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USA Tracker
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Andy7856
Posts: 260 Forumite


Hi all
Just want to pick your brains for ideas and inspiration. In summary I am wanting to swap my USA fund (Fidelity) to a USA Tracker.
I am looking at Fidelity, HSBC, or Vanguard. HSBC appears to outperformed over a 5 years period, though slightly higher charges and has been around longer than Fidelity. So this appears to be my favourite.
Any thoughts or strong opinions? Or am I worrying about nothing and plump for the cheapest fees?
Cheers!
Just want to pick your brains for ideas and inspiration. In summary I am wanting to swap my USA fund (Fidelity) to a USA Tracker.
I am looking at Fidelity, HSBC, or Vanguard. HSBC appears to outperformed over a 5 years period, though slightly higher charges and has been around longer than Fidelity. So this appears to be my favourite.
Any thoughts or strong opinions? Or am I worrying about nothing and plump for the cheapest fees?
Cheers!
0
Comments
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You should look at how closely it has tracked the index. A tracker that outperforms the index might sound good, but it signals tracking error and this could easily lead to a period of underperformance after you invest. Since fees can change over time, I normally look over shorter periods (e.g. 3 months, 6 months and discrete calendar years) and prefer to go with a tracker that closely matches the index minus fees.0
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The problem with looking at a 5 year historic period for trackers is that in recent years the typical fees have changed (and broadly, come down right across the board) so their historic performance against the index may not be quite comparable with what they each achieve today.
It is true that each fund manager does generally have their own level of 'tracking error' driven by the strategies they use to capture changes in the index, handle subscriptions and redemptions etc. These may be positive or negative for a given set of market conditions and not too easy to predict or understand over time, particularly as different managers may have changed their systems or approach over the last decade or so.
You are probably right that plumping for the cheapest fees is a decent approach. Vanguard for example is at 0.07% for their S&P500 ETF, 0.10% for their North America ETF, or 0.10% for their US Equity Index Fund OEIC (S&P total market tracker). Any of those gives you broad market exposure to big US companies although encompass slightly different holdings. IMHO, as they're reputable and use physical replication for their indexes. it's not really worth shopping around for much lower than that unless you have very big numbers invested.
You might find some slightly lower fees but make sure you consider the all-in costs, i.e. any platform fee and any buy/sell fees from your platform provider on top of the fee from the fund manager. If someone offers a tracker with a headline AMC/TER/OCF of under 0.1% but you have to hold it via their platform at 0.3%+, you could probably just get the Vanguard fund on a cheaper platform instead for a lower all-in cost.0
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