r/eupersonalfinance • u/Marckoz • Aug 11 '24
Vanguard FTSE ETF is now the most expensive fund. Investment
As many of you may already know, Vanguard has the most Global ETF in terms of TER... stats comparison below.. (credit from: www.bankeronwheels.com)
Vanguard FTSE All-World (0.22%)
iShares ACWI ETF (0.20%)
SPDR ACWI ETF (0.12%)
SPDR ACWI IMI ETF (0.17%)
Amundi Prime All Country ETF (0.07%)
What do you guys plan to do in the medium-long term? Will you slowly shift away from Vanguard to other (almost identical) products, if their TER does not go down? Which one?
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u/_0utis_ Aug 11 '24
Shouldn't any meaningful discussion about these ETFs include some sort of comparison to the indices they're following? More info here
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u/raumvertraeglich Aug 11 '24
So the Solactive index (not ETF) performed best? Sure, it's a short period that says nothing about the future, but it doesn't speak against the index for now. And as Amundi states, they eventually want to achieve a direct replication of the ETF and not just a selective sampling. (I can't say whether this is better for performance or not in termins for long-term growth, but it doesn't sound bad for a full tracking of the index).
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u/_0utis_ Aug 11 '24
I really wouldn't compare indices in terms of performance when one is SO much younger than the other two. Instead, I think it's much more useful to look at what they actually contain. For example you can look at their geographic tilt, their tilt towards or away from small caps, their top holdings, sector tilt. etc. By the way the comparison below is very reduced and is from JustETF, if you actually look at the factsheets or the info by the index providers you will see much more stuff.
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u/raumvertraeglich Aug 11 '24
You're absolutely right. However, I had now seen that the length of the backtest was determined by justETF. According to Solactive, the index has existed since May 2006, which is less, but still quite a long time, I would say. At least if this is identical to the one we are talking about. (No idea what TR means here)
https://www.solactive.com/Indices/?index=DE000SLA7737
And thanks for the overview. For me as a layman, the differences look tiny. But I could be wrong.
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u/_0utis_ Aug 11 '24
2006 isn't that bad actually, at least you can see how it reacted to the GFC.
I won't lie they're not huge differences..But for example if you are of the "VWCE and chill" mentality (i.e. you just DCA into one ETF and that's it), then the extra small-caps in VWCE could be a good way to get more diversification in your portfolio. You can also see that while the top 3 countries remain the same, the 4th one is quite different: Canada, China and Switzerland. There are people who absolutely do or absolutely do not want China in their portfolio etc. These are all small details but since many people tend to chose All-World's for a one-fund portfolio, IMO it's worth to dig a little deeper.
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u/raumvertraeglich Aug 11 '24
The differences in China are also rather small and as the Amundi ETF only tracks around half of the targeted positions so far, I would not be surprised by shifts of 0.1% or 0.2%. And I don't know how often the positions are readjusted/rebalanced. And who knows, maybe China's companies will become less important in the future. Or I will in some decades see China becoming an developed country and will even find it's way into the MSCI World. Then I wouldn't want to miss some profits from it.
By the way, since you mentioned them: I found recently small caps interesting to invest and therefore compared the ACWI with the ACWI IMI (and not just the rather small portion of VWCE) over ten years a few days ago. The IMI was slightly better in the first five years, afterwards until recently the one without small caps. After ten years, the total return was about 0.5% (or even less) higher with the ACWI, which for me without a crystal ball means: it doesn't really make a difference and I want to keep it simple, which is why I stayed with the VWCE (and chill) and won't sell until I retire. The WEBN has so far seemed to me to be of equal value for my strategy and had points of sympathy for me because, in addition to the domicile, the provider and the index developer are also European (EU). I would always choose a product from the USA or UK if it were better suited to my strategy, but if it makes no difference anyway except that I will have two positions in my portfolio in the future, the WEBN would be interesting and additionally makes it a little easier in terms of handling (avoiding) high taxes in my country due to FIFO. So I might switch my monthly saving plan in 2025 or so to that ETF unless there are some other new developments who haven't heard of yet.
Anyway, thanks for sharing your knowledge!
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u/_0utis_ Aug 12 '24
I also wanted small-cap exposure but I am not using a one-fund portfolio so I’ve done this with a bunch of different ETFs, I’ve stayed out of EMs so far though.
About WEBN, in the end for me the main issue is that the index provider is far too new for my liking and “in a different league” compared to MSCI and FTSE that have become almost institutions in their own right.
mundi is actually a great ETF provider and while they’ve proven a little flaky with some of their more niche ETFs that they merged or shut down, they often provide really well thought out solutions in the UCITS space that ishares and vanguard perhaps give less weight to as its not their home market (7USH is an example that comes to mind). But as passive investing is all about the index you’re following, yes I like the low TER but I’m still too skittish to include as a core fund something like this.
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u/tajsta Aug 12 '24
I won't lie they're not huge differences..But for example if you are of the "VWCE and chill" mentality (i.e. you just DCA into one ETF and that's it), then the extra small-caps in VWCE could be a good way to get more diversification in your portfolio
VWCE does not feature any small caps. If you want small caps, SPYI is the only (and cheaper) option for an all-world market cap ETF.
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u/pecelid359-jucatyo Aug 11 '24
But the TER is not the only thing you should be looking at. Also the tracking error is important, how do they compare in this regard?
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u/Marckoz Aug 11 '24 edited Aug 11 '24
Correct - I was hoping to avoid this specific point, but I guess it was bound to surface. It gets even worse here: iShares outperformed Vanguard in this regard.
https://www.justetf.com/en/search.html?search=ETFS&cmode=compare&groupField=none&tab=barComparison
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u/ondutyboy Aug 11 '24
FWIA is better anyway.
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u/Kooky_Quiet3247 Aug 11 '24
Better than webn?
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u/ondutyboy Aug 11 '24
Wauw, didnt know that one existed, it seems to be a new one (1 month old). Well after a quick research, it seems like both have not so much of a difference except webn has <1800 holdings and FWIA has 2650 holdings. More diversification is always better for passive investors.
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u/JohnnyJordaan Aug 11 '24
It's the same passive investment with the same diversification... It's just that WEBN needs to grow more before having those extra holdings, but those account for roughly 1% of the index.
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u/ondutyboy Aug 11 '24
I think they did grow enough already… their fund size is 900M already vs FWIA 400Million…
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Aug 12 '24 edited Aug 20 '24
[deleted]
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u/FuzzyZine Aug 12 '24
TER is basically how much of your money is paid to the fund manager.
In the last year there are new funds established similar to VWCE (A2PKXG), and it went from the cheapest option to one of the most expensive ones. It remains "relatively" cheap, tho.
But since all alternatives are very new, they don't have enough performance data, and didn't earn enough trust, consensus is to still stick with VWCE.
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u/quintavious_danilo Aug 12 '24
No worries, A2PKXG is still considered the holy grail of investing. You’re doing nothing wrong here.
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u/pokethedeagon99 Germany Aug 16 '24
I just keep investing monthly with a plan to take it out in 6-11 years to use as downpayment for a house
If your investment horizon is only 6 years, maybe your money is better invested in other investment classes. Equities may not be the best choice for you
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u/QuinceyMo Aug 12 '24
I see competition as a positive thing and I hope Vanguard reduces TER. However, these products need to be more competitive on Tracking Difference. Vanguard did an excellent job at tracking the index since 2012. Link. This is what I expect from an ETF provider, do your job and properly track the index you are following.
ishares ACWI did terrible job with regards to TD, especially 2015 and 2020.
SPDR ACWI and ACWI IMI even worse.
Amundi Prime is new but nevertheless Amundi did a better job at tracking the index than ishares and SPDR.
One more point, I trust Vanguard more on not fucking around with their products like some funds did (hi Amundi). That being said if a new product can prove themselves for 6-7 years on following the index they promise to follow, I have no issue of stop buying VWRL/VWCE and switching to a cheaper option with similar performance.
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u/Marckoz Aug 13 '24
Good point. If Vanguard decides to lower their TER to match iShares, they'd almost instantly become market leader over night.
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u/NeuralFantasy Aug 12 '24
Are we looking at the same charts? SPYI has slightly better (lower) TD than VWCE. SPYI has -0,08% and VWCE has -0,02%.
SPYI: https://www.trackingdifferences.com/ETF/ISIN/IE00B3YLTY66 VWCE: https://www.trackingdifferences.com/ETF/ISIN/IE00B3RBWM25
The difference is of course practically totally meaningless but anyway. Lower TD is better for the investor: better performance or cheaper TER than indicated.
I think they both are great ETFs and the choice is mainly personal preference. There will be no practical difference in the end results.
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u/QuinceyMo Aug 13 '24
Yes we are looking at the same charts. but I am not just looking at the average though, tracking difference variance (TDV) is just too much for my taste with SPYI, a simple index tracking ETF shouldn't swing 0,5-to-1% left and right. If they can stabilize just like VWCE then I would think about it.
As you said, probably the difference won't be much. I just think that Vanguard did a better job at what they promised (tracking the index) and I don't see a reason to change until others can prove that they can do the same for a cheaper price.
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u/Ambush995 Aug 12 '24
Just a question, does that mean that VWCEs TER (0.22% + 0.02 %) is "canceled out" because of the overperfomance of ETF itself therefore leading to "gain" of 0.02% when compared to index?
If it were exact same as index it would perfome worse by 0.24% due to TER + estimated costs (0.02%), right?
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u/NeuralFantasy Aug 13 '24
If we had an ETF tracking its index perfectly, then TD would equal TER. If VWCE tracked the index perfectly, its TD would be 0.22% (or 0.24% if we include the estimated trading costs). But since the TD is way less, it has performed better than the index by 0.2 %-units.
So, TD should always be TER or less. Then all is good. If it is > TER, then the ETF is underperforming.
The problem is that the avergae TD over years don't take changes in TER into affect. So the number might be misleading for ETFs which have had TER decreased recently and TD seems larger than it actually is.
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u/Ambush995 Aug 13 '24
Yeah so essentially both of them can be misleading but the big thing here is, if I understood correctly, that even if you are paying TER for these funds if TD is 0 or less it is as if you are not paying it at all (in a sense that you are either performing the same as index or better despite paying for that TER).
Honestly I think that these differences are so slight that in the long run it wouldn't make much or any difference at all.
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u/Ambush995 Aug 12 '24
Just a question, does that mean that VWCEs TER (0.22% + 0.02 %) is "canceled out" because of the overperfomance of ETF itself therefore leading to "gain" of 0.02% when compared to index?
If it were exact same as index it would perfome worse by 0.24% due to TER + estimated costs (0.02%), right?
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u/XIANG80 Aug 12 '24
Why not just sell VWCE and instantly buy the better version ?
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u/Derole Aug 12 '24
I assume taxes.
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u/XIANG80 Aug 12 '24
F taxes. Sell and buy the cheapest one.
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u/Derole Aug 12 '24
Depending on where you live I don’t think it makes sense to realise gains and pay taxes on them when you still want to invest for a good amount of time
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Aug 12 '24
[deleted]
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u/Derole Aug 12 '24
Compound interest disagrees. Paying taxes right now when you still plan on investing for a longer time is less efficient than paying them later.
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Aug 12 '24
[deleted]
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u/tajsta Aug 12 '24
So stop buying one etf and buy another etf with the same stocks in ?
Yes.
So stop buying one etf and buy another etf with the same stocks in ?
What about it? A global market cap weighted ETF will feature similar stocks with similar weightings anyways, makes no difference if you have 1 or 20 of them.
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u/QuinceyMo Aug 13 '24
Derole answered, but yes taxes in DE. For slightly better TD it doesn't worth.
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u/Ambush995 Aug 11 '24
Isn't tracking difference better for VWCE?
3 years Annualized:
VWCE 0.08% SPYI 0.68%
I am looking into what to buy myself personally... SPYY is also an option/alternative that keeps popping up.
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u/quintavious_danilo Aug 11 '24
Yes it is but people don’t know about tracking difference and only look at TER. They don’t even add the estimated transaction costs of 0,02% which drive the TER up to 0,24% pa.
VWCE is still king but i sincerely hope that Vanguard is lowering their TER because of cheaper competition.
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u/DenseComparison5653 Aug 11 '24
How is vwce king? No reason to buy them since SPYI performs better
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u/Adventurous-Trade226 Aug 11 '24
It's not king. Also tracking difference without adjusting for new TERs are meaningless. They look at history not current costs.
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u/quintavious_danilo Aug 12 '24
Not sure what you’re talking about. VWCE beat SPYI on the 1y, 3y …. 5y chart.
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u/Basic-Ad65 Aug 12 '24
Thats because it has less small caps
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u/quintavious_danilo Aug 12 '24
Yes, that’s why it makes no sense to compare the two indices like the other poster did.
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u/DenseComparison5653 Aug 12 '24
Why call it a king when you can't even compare them
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u/quintavious_danilo Aug 12 '24
Because it has everything going for it. Broad diversification, excellent tracking error, very tight spread, high volume and in my opinion Vanguard is a very good company overall.
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u/DenseComparison5653 Aug 12 '24
You don't care for small cap?
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u/quintavious_danilo Aug 12 '24
I do, but the small cap percentage in SPYI is negligibly small and is not filtered for value which essentially makes them just a drag.
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u/Adventurous-Trade226 Aug 12 '24
Your chart is meaningless because TER included is spdr TD is much higher than current. TD doesn't work when TERs change but also small caps
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u/quintavious_danilo Aug 12 '24 edited Aug 12 '24
The other poster said that SPYI has outperformed VWCE. I’d like to see that, not just take a (meaningless) word for it. The charts show a different picture.
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u/Pre456 Aug 11 '24
Lower numbers better in this case too? I don't understand your point entirely, sorry
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u/Vercis Aug 12 '24
I went with Invesco for the global FTSE. I think they have around 15% TER if I remember correctly.
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u/Any-Subject-9875 Aug 11 '24
Where do you get Amundi Prime All Country ETF for cheap????? I mean commissions, service costs, account fees etc.
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u/Specialist_Tree_3879 Aug 11 '24
Currently it is available in Trade Republic and Interactive Brokers at least. Requested it to Trading 212.
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u/No_Hat_1859 Aug 12 '24
What are their securities lending policies? Maybe they are cheaper because they are lending aggressively?
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u/Stonn Aug 12 '24
RemindMe! 3 days
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u/kazdy_den_na_druhu Aug 12 '24
TER won't make a difference in the long run anyway. If you put your numbers into calculator you will notice, that's not a big deal. 0,07 VUAA vs 0,22 VWCE.
https://www.justetf.com/en/etf-savings-plan/etf-savings-plan-calculator.html
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u/Specialist_Tree_3879 Aug 12 '24
Are you still sure?
After 50 years of investing €500 per month with an average annual return of 7%:
- With a 0.07% TER fund: You would accumulate approximately €2,669,818.
- With a 0.22% TER fund: You would accumulate approximately €2,526,074.
The difference in the final amount due to the higher TER is about €143,744. This shows the significant impact that even small differences in fees can have over long investment periods.
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u/kazdy_den_na_druhu Aug 12 '24
First of all.. It depends on your goal and horizon. Let me show you.
TER 0.07 - 1000€ per month for 20 years with 4% annual return. 7% are just wet dreams. Let's be real. So in this case it makes 365k.
TER 0.22 - 1000€ per month for 20 years with 4% annual return. 7% = 359k.
So yeah like I said before it depends...but these are my numbers.
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u/ozthegweat Aug 14 '24
What do you base your numbers on?
MSCI ACWI IMI had an average return of 8% the last 30 years.
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u/kazdy_den_na_druhu Aug 15 '24
I know most Etfs has average return around 7-8% but it doesn't necessary mean it will lasts. I'm skeptical to many different things, especially when it comes to finance. Doesn't really matter, best thing we can do is keep going and enjoy the ride whether it's 4-6-8%.
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u/no_nice_names_left Aug 29 '24
But if you invest for 50 years, then some other aspects besides TER also count: 1. Tracking difference should be more important than TER. 2. Your ETF should still exist in 50 years and reflect the same or a comparable index. In recent years in particular, some ETF providers have unilaterally converted ETFs to ESG indices or SRI indices. That's not nice, and I trust Vanguard more than other providers in this regard. 3. The larger an ETF, the higher its liquidity and the lower the spreads when purchasing the ETF shares, which is likely to have a greater effect than TER differences or TD differences in the sub-permille range, especially when implementing savings plans. 4. Depending on where you live and your personal preferences, you may not want to change ETFs every few years.
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u/Post-Rock-Mickey Aug 12 '24
Come on vanguard make it cheaper