Is there an ETF alternative for Vanguard Global Small Cap?

JohnRo

fwiw, the deed is done, decided to push the button on this dip, hoping it won't turn into a rout.

35% VWRL
35% WOSC
20% SLXX
10% IWDP

time to see how this progresses, the nine blackrock index funds and vanguard SC fund I've ditched did their job well but I prefer the flexibility and lower platform costs of this setup.

bigfreddiel

JohnRo wrote: »

fwiw, the deed is done, decided to push the button on this dip, hoping it won't turn into a rout.

35% VWRL
35% WOSC
20% SLXX
10% IWDP

time to see how this progresses, the nine blackrock index funds and vanguard SC fund I've ditched did their job well but I prefer the flexibility and lower platform costs of this setup.

That's pretty close to my portfolio, which is doing just fine, keep it simple and cost effective is the way to go. God luck fj

cloud_dog

JohnRo wrote: »

fwiw, the deed is done, decided to push the button on this dip, hoping it won't turn into a rout.

35% VWRL
35% WOSC
20% SLXX
10% IWDP

time to see how this progresses, the nine blackrock index funds and vanguard SC fund I've ditched did their job well but I prefer the flexibility and lower platform costs of this setup.

Which platform are you with?

Linton

Not sure what to make of this.....

Out of interest I put your new portfolio into the trustnet performance graphing facility. Since December 2013 its total performance graph matches VLS100 very very closely though the asset allocation is obviously rather different. I cant go earlier as WOSC was only launched in November 2013.

My active managed fund based growth portfolio does rather better though it's not a fair comparison as mine has a much higher % of small companies than VLS100 and unlike your portfolio is equity-only.

Lets see what happens....

JohnRo

cloud_dog wrote: »

Which platform are you with?

CSD.

I'm also holding an active IT income portfolio with them so this is a switch to ETF based index trackers in order to eliminate all platform custody fees.

cloud_dog

JohnRo wrote: »

CSD.

I'm also holding an active IT income portfolio with them so this is a switch to ETF based index trackers in order to eliminate all platform custody fees.

The reason I was curious about the platform was in relation to ongoing charges for a non-OIEC/UT portfolio, and I am a little confused by the custody fee bit highlighted above.

According to the Charles Stanley Direct website they charge 0.25% platform fee (ignoring loyalty programme).

What am I missing?

The reason I ask is that I switched a portfolio from funds (OIECs/UTs) to ITs / ETFs (more recently) due to the RDR changes a while back and the complexities involved at the time around charges, and since then pay zero platform fees.

I have been tempted to ask this question before but, what is the value of holding funds (OIECs/UTs) on a platform over ITs/ETFs (but never got round to it).

I know for funds you don't pay buy/sell and dividend reinvestment charges but for a relatively stable / occasional rebalance it 'seems' to make sense to go down this IT/ETF route rather than funds? Even buys/sells/dividend reinvestment can be done for £1.50 per transaction (obviously I haven't mentioned stamp duty which needs to be considered for some stocks).

So, I'll ask the question (on your thread if you don't mind).... What is the value of holding a OIECs/UTs portfolio over a ITs/ETF portfolio?

Or is it that the underlying fund charges are significantly lower (generally) on OIECs/UTs over ITs/ETFs?

EDIT: The portfolio I mention is with TD Direct btw.

grey_gym_sock

cloud_dog wrote: »

I have been tempted to ask this question before but, what is the value of holding funds (OIECs/UTs) on a platform over ITs/ETFs (but never got round to it).

1) with a smaller total amount invested, paying an on-going percentage on the value of your investments will be cheaper than paying transaction charges every time you buy or sell an investment (and perhaps also paying a fixed annual charge for an account that holds shares/ITs/ETFs).

this is dependent on how often you buy and sell. many people add to their investments monthly; and may hold many different collective investments; and may switch them to different investments from time to time.

it's also dependent on how much you pay for each purchase and sale. not everything can be bought for £1.50 on every platform, and sales are almost always more expensive. you could be paying between £5 and £12.50.

especially for people just starting out, e.g. putting £100 a month into a S&S ISA, then using funds and a percentage-charging platform will be cheaper for at least a few years.

2) the range of investments available as funds vs as ITs/ETFs varies.

for actively managed funds vs ITs, for any 1 area of investment (e.g. europe ex-UK equities), there may well be both funds and ITs available, but if you think you can pick an outperforming manager, that manager usually won't be running both a fund and an IT. if you can really identify an outstanding manager (and if you can't, why are you using an active fund/IT at all?), having the right manager will almost certainly make more difference than the platform charges.

passive funds vs ETFs are more easily interchangeable - something tracking the same index, or even a very similar index, will do - though you can't always find a close equivalent.

multi-asset funds (e.g. vanguard lifestrategy, L&G multi-index, blackrock consensus) are AFAIK currently only available as funds, not as ETFs.

investing beginners would often do well to start with a multi-asset fund, which - combined with the fact that they are often starting investing a small amount - gives them 2 reasons to start with funds and percentage platform fees.

cloud_dog

The above is probably a fair summary of the pro's / con's, with a smaller portfolio and trading frequency being the bigger considerations.

grey_gym_sock wrote: »

1) with a smaller total amount invested, paying an on-going percentage on the value of your investments will be cheaper than paying transaction charges every time you buy or sell an investment (and perhaps also paying a fixed annual charge for an account that holds shares/ITs/ETFs).

I think I only disagree on the highlighted bit above, I've found it relatively easy to find a stocks based platform provider (for ITs/ETFs) where you won't pay a platform fee (some have criteria you need to meet in order to achieve this but they have not been onerous) but I've never found a platform where you can hold UTs/OIECs and will not have to pay the platform charge (usually but not always a percentage).

JohnRo

I part wrote this last night intending to post today but GGS beat me to it. Sorry for repeating the same stuff.

What is the value of holding a OIECs/UTs portfolio over a ITs/ETF portfolio?

I can't see any advantage for retail investors, purely in terms of the cost of holding OEIC/UT funds on most platforms. Without trawling through pages of comparisons it seems many of the index tracker funds do have a lower OCF than their ETF counterparts but it's the tracking and ultimately the performance that really matters. Internal OCF cost differences are of no real consequence if index parity is achieved in both cases.

The conundrum that requires solving is how the IT/ETF buying and selling costs stack up against the OEIC/UT custody costs, which all depend entirely on the individual trading amounts, styles and frequencies involved.

Obviously small and/or frequent IT/ETF buy/sell transactions are prohibitively expensive in terms of transaction costs as a percentage of the total consideration, where those same buy/sell transactions are free when using equivalent funds on many platforms.

Specific to my arrangement, CSD have a quirky fee structure where their platform fee is waived when making six trades each six months.

That fits well with my IT income investing style at present and allows me to effectively hold the ETF index tracker portion for free, additional rebalancing costs will be incurred as and when they might be required.

The one thing I have been contemplating is whether there's a valid argument to be made for also ditching IT investments in favour of equivalent ETF investments. I've always assumed that the IT structure with reserves, gearing, discounts, board discretion etc. have a distinct advantage over funds. Do the same arguments hold for ETF alternatives?

The reason for wondering is because most IT purchases incur stamp duty where ETF purchases do not.

grey_gym_sock

cloud_dog wrote: »

I've found it relatively easy to find a stocks based platform provider (for ITs/ETFs) where you won't pay a platform fee (some have criteria you need to meet in order to achieve this but they have not been onerous)

if we're talking about S&S ISAs, there are a few providers where you can avoid platform fees (sometimes subject to criteria, as you say). however, if you're trying to keep your trading costs down, too - e.g. to pick a platform where you can buy the ITs/ETFs you're interested in for £1.50 a month - then that also affects your choice. it could be better to go for a platform with a small fixed platform fee but lower trading fees.

for a taxable account, there are more providers where you can avoid platform fees.

and for a SIPP, it's much harder to avoid them - x-o.co.uk were offering this when i last looked, but they might be the only provider doing so.

but I've never found a platform where you can hold UTs/OIECs and will not have to pay the platform charge (usually but not always a percentage).

for S&S ISA, iweb might be the only provider doing this - but it's now £200 to open the account, if you're not already a customer.

or for a taxable account, there is: iweb, or halifax share dealing, or bank of scotland share dealing (though that is all the same provider under different names).

or for a SIPP, i don't think you can avoid a platform charge (when holding UTs/OEICs).

generally, if you have large amounts invested, and trade rarely, and would prefer to hold UTs/OEICs, there are a small number of fixed-fee platforms, where you can avoid a percentage platform charge, though you may be paying a fixed charge instead. though the number has been falling: first selftrade switched to a percentage charge, and now youinvest (or rather, they are removing the low cap on their percentage charges).

JohnRo wrote: »

The one thing I have been contemplating is whether there's a valid argument to be made for also ditching IT investments in favour of equivalent ETF investments. I've always assumed that the IT structure with reserves, gearing, discounts, board discretion etc. have a distinct advantage over funds. Do the same arguments hold for ETF alternatives?

The reason for wondering is because most IT purchases incur stamp duty where ETF purchases do not.

this is back to the old active vs passive debate. ETFs are generally going to be cheaper than ITs, not just in stamp duty, but also in OCFs, and in internal trading costs (not included in the OCF). but are they worth the extra costs?

the advantages you mention are more-or-less why i would generally favour ITs over actively managed funds. i'm less sure whether they justify going for ITs rather than cheaper passive collective investments. if in doubt, i tend to go with the lower cost. however, i did start buying MYI (murray international) a few months ago - in this case, i thought/hoped that the IT's use of gearing might make the higher costs worthwhile.