Q: Please comment on how to manage position sizes of portfolio with different equity ETFs. Max / Min weight of individual ETF? Thanks in advance. Your comments are very much appreciated.
5i Research Answer:
We have some variability, but would use 15% as a benchmark for maximum exposure to an ETF. Much depends on what the ETFs invest in. ETF trading liquidity and size are important factors, but so is the liquidity and size of its underlying assets. An ETF focused on micro-caps, for example, could see liquidity issues if all unit holders wanted out at the same time. With diversification we would not really see a need for a 'minimum' position, but trading costs, if any, should also be taken into account (i.e. $10 commission on a $100 position would be 10%). But many ETFs can be bought at low or no costs.