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Same Tracker --- What's the difference
Same Tracker --- What's the difference
Hi,
I'm interested in investing in a FTSE 250 tracker fund. There are several companies providing this fund. Which one do I go for? Surely the only reason to choose a particular company is the one with the lowest fees. Why is my investment company recommending the "ABC" fund and not the "XYZ" offering?
Thanks Mike
I'm interested in investing in a FTSE 250 tracker fund. There are several companies providing this fund. Which one do I go for? Surely the only reason to choose a particular company is the one with the lowest fees. Why is my investment company recommending the "ABC" fund and not the "XYZ" offering?
Thanks Mike
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- Lemon Quarter
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Re: Same Tracker --- What's the difference
You should research "tracking error". A well managed fund will keep closer to the index, a poorer one could be high or low. But really fees are all. And ETFs often have cheaper broker charges than funds.
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- Lemon Quarter
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Re: Same Tracker --- What's the difference
JohnB wrote: But really fees are all. And ETFs often have cheaper broker charges than funds.
And no stamp duty
A FTSE-250 ETF: https://www.hl.co.uk/shares/shares-sear ... -ucits-etf
--kiloran
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- Lemon Slice
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Re: Same Tracker --- What's the difference
I hold VMID from Vanguard. This is FTSE 250 ETF. Both brokers I use treat ETFs like ordinary shares in terms of costs, dividend management etc. The only (slight) issue with ETFs outside a protected wrapper is that they occasionally report “excess reportable income” and this needs to be accounted for to HMRC.
Best wishes,
Steve
Best wishes,
Steve
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- The full Lemon
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Re: Same Tracker --- What's the difference
Steveam wrote:I hold VMID from Vanguard. This is FTSE 250 ETF. Both brokers I use treat ETFs like ordinary shares in terms of costs, dividend management etc. The only (slight) issue with ETFs outside a protected wrapper is that they occasionally report “excess reportable income” and this needs to be accounted for to HMRC.
My accountant described the ERI issue as "negligible" unless you hold one of the fairly rare ETFs that have accumulation units (which I always try and avoid in a taxable account anyway for other reasons).
His clear implication to me was that HMRC would not be very interested in some technical inaccuracies due to ERI, particularly since they would even out over the years.
However if that bothers you then only hold ETFs in a tax-sheltered account. Some might do that anyway since ETF income is technically classifed as "foreign" income due to the overseas domicile of ETFs.
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- Lemon Half
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Re: Same Tracker --- What's the difference
Lootman wrote:However if that bothers you then only hold ETFs in a tax-sheltered account. Some might do that anyway since ETF income is technically classifed as "foreign" income due to the overseas domicile of ETFs.
Hold the ETFs in a taxed account and they can be used for CGT Allowance harvesting. You sell one brand of ETF of your index of choice and buy another. That will rebase the book cost and incur a realised capital gain or loss without much or any change of investments.
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- Lemon Half
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Re: Same Tracker --- What's the difference
Would anyone be able to estimate the expected total cost of selling £60K of iShares FTSE 250 tracker MIDD and buying the same amount in Vanguard VMID?
This thread has reminded me that I've been meaning to do this, because the iShares one has higher charges. I can work out what the difference in charges is, I just need to know how much of a hit I'll take for the change.
It's in an AJBell SIPP, so dealing charges will be £9.95 per trade. It's really the expected loss due to the bid/offer spread that I'm unsure of. And if there would be anything else to take into consideration.
(This may be hypothetical as I may take the opportunity to buy something else anyway.)
Scott.
This thread has reminded me that I've been meaning to do this, because the iShares one has higher charges. I can work out what the difference in charges is, I just need to know how much of a hit I'll take for the change.
It's in an AJBell SIPP, so dealing charges will be £9.95 per trade. It's really the expected loss due to the bid/offer spread that I'm unsure of. And if there would be anything else to take into consideration.
(This may be hypothetical as I may take the opportunity to buy something else anyway.)
Scott.
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- Lemon Quarter
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Re: Same Tracker --- What's the difference
swill453 wrote:Would anyone be able to estimate the expected total cost of selling £60K of iShares FTSE 250 tracker MIDD and buying the same amount in Vanguard VMID?
This thread has reminded me that I've been meaning to do this, because the iShares one has higher charges. I can work out what the difference in charges is, I just need to know how much of a hit I'll take for the change.
It's in an AJBell SIPP, so dealing charges will be £9.95 per trade. It's really the expected loss due to the bid/offer spread that I'm unsure of. And if there would be anything else to take into consideration.
(This may be hypothetical as I may take the opportunity to buy something else anyway.)
Scott.
You need also to consider the market makers spread as part of the cost. I have holdings in MIDD, VMID and HMCX (all FTse250 trackers). I think because I bought whichever had the lowest charges at the time.
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- Lemon Half
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Re: Same Tracker --- What's the difference
scrumpyjack wrote:You need also to consider the market makers spread as part of the cost.
That's exactly what I'm asking for!
Scott.
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- Lemon Quarter
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Re: Same Tracker --- What's the difference
Sorry, brain not awake. Easy in dealing hours to look at the quote online at your broker.
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- Lemon Slice
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Re: Same Tracker --- What's the difference
artengill wrote:Surely the only reason to choose a particular company is the one with the lowest fees.
Additionally, and in other words: size of the fund (is it shrinking?), liquidity, size and volume of daily sales, number of market makers, past history of fee changes, whether this is the fund owner's core business (or are they cashing in on a new investing trend?), is the fund synthetic, full replication, how much securities lending does the fund do, frequency of dividends or distributions (more or less paperwork or you), does choosing them diversify or concentrate your risk of being with one business? Depending on where you live, is it currency hedged?
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Re: Same Tracker --- What's the difference
Hi Lootman,
On the subject of ERI my accountant advises exactly the opposite and says it’s an easy investigation flag for HMRC. I don’t see how it would balance out over time. Since the introduction of ETFs I’d have a small but significant sum unreported. Perhaps I (and my accountant) are a bit precious about getting these things right - it’s not difficult but just something to beware.
Best wishes,
Steve
On the subject of ERI my accountant advises exactly the opposite and says it’s an easy investigation flag for HMRC. I don’t see how it would balance out over time. Since the introduction of ETFs I’d have a small but significant sum unreported. Perhaps I (and my accountant) are a bit precious about getting these things right - it’s not difficult but just something to beware.
Best wishes,
Steve
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Re: Same Tracker --- What's the difference
Steveam wrote:Hi Lootman,
On the subject of ERI my accountant advises exactly the opposite and says it’s an easy investigation flag for HMRC. I don’t see how it would balance out over time. Since the introduction of ETFs I’d have a small but significant sum unreported. Perhaps I (and my accountant) are a bit precious about getting these things right - it’s not difficult but just something to beware.
I have always found accountants to be a bit like lawyers. Ask nine of them and you get ten different opinions!
That said it may depend on which ETFs you hold and in what quantities. The amounts I have seen for ERI are very low, with a few notable exceptions. If you do not hold one of those exceptions then it is probably a matter of pennies for most people. I don't know how "easy" it would be for HMRC to flag that for anyone who holds an ETF, at least not in an automated way. And the taxman surely looks at the likely amount of any shortfall before deciding whether to launch an investigation.
My comment about it averaging out over a few years was really the observation that you will still pay tax on this unreported income, just in a later tax year i.e. usually the following year when that income is paid out. Or when you sell of course. In the end it will come out the same either way. All that said wouldn't it be nice if ETFs just did this right? The same fund managers manage that easily for open-ended tracker funds.
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- Lemon Quarter
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Re: Same Tracker --- What's the difference
JohnW wrote:artengill wrote:Surely the only reason to choose a particular company is the one with the lowest fees.
Additionally, and in other words: size of the fund (is it shrinking?), liquidity, size and volume of daily sales, number of market makers, past history of fee changes, whether this is the fund owner's core business (or are they cashing in on a new investing trend?), is the fund synthetic, full replication, how much securities lending does the fund do, frequency of dividends or distributions (more or less paperwork or you), does choosing them diversify or concentrate your risk of being with one business? Depending on where you live, is it currency hedged?
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also i have read somewhere that ISHARES lend your stocks out to short sellers.
i dont know if thats correct or whether it matters .
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- Lemon Quarter
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Re: Same Tracker --- What's the difference
jackdaww wrote:JohnW wrote:artengill wrote:Surely the only reason to choose a particular company is the one with the lowest fees.
Additionally, and in other words: size of the fund (is it shrinking?), liquidity, size and volume of daily sales, number of market makers, past history of fee changes, whether this is the fund owner's core business (or are they cashing in on a new investing trend?), is the fund synthetic, full replication, how much securities lending does the fund do, frequency of dividends or distributions (more or less paperwork or you), does choosing them diversify or concentrate your risk of being with one business? Depending on where you live, is it currency hedged?
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also i have read somewhere that ISHARES lend your stocks out to short sellers.
i dont know if thats correct or whether it matters .
I think they all do but only with copper bottomed security and a share of the lending fees go to the ETF so reducing costs. Not a problem IMO
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