But I’ve heard the Value message and think it makes sense, so I’m going to buy an ETF benchmarked to the MSCI World Global Value Index
Oh, so you like Real Estate?
No, I’m very worried about Commercial Real Estate, I think it’s the next “shoe to drop”
We agree, but then you should know the MSCI World Value index has 4% exposure to that sector
when some active managers like us have zero
Well, it’s only 4%
Yes, but if the “shoe drops” by 50%, you’ve lost 2%, how much is that fee differential again?
Well, the US has been the winning region and I like betting on winners
Past winners or future winners?
Duh, future winners obviously!
Well Berkshire Hathaway must think Japanese equities are “future winners” if WB was happy to leave his Omaha steakhouse and travel to Japan for
Well, this ETF also has Japan at 6%
Yes, but Toyota is roughly 25% of that with a 1.4% holding
Do you like car companies?
Pity because you get Honda too
Anyway, some active managers have far higher weightings to Japan than 6% (without autos)
And do you like tobacco companies?
Are you crazy – I don’t like companies that “harm” their customers (to put it kindly)
Us neither, but then you better “look under the hood”
And I’m not referring to the “hood” of one of the many car companies you hold
Because you’ve got:
British American Tobacco at 1.4%
Altria at 0.58%
Japan Tobacco with a 0.35%
Imperial Brands at 0.33%
Roughly 2.7% in tobacco companies in the MSCI World Value ETF from what I can tell,
You wouldn’t want that lot “going up in smoke” would you?
Could cost another few years of fee differential..
Well, I see from the fact sheet that some of the largest holdings are United Health and Procter & Gamble and they’re nice solid companies
Ah yes on 23x and 27x earnings…
But that’s not Value!
No, we don’t think so either, that’s why we don’t hold them
Well, how did they get in here?
Good question – ask them
if there’s anyone to ask…
But at least you’ve started “looking under the hood”
Unfortunately, many Passive investors don’t, and simply stop at the
“lower fees, can’t beat the benchmark”… argument (yawn)
You could say…
they’ve been “hoodwinked”…