Inside The Bedokian’s Portfolio is an intermittent series where I will reveal what we have in our investment portfolio, one company/bond/REIT/ETF at a time. In each post I will briefly give an overview of the counter, why I had selected it and what possibly lies ahead in its future.
For this issue, I will talk about the Vanguard FTSE Developed Markets ETF (ticker: VEA).
Overview
VEA is an ETF from Vanguard, one of the largest and established ETF providers in the world. VEA uses the FTSE Developed All Cap ex US Index as the benchmark, and previously it was tracking the MSCI EAFE Index, in which EAFE stands for “Europe, Australasia and the Far East”. As indicated in the current and previous index names, the ETF does not contain any US listed companies in its holdings. In addition, the ETF contains listed companies from the developed countries in the said regions, such as Japan, United Kingdom, South Korea, Australia and Canada, to name a few.
Why VEA?
As I had mentioned in my eBook1, since passive income is prerogative for The Bedokian Portfolio, it is advisable to go for financial markets that are developed, in which the economies are matured and stable and hence, a steady stream of dividends can be expected from the established listed companies. Also, for my overseas investment strategy, rather than going for a global-wide ETF, I decided to break it into US-based and EAFE-based as I believe there are merits in holding a sub-portfolio of US-listed equities (both ETFs and individual securities) and a sub-portfolio of EAFE ones.
The choice of VEA as the ETF to go for is obvious; it has the largest assets under management (AUM) (currently USD 102,820 million) and has one of the lowest total expense ratio (TER) (0.05%)2. An ETF with a high AUM tends to be more liquid in the market and brings about an economies of scale in fund expense management, and interestingly VEA’s TER is relatively low compared to others.
EAFE Going Forward
The growing polarisation between the United States and China could bring a scenario of what I described as “the dichotomy” of the world’s two largest economies. Though geo-political and historical wise, some of the EAFE countries tend to side one faction over the other, but as a “third party” there could be some positive spillover effect resulting from “the dichotomy”.
Disclosure
Bought VEA at:
USD 41.47 at Feb 2014
USD 40.65 at Sep 2014
USD 38.05 at Oct 2014
USD 37.695 at Dec 2014
USD 36.00 at Aug 2015
USD 35.10 at Mar 2016
USD 33.20 at Jun 2016
USD 39.50 at Aug 2019
1 – The Bedokian Portfolio, p107
2 – ETFDB.com (accessed 23 Aug 2021)
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