Today I spent a good amount of time thinking about higher ER funds I hold- XMHQ, AVUV, and AVNM- and weighting their benefits in my portfolio such as added diversification and hopefully higher long-term returns via the small cap, value, and quality factors, against the relatively high expense ratios. From the diversification standpoint, my thinking was to opt for VOO as my core position instead of VTI, and add XMHQ and AVUV for addition US exposure, but screened by the factors listed above. AVNM is a similar thought- use factoring to be more selective of relatively volatile international stocks for my foreign exposure.
The question I'm still looking for an answer on is around the value of diversification through this method. Again, hopefully the long-term returns of these funds makes up for the .20-.25% difference in ER over a basic VTI/VXUS setup, as an example, but no one can predict future returns. How do you quantify the value of diversification? Personally, I believe in my strategy, which obviously carries weight, but curious if others in this sub have insights to share on diversifying through higher ER factor funds vs the passive indexing approach.
Edit: Do XMHQ and AVUV add real diversification value within the US?
Submitted June 10, 2024 at 09:25PM by gasallbrakesno https://ift.tt/foBWjCN
