market is broad and deep, and usually not in the UK, but can happen in smaller markets where perhaps one company has a huge cap weighting. The limits are there to mitigate single-company or single-sector risk, and is not an active attempt at alpha.

Both ishares and Vanguard have excellent reputations, low tracking errors and are very solid. Not much to choose between them IMHO and I would just look at cost.

[Muddywaters]

thanks for your comments lootman

I hear what you're saying in terms of growth ETF's but almost all of my IT exposure is growth based which at the moment still accounts for the majority of my portfolio.

I was thinking about a value based investment to add some diversity to my portfolio in terms of strategy. I was looking to allocate around 5-7.5% of my portfolio on this basis when I add new cash, which will probably be in the new tax year

May need to give it further considerations

[Chloe]

May I ask in a completely non-challenging way: Why is it worth having a small percentage - 5-7.5% of value ETFs in a (growth) portfolio? Over the medium/long term, how much extra annualised return can one hope to achieve, or is it risk reduction or income generation or ...?

CB