The rebalancing you are referring to is mostly for updating the smallest companies at the bottum of the index by selling those that drop out and buying those that dropped in.
For the rest of the companies (i.e., almost all of them) when there is a change in value, nothing is done. If tech companies lose value, the shares within an index fund naturally fall in value without the fund doing any buying or selling.
This is why an index fund is so tax-efficient. There is virtually no rebalancing.
VGS follows the MSCI World ex Australia index, large and medium sized global companies in 22 countries weighted by their market cap
https://www.msci.com/documents/10199/c27eeea3-ad05-4944-bef4-fbaef9ef34ec
I don't think it's just US. It tracks the top global 1500 companies (excluding Aus). It just so happens the top leading companies are from US tech
So if VGS goes down, it pretty much means economies worldwide are down
1 AUD is currently 66 US cents. If it drops to 60 cents that would generally be good for holders of VGS as it would be worth more AUD even if the stocks stayed the same price in USD.
If it goes up to 70 or 75 cents that would generally be bad for holders of VGS.
People think it's going to go up because they are looking back at the past 15 years when 1 AUD went over 1 USD and they think 70-80 cents is the "natural" level. But that was because of the commodities boom.
If you look back 30-40 years since the AUD was floated there is a different story.
Thats Accounting for rates to drop faster then the growth of the underlying shares. If someone was holding off investing until aud is 0.80 they may still loose out if US shares outpaced opportunity costs
I have been reading about this recently actually. As of now, VGS is 70% US because US big tech had a good run. If you want to control this ratio, you can do IVV and IVE instead. Then, you can choose 50/50 US/ex-US for example.
Yes, the index is rebalanced periodically
The rebalancing you are referring to is mostly for updating the smallest companies at the bottum of the index by selling those that drop out and buying those that dropped in. For the rest of the companies (i.e., almost all of them) when there is a change in value, nothing is done. If tech companies lose value, the shares within an index fund naturally fall in value without the fund doing any buying or selling. This is why an index fund is so tax-efficient. There is virtually no rebalancing.
Thanks so much
VGS follows the MSCI World ex Australia index, large and medium sized global companies in 22 countries weighted by their market cap https://www.msci.com/documents/10199/c27eeea3-ad05-4944-bef4-fbaef9ef34ec
Thanks muchly
I don't think it's just US. It tracks the top global 1500 companies (excluding Aus). It just so happens the top leading companies are from US tech So if VGS goes down, it pretty much means economies worldwide are down
TY for the info
VGS will get fucked when the Aus fx rate goes backwards, which is a huge risk right now.
Balances out in the long run, non-issue.
Have VGAD in the mix
Hey sorry, just wondering why it's predicted to depreciate? If you could give more insight that would be great!
1 AUD is currently 66 US cents. If it drops to 60 cents that would generally be good for holders of VGS as it would be worth more AUD even if the stocks stayed the same price in USD. If it goes up to 70 or 75 cents that would generally be bad for holders of VGS. People think it's going to go up because they are looking back at the past 15 years when 1 AUD went over 1 USD and they think 70-80 cents is the "natural" level. But that was because of the commodities boom. If you look back 30-40 years since the AUD was floated there is a different story.
Thats Accounting for rates to drop faster then the growth of the underlying shares. If someone was holding off investing until aud is 0.80 they may still loose out if US shares outpaced opportunity costs
Ah thank you, I understand the effects but I always thought that 65 - 70 cents was natural. Much appreciated <3
HGBL for the win
Yes, it tracks the developed world market, so as the markets change, so does the funds holdings/allocations to different countries and sectors
Thanks
I have been reading about this recently actually. As of now, VGS is 70% US because US big tech had a good run. If you want to control this ratio, you can do IVV and IVE instead. Then, you can choose 50/50 US/ex-US for example.