SPYL vs VWRA: Should You Bet on America or the World?

[00:00:05]Welcome back. My name is Adam. I have Rusman. Hello, Victor.

[00:00:07]>> Hi, everyone.

[00:00:08]>> Thanks for joining us. Today we're going to talk about ETFs. So, we haven't been talking about ETFs for some time. I think it's time to jump onto it. And uh today we're going to talk about this question I get a lot when I'm online.

[00:00:20]Whereas when you when you have an ETF strategy, you would invest uh usually a lot of people pick the S&P 500. So, an ETF that tracks the S&P 500 or they invest in the whole world. All right?

[00:00:32]So, basically the US and everything else. And sometimes people ask this question, should I just stick with the US because it's the it has the best companies in the world, um the best economy, or should I just hedge my bets and invest in the entire world? Because in that case, you can't go wrong because the entire world is in it, right? So, we have ETFs that track that and we're going to cover the favorite ETFs for investing in the US and investing in the entire world. Um but I think people have this question like so should I go to the US or should I go with the world which also includes the US which one's a better investment >> I think the answer you will get the right answer if you know the future [laughter] you know US going to dominate to continue dominate the rest of the world for the next 10 20 years then of course it make more sense to focus entirely your money into us >> right does it is it a sure thing no one knows right so we don't know the future so We don't know the exact answer and especially with Trump now uh being the president of US it's very >> it's only like maybe two more years right >> yeah two more years >> hopefully I mean hopefully there's no long-lasting you know damage in that sense >> um but yeah the country is I mean you look at the history of the US I mean the 20th century was the American century >> so people might still think that it's going to there's still a very very strong economy in it >> yeah I have this uh MSI world index And uh it stretches back to the 1980s. All right. So it if you look at the equity contribution from this MSI world index that the way they construct it um in the 1980s uh you can pretty much see that APAC is actually the largest 47% and out of this 47% basically that 40% out of 47% it's actually coming from Japan. So 1980s Japan was pretty strong.

[00:02:16]>> Yeah.

[00:02:16]>> Right. And the stock market there was hitting alltime high. Property prices were all time high.

[00:02:22]>> Right. And of course uh next three decades we know Japan is a lost two three decades right and only until recently they started to come back again right uh the time back then it was a dominating force right uh in the 1980s so they contribute quite a big chunk of the index right and over the years uh as we enter into 2000s uh early 2000s I think we can see that US started to become dominant force uh and they contribute about 53% and then followed by Europe and then Japan have strong right because of the last decade Right.

[00:02:52]And today last 20 years right or 21 years I think US I think is the biggest contribution in the MCL whole world the world index right so it's about 75%.

[00:03:03]Even if you look at that fully all world index I think US is the dominant force today again how you going to allocate your money in the ETF whether it should be US or ETH or the rest of the world um no one knows.

[00:03:19]>> Yeah. So I think that that and the way the way I prefer it I would uh personally stick to all world.

[00:03:25]>> Okay.

[00:03:26]>> All right. Because if you look at the the market how the stock market work usually is the survival of the fetus.

[00:03:32]Whichever country is the strongest they will become the dominant force and that all world index will automatically reshuffle it change it right the constituents. Okay.

[00:03:41]>> At least you still can still grow alongside with the entire world GDP.

[00:03:44]>> Okay.

[00:03:45]>> Yeah. So, but if you were like back in the 1980s thinking that Japan were the dominant force and they continue to do so, um then of course fast forward to today you'll be very sad because you'll be underperforming >> for the last three decades. the three decades. [laughter] >> So um generally the whole idea of ETF is really diversification, >> right? You are not betting on one single company or one single country, >> right? So uh I think the more rational take uh the way I'll approach it will be like over.

[00:04:16]>> Okay.

[00:04:16]>> Yeah. And then of course uh of course if you still like US and US is still the dominant force today, right? I mean they have the biggest gun in the world.

[00:04:24]>> Yes. Yes. [laughter] Yes. The biggest guns. Yes.

[00:04:26]>> Yeah. So uh and now the AI development there seems to be like the most advanced AI model just living there right and of course the China is coming up fast and know these two country continue to compete right so we really don't know who is going to be the winner in the next 10 20 30 years right so that's why overall index seems more reasonable or more logical >> right in that case you hedge your bets >> yeah I hedge my bets >> so let me ask you a question this MCI world index does it include uh any uh representation of Chinese companies because now China is number two biggest I it's bigger than Japan ever was but it doesn't seem to reflect that you know represent like how strong the Chinese economy is >> yeah so for MSO index I think they only classified developed market so um according to their definition China is still emerging market right so it's not part of this right but in the future that may change right so uh the only option of course uh or the one of the option that you can consider of course is the fussy uh oral index right and this does include absolute emerging country right so if any of the emerging country will ever come up stronger all right so that will capture it right so you have uh two main uh ETFs all right usage based ETF that uh index uh so called they build their portfolio according to the fussy all over world index all right and that will be VWA which is well known uh very popular and yeah the other one is the FWR less popular but increasingly more and more people are choosing FWR uh because the fees are lower at 0.15% versus VWA at 0.19%.

[00:06:02]>> Yeah, it's exactly the same. They track the exact same index.

[00:06:05]>> Okay. So, V has about 3,000 over holdings uh and FWR have slightly less but 2,000 over holdings. Right. Even if you look at 20,000 holding is very diversified.

[00:06:15]>> Okay.

[00:06:15]>> Right. And uh if you compare their top 10 uh holdings, I think this is like the most crucial part because usually it's the the biggest. Right. Right. So top 10 um for VWRA and um yeah so it's very similar right so you're going to see the Nvidia Apple alpha bird Microsoft Amazon right your Mac 7 in that portfolio right so yeah so this will be the holding I think you will see similarly for VW and FW >> yeah I think VW has been popular for a very very long time FWR came up a little bit uh later >> yeah 2023 >> 203 it's quite recent but it's also by a very reputable ETF issuer which is Invesco which is behind QQQ. So I don't see an issue with that. Uh it's cheaper.

[00:07:00]So if you're considering between VW and RA and FWR, I think they're more or less the same but FW is cheaper.

[00:07:05]>> Now the thing is when someone looks at the you say the top 10 holdings of one of these two. Okay. FWR and VWR. I'm going to use them. I'm going to use those two interchangeably. Uh it's all American companies anyway.

[00:07:16]>> Yeah.

[00:07:16]>> Yeah. So someone is like it's already 60% American companies. Is there really a point uh to go with an S&P 500 ETF in that sense? Because you said like you said uh seems like the best companies are in the US. Why don't I just focus on that?

[00:07:32]>> I know you say you can't predict the future.

[00:07:34]>> But all the latest innovations, the breakthrough like the bleeding edge technology is all there.

[00:07:41]>> Yeah. So that that that will be uh again uh if you want to have more focus right, more growth, right? uh obviously US right now looks like they are in the good position right and of course uh uh then you can look at the S&P 500 right and look at the ETFs you based ETF that u built upon those S&P 500 right so I think right now what we have is that of course we have uh the most one of the very popular one is CSPX right so these are usage base ETF okay the reason why we are highlighting USID based ETF is because uh these are more tax efficient >> Mhm. M >> right. So they don't really have that estate tax.

[00:08:22]>> Yeah. No estate tax. US estate taxes.

[00:08:24]>> Your dividend tax is I think 15%.

[00:08:26]>> And 15% versus the traditional um US uh ETFs, right? If the house sells in the US, I think you're going to get 30% with holding tax.

[00:08:33]>> And also despite that they have slightly higher uh expense ratio than the US uh ETF, but because of the 15% rehing the US one you going to have 30%. Overall you'll still end up cheaper actually.

[00:08:49]>> Yeah. Okay. So most of them are Irish doicile uh listed in London. A lot of uh us look at those ETFs.

[00:08:57]>> Yeah. So you have uh CSPX the most popular one. There are a lot of option actually. ETF is like you have one index but there are so many ETFs that is like following the index.

[00:09:05]>> You kind of like sometimes don't know which one to choose right. Why why are there so many flavors of the same flavor in [laughter] a sense? You know, then you got to kind of sometimes have a look and see which one actually is the one that you're looking for.

[00:09:17]>> Yeah. And the other one that's quite popular is the Vanguard S&P 500 US CTF uh VUA. Right. So this one, the EUM size is about 86 billion versus the CSPX is about 150 billion. Right? So the number of holdings is very similar because they index after S&P 500, right? So uh and they're going to have a very similar top 10 weightage. Uh and of course the fees uh VUAA versus CSPX is very similar 0.07%.

[00:09:42]Okay. And they are 100% US all in.

[00:09:44]>> Mhm.

[00:09:45]>> Okay. And then of course you have SP, right? So this is also index uh S&P 500, right? And the fees come in at a lot lower at 0.03%.

[00:09:54]>> This one's this one is really cheap. SP I like SPY L because it's just >> it's just a very very competitive. So someone who wants to invest in just the S&P 500 an ETF like the spy L Irish doicile yeah >> uh 0.03% is is really really good.

[00:10:09]>> Yeah and by the way all this ETF that we highlight they are all accumulating right so there's no dividend in the sense that they kind of reinvest it back yeah into the ETF.

[00:10:16]>> So I I I think if you really want to invest in the US is because you want to maximize the returns.

[00:10:24]>> Okay.

[00:10:24]>> And if you want to invest in the world index right it's because you are scared of concentration.

[00:10:28]>> Mhm. So, so it's sort of like concentration versus diversification.

[00:10:32]But I also want to say is that uh despite uh people some people are afraid to in invest just purely in the US right uh but based on history if you were to look right uh I think a lot of investor really underestimate how adaptive right US >> uh economy can be right >> uh for if you look at all the past history decades right they have transit through rail ra reals industrialization personal computing the internet, cloud computing and now they are translating to AI.

[00:11:05]>> Yeah. So all of those inventions >> Yeah.

[00:11:07]>> came from the US. Yeah. Like basically the 20th century was the American century. All the things that we have internet, computers, microchips, >> um >> the the light bulb, cars, all from the US >> and they have basically environment that allows uh capital, you know, rich people and inventors, >> correct >> to to meet >> and then basically start up all these companies. there is a hot bit.

[00:11:32]>> Yeah.

[00:11:32]>> So it's like I don't think anywhere in the world comes close to that correct at this point.

[00:11:37]>> I think because of how how the whole country is built right >> that that is why they are so adaptive.

[00:11:43]>> Mhm.

[00:11:43]>> Yeah. So that one we cannot >> uh we cannot how say uh just discard it off. I think that is a very important part of the US market.

[00:11:52]>> Yeah. So someone could look at that and say I'm just going to go all in into I mean all in is still 500 companies.

[00:11:57]You're still very diversified, but you're just banking on the US economy, US companies that is going to outgrow the rest of the world over the next 20, 30 years.

[00:12:05]>> Correct. And they've proven it. If you look at the S&P 500 compared to the world index, they still outperform it.

[00:12:12]>> Still out.

[00:12:12]>> Even though World Index also have S&P 500, they still outperform the world index.

[00:12:15]>> Yeah. I always remember Warren Buffett say this though never ever bet against America.

[00:12:20]>> Yeah.

[00:12:20]>> Right. I mean, he might be wrong one day, but we don't know when that is going to uh be the day, right? So uh US is really the dominant force here. So I think the tricky part is that uh is really we don't know the future right that's why u u is clear now they are the the one uh but like the history we have shown right all right every nation rises and fall right um and that's why world ETF right the allocation will sort of capture or auto adjust that for you >> right but you are very confident right you say no way other no other country can catch up with us then of course you follow your own >> uh risk appetite and you want US of course you can just go right into the US.

[00:13:00]>> Yeah. But but when you look at the US you also have to understand that there's years that they underperform >> right for the past 101 15 years they have been performing very well. But if you look back in the 1970s 1980s and 2000 they they they international markets >> actually perform much better than the US market during this time period. So, so you must accept the fact that US right at certain decades right they they may not perform as well as how you see it now. So you need to accept the fact but as long as your time horizon is like 30 years >> you can write through all these decades and come back again.

[00:13:35]>> So this is one thing that you need to take note but if you want a more >> stable uh return on every decades >> then the world index >> makes more sense.

[00:13:48]>> It's the whole world. Yeah, it's the whole world. [laughter] Yeah.

[00:13:49]>> Yeah. Basically the best companies in the world, right? Yeah. Unless the world is not doing well.

[00:13:53]>> Yeah. Then of [laughter] course the world then of course the whole ED will not do well. Sure. Right. So uh and actually compared just last one year uh BW Bangard FYI or UC ETF the popular ETF for the world exposure.

[00:14:05]>> Uh last one year performance is about 30%.

[00:14:08]>> Wow.

[00:14:09]>> Okay.

[00:14:09]>> Okay.

[00:14:09]>> SP okay which is uh S&P 500. All right.

[00:14:13]the last one year. Okay. The performance is about 22%.

[00:14:18]>> Okay.

[00:14:19]>> Also good but >> not as impressive as VW.

[00:14:22]>> Yes. So [laughter] um yeah even though they are the world the long the strongest economy. So time to time like what we say they may perform well they may underperform >> right depending on the valuation >> or the market.

[00:14:35]>> Yeah. But but this you're seeing one year because the past one year the the emerging markets are doing well. Well yes >> that's why the VW is doing well for pass but if you look on a longer horizon it sort of like balance out each other >> so yeah of course uh and you want to have the exposure in Mac 7 then obviously uh S&P 500 will be a good choice right but even if you go for the old world they have all the max 7 as well inside and US already account close to 64% 70% right times u and you will have a still have exposure even you go for the old world right and US is going to be your biggest exposure Yeah.

[00:15:10]>> All right. So, just to summarize, basically you if you're like super bullish about the US economy in the next 20 30 years, >> then of course the S&P 500 makes more sense. Y >> because then you just like you just I just want that exposure. But the VW, FW will be more balanced. You still get US exposure 60%. Which is the which is the biggest, you know, chunk of it >> and then you still get exposure to the emerging and developing market developed markets >> uh in the whole world. So you kind of get the best of both worlds. Maybe you could say but then but again if the US does so well you might look at that and go oh I should have gone with the US entirely.

[00:15:42]>> Yeah but again you you can you can never predict that. Yeah, but there there's also some uh investor who also prefer to have some diversification but they don't want to have so much like 40% in the uh uh the other markets okay the international market so I think some strategy that some people they did is uh they may do like 70% of their portfolio in VWA 30% of the perfering spy because they still want more exposure but they still want a bit of diversification they don't want 40% they want less you can do it that way also So basically you're just increasing your exposure to the US just by adding on >> Yeah.

[00:16:18]>> an S&P 500 ETF.

[00:16:19]>> Actually to be honest you look at some of the or most of the underlying S&P 500 companies a some of their businesses also come from outside of US. So in the way that you are also getting advantage or exposure through overseas market through this company although they are listed in the US they are classified as a US company you have revenue sources coming yeah from like Apple right so they have China revenue right. So actually in the way that you are >> that's the argument. So even though it's US, it's actually global still.

[00:16:45]>> Yeah.

[00:16:45]>> All these US companies are the top US companies are global >> more more or less unless like maybe Costco is a bit more US focused for example.

[00:16:52]>> But in general the biggest Google the Mac 7 all global. Yeah.

[00:16:56]>> In their footprint is global.

[00:16:58]>> So someone could just go like I'm just going to stick with that.

[00:17:01]>> But then obviously the more I guess version [laughter] >> is to just stick with the all ETF.

[00:17:07]>> Let it auto adjust.

[00:17:08]>> Just just let it be. Let it run. I think some people actually prefer that. And for you, you actually like just >> if you're going to do an ETF strategy, just go to all all world. Yeah. Yeah.

[00:17:17]What about you, Victor?

[00:17:18]>> Uh I I will do with the all world also.

[00:17:20]Okay. I do it for my kids.

[00:17:22]>> Okay.

[00:17:22]>> So, you just don't want to care about predicting which economy is going to be the best.

[00:17:26]>> With the all world, I still have US exposure. That's good enough.

[00:17:29]>> That's all enough. Yeah. Anyway, they will auto adjust it.

[00:17:32]>> All right. Right.

[00:17:33]>> Uh another question is what is the China exposure for uh the all world ETF? So, I know the MSEI World Index doesn't have China in it, but the all world ETF uh someone could cuz now someone looking at China, it's like that's the next uh that's the country that's competing with the US. So, does the the VW have exposure to China as well?

[00:17:54]>> They do have exposure right now, right?

[00:17:57]It's about 2.6%. Very low.

[00:17:59]>> That's it. So, it's for the biggest the second biggest economy.

[00:18:03]>> I mean, China is also at the bleeding edge of certain technologies as well.

[00:18:06]>> Yeah.

[00:18:06]>> It's only 2.6%. Yeah.

[00:18:08]>> So someone could say like hey this is not enough. I mean if someone who is pro like I mean bullish about China um this is not enough for me.

[00:18:14]>> I think it's not a fair representation for China to have such a small weightage largely because a lot of the Chinese companies are state owned.

[00:18:22]>> Okay.

[00:18:23]>> Right. Uh and uh increasingly of course that percentage might go up.

[00:18:27]>> Uh but anyway I think uh if you want to have like more exposure uh in China of course you can always pair with uh Chinese um based ETFs right. um those that index CSI 300 or uh A50 or even uh Hansen index then that will give you exposure to Chinese soft tech >> all right mostly are in the Hong Kong hot techch you have to go to A50 or CSI 300 right or the chin chinx right the >> their soal the super growth u uh index >> okay so in general if you're going in this in this case right now VWA FWR will still be mostly US and the rest of the world but China is only 2.6% 6%.

[00:19:07]>> And if you want more exposure to China, you would actually have to pair that with >> like a Chinese >> S&P 500 kind of thing. Yeah.

[00:19:13]>> And so in this case A50 or CSI 300 or the Hansen.

[00:19:16]>> Yeah.

[00:19:17]>> And that gives you to actually more Chinese exposure if you actually like the Chinese growth story.

[00:19:21]>> Yeah.

[00:19:22]>> Yeah. So actually sometimes we have to look at what the allocations are or the holdings are in the ETF because someone could look at this and go like oh ETF I'm going to invest in the whole world.

[00:19:32]But actually sometimes they might want more exposure to the second biggest economy. it's only 2.6%.

[00:19:37]>> And then it's like hm that doesn't make sense. So actually it depends on the person, right? There's no one size fits all u you know kind of like thing I should invest in.

[00:19:45]>> Yeah. But uh I think someone could be looking at this. Oh, I didn't know that about China in this in this sense.

[00:19:50]>> So in the case uh you have to go to the Chinese-based ETF and then look at those u the the best ETFs out there, right? So Cracker Fund is one of them, right? I think they have the lowest fees and one of the largest AUM over there that will give exposure to the Hong Kong um um companies, right? and that have uh businesses a lot of the businesses are coming from China right so that is how you can actually build that portfolio if you don't want to miss out China uh yeah so again uh you need to have a bit of uh knowledge right on how to go about uh selecting the ETFs right so I think of course right now I think the good news is that we have this uh ETF dojo which have just launched all right and basically it's a course where we >> uh teach you how to uh look at ETFs and pick the best ETF in fact we already done that for you. We already picked the best ETF and listed down >> in the watch list, right? And then you can just go there and see what exposure you want to have. Uh if you are looking at Singapore, >> we have the best ETFs in Singapore that we shortlisted for you. If you want Japan, Japan have been shortlisted. All right? And the top two top three that's it because there's so many ETFs, right?

[00:20:53]I think right now as I check, I think has about 17 over,000 ETFs right now listed. Last year was about 14 over,000 >> and just within a year it grown to 17,000. Okay. So like I like like what we said just now one index can have many many many ETFs that following the index.

[00:21:10]>> So which one do you pick because there's so many you want to go with the best one or two or the ones with the cheapest >> or the ones that basically are more tax efficient as well.

[00:21:18]>> Uh so do check out ETF dojo.com if you're interested in that. We basically teach you how to pick ETFs and the entire watch list watch list of the ETFs that we like is also available. So do check out >> uh ef dojo.com if you're interested.

[00:21:30]>> Yeah. And of course most investor will go for the lowest fees right that sometime makes sense but sometime you have to look at the context like you know the world fussy all world you see ETFs I think recently I think they will there are two new ETF that will launch all right one is by X tracker the other one by right uh the ticker symbol is LLW right for XRE and the other one is the FDA right all right so if you look at it this one also the index after uh Fussy all right and their fees are a lot lower okay especially look at the X tracker expenditure ratio is 0.07%.

[00:22:03]>> Very low, right? But you look at the AUM size right now is about 39 million.

[00:22:06]>> Oh, >> so it's quite very small, right? So um I would not personally look at it now but maybe two three years down the road they could have grown into like uh billion more people invest once you have more people invest in that ETF then you have more liquidity right then that is a time where you can start to consider them but right now they are still very small. So I would not personally go ahead with it just because oh they're the lowest the cheapest right but they don't have that liquidity. So when they don't have liquidity of course the spread that you're trying to buy ETF will be wider.

[00:22:34]>> Mhm.

[00:22:34]>> Yeah. So that's why uh not just purely everything on fees.

[00:22:39]>> Mhm.

[00:22:40]>> Yeah. So I think there's certain factors you need to look at when you're selecting ETF. It's not just like oh I'm just going to pick ETF and just it's easy. Um but all these things are you know you have to go through as well almost like picking a stock. It's a lot simpler, but there are all these things that you still need to consider. So, we cover all that in ETF dojo. All right.

[00:22:56]All right. So, uh just to summarize, uh if you're bullish about the US, you would go with the S&P 500 ETF. In this case, we like SPY L because it's the lowest expense ratio and it's also a very big ETF. AUM is uh in the billions.

[00:23:13]>> Yeah.

[00:23:13]>> Yeah. Uh but if you just basically want to invest and hedge your bets then the FWR VW is a good option >> because you also get exposure to the US anyway.

[00:23:22]>> Yes.

[00:23:23]>> Yeah.

[00:23:23]>> So and like you said uh certain years certain decades the the world may do better than us.

[00:23:29]>> Well you never know you can't predict.

[00:23:31]So I think the the the important thing is that I think people are wor worry is that in the event where US cannot adapt and there's a market leadership change >> not say that you you cannot invest in you still can invest in the US but in the event if that really happens then you must be your own ETF manager to >> uh adapt and sell your this ETF and switch. But if you were to go to the world world ETF, they help it's just one fund and they automatically help you adapt.

[00:24:04]>> They rebalance it for you.

[00:24:05]>> Yeah. So you know you do anything. So it's it's really depends on you.

[00:24:08]>> I think it's quite quite scary. I mean if you have like been dcing your you know retire retirement money into the S&P 500 for example and then one day the US just like just doesn't I don't know something happens to you.

[00:24:20]>> Yes. Maybe in the case of Japan 30 years ago, 30 years ago, the ETF may be non-existent, right? Or very very small.

[00:24:27]>> Um, and just imagine if uh this year all the way until now, you will be >> it's just flat, you know, if that happens to the US.

[00:24:35]>> You won't believe in ETFs. [laughter] >> Yeah. So, I guess uh for you guys, I think for me as well, I also prefer the world ETF. You get US exposure, but then if you know the US doesn't really perform in the next 30 years, you still have the rest of the world to to back it up. But it really depends. Some people really do believe that the US is always going to be number one and the growth is going to be there. So it's really up to you. Yeah. So I think we try to help to answer that question. Yep.

[00:24:59]>> Uh and then give you some of our favorite ETFs in these uh all these different uh indexes as well. All right.

[00:25:06]So uh spy for S&P 500 and FW for fol if you like that. Okay. All right. So I think that's pretty much it.

[00:25:16]>> Yep.

[00:25:16]>> All right. So my name's Adam Rosem and Victor. Thanks for joining us. uh tell us what you think, what your opinions are, whether you should go with, you know, would you bet on America or would you, you know, invest in the whole world? Uh what your choice would be and why. And of course, if you have any questions, you can also answer them in the comment section. Uh if you like the round table, please hit like button. Uh just check out edfjo.com if you're interested in ETFs. And of course, you know, we'll see you again when more round tables come up. as you