Sub-asset allocation

The weighting of an asset class within a portfolio is often proportional to its weighting in the broad market.

However, for some investors, tilting the concentration within a security, industry sector, market segment or asset class can be a practical way to meet unique objectives. Specialized ETFs can provide the desired tilt.

For example, investors who believe that emerging markets will provide higher returns than developed markets might invest a larger proportion of their assets in an emerging markets ETF.

 

Approximate equity market weights

 

Investor preference (hypothetical)

Source: Vanguard. Approximate market weights and investor preferential weights are for illustrative purposes only and shall not be construed as a recommendation to buy or sell any security or financial instrument, or an offer or recommendation to participate in any particular trading or investment strategy.

 

Points to consider

• Concentration in any security, industry sector, market segment, region or asset class can lead to greater risk relative to a diversified portfolio.
• Foreign investing involves additional risks including currency fluctuation and political uncertainty. ETFs that invest in emerging markets are generally more risky than those that invest in developed countries.