I see SCHD + VYM and VOO + VTI recommended constantly as "diversified portfolios" and it's just not true. 86% of SCHD's holdings are also in VYM, and their correlation is 0.95, meaning they move in lockstep. VOO and VTI is even worse, 0.99 correlation, because VTI is literally VOO plus a thin 15% layer of small and mid caps. You're not diversifying, you're paying two expense ratios to own the same 30 mega-caps twice. Real diversification means uncorrelated assets, like adding VXUS for international, BND for bonds, AVUV for small caps, or VNQ for REITs. Not another flavor of large-cap US dividend stocks. Most people who hold both didn't diversify on purpose, they just couldn't pick one and hedged by buying both, which is indecision dressed up as strategy. Pick one as your core and add something genuinely different around it.
What do y'all think?
Overlapping ETFs as a good investment strategy?
byu/Infnits ininvesting
Posted by Infnits
5 Comments
Anyone that suggests VOO and VTI together shows their ignorance and does not understand the investments.
The *vast* majority of people on investing subs will not recommend VOO and VTI together. Just because you found one or two newbies recommending it does not mean that’s the common recommendation.
This is just engagement bait for his stupid site.
I could see VTI and VXUS for someone willing to specifically derisk from US equities given the current political environment. Or just do VT long term and call it good enough since the overall returns are roughly similar.
For Bonds I believe IUSB, BND, or AGG are pretty close too with about 17k basket holdings according to Fidelity Investments.
Anything else is simply decreased diversification and increased risk at the benefit of potentially higher returns or greater losses
Ever since I analyzed my portfolios on etfinsight.org I realized that nobody needs anything more than a Vanguard model portfolio. You think you’re doing all this fancy diversification but in the end you’re just paying a lot more for the exact same thing over and over again.
It makes sense in some cases if you want to specifically overweight something…. Such as if you believe that US tech will continue to outperform, owning VTI+QQQ would make some sense. I do agree that the benefit is overweighting something and not diversification in most cases however.
I’m not sure I understand what you mean by paying two expense ratios however. VOO+VTI for instance you’d pay the same expense ratio owning both or just one. So there also isn’t a lot of downside for going this route, the benefits are just unclear.