Hi Everyone
I'm looking at investing in some ETFs but a couple of things got me a bit confused. I've gone back about 2 years but couldn't find the answers so thought I would post the questions here.

* Diversification - I have been told that ETF's are a great way to diversify your portfolio, but looking into a couple of them, there seems to not be as much diversification as I thought there might be. EG1 Smartshares ASF has a quarter of it's holdings in a single share. EG2 Smartshares EMF (Vanguard VWO) one of the top ten holdings main business is holding an investment in another of the top 10 holdings "investment in Tencent also appears to be the main driver of the value of its own stock, and has since overshadowed the operational aspects of the Naspers business" - So my question, How do ETF's decide what shares to buy at what proportion? How often does this change?

*Fees - Most of the Smartshare ETF's I've looked at have a single holding - a Vanguard ETF, which charges normally about .05% in fees. Smartshares are charging ~ .5% in fees in most cases, so about 10 times that amount. Am I missing some fees or something out? Is there a better way to buy Vanguard ETF's which has a lower spread on the charges?

*Fees again, If you were looking at a longer term holding with a higher amount of money - wouldn't you be much better off just buying the same basket of shares at the same proportion instead of through the ETF? I'm more meaning for something like the NPF Local property fund which only has 8 holdings

* Foreign exchange risk / hedge - One of the main reasons I'm interested in foreign ETF's is (I think) a way to hedge the risk investing in the NZ economy. This seems to me like it would be a large driver for the price of an overseas etfs, but I haven't seen it mentioned much. when the NZ economy cycles downwards then money flows out of NZ and the dollar drops, making the ETF more valuable, correct? But I have also heard when the US economy tanks that investors get spooked and pull their money back? Can someone explain this part of ETF investment a bit better, especially from the view of a very small economy VS big ones.

I'm sorry for all the questions, and have enjoyed reading up on your previous comments!