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Mailbag: ADRE vs. VWO

Reader Dan in a recent E-Mail writes,

Could you post your TFSA holdings too? Any particular reason you hold BLDRS Emerging Markets 50 ADR Index (ADRE) and not the Vanguard VWO that is for emerging markets too and has a lower MER of 0.27% I think?

With respect to the BLDERS Emerging Markets 50 ADR Index (ADRE) my decision to hold this ETF over others such as Vanguard’s VWO goes beyond the cheaper MER.  For the size of my position 0.03% makes up only pennies in terms of its annual fee; the holdings and allocations are far more important. 

With any investment it’s the investor’s individual objectives that matters more than the comparing what I own versus others.  My risk tolerance, intention for exposure to various markets and comfort with the underlying holdings may be entirely different than 9 out of 10 other investors with similar portfolios.

Both ADRE and VWO have a large portion of their holdings in three main sectors: energy, materials and technology.  Where they differ is with their exposure to different economies.  ADRE has it’s largest country exposure to Brazil, China, South Korea, India and Mexico.  VWO in contrast has larger exposure to China and Russia which I view as more economically unpredictable.  Their currencies offer more risk to me as a North American investor and their governments, to a large extent, feel the need to express their views economically much more independently than other nations.  ADRE is also more concentrated than VWO (which has more than 50 holdings).

Either investment is a good choice for an investor seeking an ETF with exposure to emerging markets; it simply depends on the investors’ individual comfort and objectives.  ADRE and VGK make up the majority of my non-North American exposure in my RSP.
With respect to my TFSA (tax-free savings account) I currently hold only the TD Canadian Bond Index-E in both my TFSA and Claire’s.  In the future I’ll likely invest in corporate bonds/bond ladders in those accounts once contribution room allows.

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{ 2 comments… add one }
  • Richard Arabit March 29, 2010, 10:23 am

    Hello,

    Could you please update your DivG Top 10 Holdings or at least put a date of when it was last updated.

    THANKS!

  • Nurseb911 March 29, 2010, 12:06 pm

    Richard:
    I recently posted a complete breakdown of my DivG portfolio including the percentage holding of each stock. Normally I update the top 10 lists once quarterly so this week will be when they're updated next.

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