The Top 50 In May 2019 – One weakness of many investors is the fact that they let their adviser pick their mutual funds or ETF or stock investments without looking at potential duplication or increased risk due to duplication of the same or similar investments. I have seen accounts with twenty-plus mutual funds when five would have accomplished the same purpose. It makes the novice think their adviser is smart. May I suggest that might not be the case?
It is difficult to know if two different ETFs hold similar investments. For example, there is overlap between ETF VYM and SCHD. What I try to do is look at the top ten holdings to get a sense of the overlap. VYM’s top five are JPM, JNJ, XOM, PG and CSCO. SCHD’s are PEP, KO, PG, HD and PFE. So there is overlap with PG. In other words, because I hold both VYM and SCHD, I have more of PG than I might otherwise have if I owned only one of these ETFs. However, the differences outweigh the overlap.
A recent Seeking Alpha article does a nice job of talking about this. He includes VYM and SCHD in his analysis. Above is a list of the top companies from his analysis. He provides many good illustrations in the post, so you may want to go to the link provided below.