Vanguard Funds to Vanguard ETFs?

DoctorW

Hi,

Wanted to ask the question of more experienced folk who may have already gone through the same process of converting Vanguard Funds to Vanguard ETFs -

I've got about 25-30k with Hargreaves Lansdown in Vanguard's FTSE UK All Share Index Fund

About 10k with BestInvest SIPP in Vanguard Emerging Markets, Pacific ex-Japan and Lifestrategy funds.

I've read about the lower expenses of the ETFs and to be honest there doesn't seem to be many negatives? The more frequent-pricing won't cause me to do anything stupid, they'll still be held for the major long term, so what am I missing? Why would anyone NOT want to go for the ultra-cheap ETFs?

If anyone could also tell me what the conversion process is like, do I have to re-pay Stamp Duty? Dilution levy etc?

Thanks a bunch!

D

masonic

The ETFs don't have a dilution levy, which is one of their advantages vs the OEICs, although if holding for the long term that shouldn't really be a consideration. ETFs do not attract stamp duty. The disadvantage is the trading cost if you can trade funds for free (e.g. at HL), but you'd potentially save on fees overall if you have a large holding and pay a %-based platform fee for funds. I don't think there is any conversion path - you'd need to sell up your OEICs and use the proceeds to buy into the ETFs.

TCA

DoctorW wrote: »

why would anyone NOT want to go for the ultra-cheap ETFs?

If anyone could also tell me what the conversion process is like, do I have to re-pay Stamp Duty? Dilution levy etc?

Off the top of my head, ETFs cost the same to buy as shares, so not as cost effective for investors wanting to make more frequent purchases, although there are regular investment plans to circumvent this.

There's no conversion as such. Just sell and buy, with all the related costs.

DoctorW

TCA wrote: »

Off the top of my head, ETFs cost the same to buy as shares, so not as cost effective for investors wanting to make more frequent purchases, although there are regular investment plans to circumvent this.

There's no conversion as such. Just sell and buy, with all the related costs.

This might suit me even more actually, as soon as the ISA opens up in the new financial year, I'll be purchasing the full amount of £15,240 (I think) in 3-4 Funds/ETFs to hold for next 15+ years. Suppose would be daft not to go for ETFs for the lower-expense ratio if I'm purchasing only once per year - at least in my ISA account?

I'd ask you guys for recommendations for the best platforms for ETFs holding/purchasing but I think Monevator has about the best comparison on the net at the mo.

Thanks for all your replies!

rpc

DoctorW wrote: »

This might suit me even more actually, as soon as the ISA opens up in the new financial year, I'll be purchasing the full amount of £15,240 (I think) in 3-4 Funds/ETFs to hold for next 15+ years. Suppose would be daft not to go for ETFs for the lower-expense ratio if I'm

Bear in mind that you don't get accumulation ETFs so depending on your cashflows there may be advantages to being able to hold accumulation units of the funds.

puk999

rpc wrote: »

Bear in mind that you don't get accumulation ETFs so depending on your cashflows there may be advantages to being able to hold accumulation units of the funds.

Does this mean an ETF holder has to think about what to do with dividends, and if they reinvest those dividends into the ETF, then they'll attract transaction costs? Is there some way to switch to ETFs and have an efficient reinvestment of dividends?

ajdj

I'm using AJ Bell Youinvest platform for Regular ETF purchases.

£1.50/trade on 10th of each month, no cost to hold them.

Works for me but there may be better options out there for larger or mixed portfolios. As already mentioned, I think the Monevator comparison table is the tool you need.

rpc

puk999 wrote: »

Does this mean an ETF holder has to think about what to do with dividends

Yes (or you could ignore them, I suppose, but that might hurt your returns...)

Is there some way to switch to ETFs and have an efficient reinvestment of dividends?

Platform dependent. Some do relatively cheap dividend reinvestment but you need enough dividends accrued to make it worthwhile - the fee on a £5 dividend will probably be quite a lot as a percentage. If it's £5000 in one go then fees are less significant. So the dividends might sit there until there is enough to make it worth doing something, or you put more cash in.

The ETF will pay dividends and you need to do something with them. What you do is up to you and your platform.

gadgetmind

I went through this process with BestInvest, but this was mainly to let me use their grandfathered fixed fee model for equities rather than their new platform percentage charge.

I sold the Vanguard trackers in phases, and slightly changed my asset allocation etc. as I rebought. The process was smooth, particularly the rebuying side.

I intend to let dividends accumulate until I next decide to rebalance, which will be once a year for SIPPs, and probably twice a year for ISAs as I add new funds.

My dealing fees on BestInvest are £7.95 per trade, and I am conscious that this means I need to rebalance carefully, but I only expect to make maybe four trades per year per pot. Let's see how it works out.

Ryan_Futuristics

So (top of my head) if you've got £25k in an All Share tracker, paying a 3.4% dividend, that's £850 in the first year

£5 dealing fee for reinvesting those dividends?

That's just under 0.6% you lose on the dividend; 0.02% lost on the overall investment ... ETF charges 0.02%, vs OEIC 0.08% ... So you save about £10 in the first year(?)

masonic

Ryan_Futuristics wrote: »

ETF charges 0.02%, vs OEIC 0.08% ...

Which ETF charges 0.02%?