Community question: are your ETFs more alike than you think?

Wednesday brought a split session on the ASX. Selling concentrated in technology and defensives, while pockets of the materials space held up. It is a useful reminder that sectors can move in opposite directions on the same day, and that is exactly what diversification is supposed to accommodate.

A question worth sitting with

Here is something that catches a lot of investors off guard. You might own three or four different ETFs and feel like your money is spread across a wide range of companies. But if you look under the bonnet of each one, you will often find the same handful of large companies sitting at the top of every fund. A big bank, a big miner, a big retailer. They appear in the Australian shares ETF, the ESG ETF, and the dividend ETF all at once. The portfolio looks varied from the outside, but the underlying exposure is doing a lot of overlapping.

So here is the question for the PortLens community: when you look at the actual companies inside each of your funds, how much genuine variety do you find, and does the overlap surprise you?

What moved today

Information Technology was the hardest hit sector on Wednesday, falling 2.49%, with Utilities not far behind at minus 1.63% and Consumer Staples down 0.91%. WOW dropped 1.31% and TCL shed 1.64%, both reflecting the defensive selling that ran through the session. It was a day when owning the more defensive or growth-oriented parts of the market cost you.

On the other side, Communication Services gained 0.89% and Consumer Discretionary added 0.86%. In individual names, LTR rose 2.25%, PLS lifted 1.55%, and RIO added 1.66%, suggesting some renewed appetite in the lithium and diversified mining space. Whether that reflects a shift in sentiment around commodities or simply a short-term rotation is too early to say.

A lesson worth keeping

There is a version of investing wisdom that only arrives after years of watching your own behaviour. A lot of experienced investors, if they are being honest, will tell you that the complexity they built into their portfolios over time added very little extra return and a great deal of extra stress. The research generally agrees with them. A single broad index fund, held for a long time, is genuinely hard to beat once you account for costs, taxes and the energy spent second-guessing everything.

That does not mean complexity is always wrong. It means the bar for adding something new should be higher than it often feels in the moment. Before adding another fund or another position, it is worth asking whether it is doing something your existing holdings are not already doing. Simple is not naive. Sometimes simple is just correct.

Thanks for reading today's note. PortLens is here to help you see your portfolio more clearly, not to tell you what to do with it. None of this is personal financial advice. If anything here raises a question about your own situation, a licensed adviser is the right next step.