OEIC or ETF for S&P500?

aroominyork

What are relative merits of an OEIC or an ETF to invest in the S&P500? I get the impression the pros favour ETFs but from what I can see OEICs edge it: comparing HSBC American Index to HPSX or VUSA, the ETF charges are a fraction higher and there is also a small spread.

A_T

ETFs can be traded instantly like shares. OEICs are valued once per working day so you can't be sure of the price.

Audaxer

Funds are covered by the FSCS, ETFs are not.

aroominyork

Audaxer wrote: »

Funds are covered by the FSCS, ETFs are not.

If I hold an ETF through a platform (Interactive Investor) where I hold OEICs totaling over £85,000, should II fail presumably it makes no difference whether my S&P is in an OEIC or ETF? And presumably FSCS is only needed for cash II is holding or fraud in how it has used my funds; money invested in managed funds or ETFs would be safe?

System

Audaxer wrote: »

Funds are covered by the FSCS, ETFs are not.

FSCS protection is like a comfort blanket for some investors, but grown-up investors do not worry about it.

Iain_For

aroominyork wrote: »

If I hold an ETF through a platform (Interactive Investor) where I hold OEICs totaling over £85,000, should II fail presumably it makes no difference whether my S&P is in an OEIC or ETF? And presumably FSCS is only needed for cash II is holding or fraud in how it has used my funds; money invested in managed funds or ETFs would be safe?

For investments the protection is 50k and it is only triggered if an investment product provider goes bust or for a loss arising from bad advice. An underlying investment going down the tubes is not covered. Investment trusts and ETFs are shares so not covered by the FSCS unless there is case for bad advice.

masonic

aroominyork wrote: »

If I hold an ETF through a platform (Interactive Investor) where I hold OEICs totaling over £85,000, should II fail presumably it makes no difference whether my S&P is in an OEIC or ETF? And presumably FSCS is only needed for cash II is holding or fraud in how it has used my funds; money invested in managed funds or ETFs would be safe?

If II fails your loss won't be 100%. Most likely your loss will be zero and another company will take over management of your investments. Otherwise your loss will be the cost of the administration shared between investor in proportion to the size of their investments. I've seen a worst case figure of about 30% used.

If a fund you invest in fails, then if it is an OEIC you have £50k (going up to £85k in April) protection against losses, whereas if an ETF goes belly up you have no protection. That protection doesn't include any losses from the underlying holdings.

aroominyork

masonic wrote: »

If II fails your loss won't be 100%. Most likely your loss will be zero and another company will take over management of your investments. Otherwise your loss will be the cost of the administration shared between investor in proportion to the size of their investments. I've seen a worst case figure of about 30% used.

If a fund you invest in fails, then if it is an OEIC you have £50k (going up to £85k in April) protection against losses, whereas if an ETF goes belly up you have no protection. That protection doesn't include any losses from the underlying holdings.

OK, thanks. I think I've seen other threads on this issue. It's not a concern to me.

So back to my OP - the only difference is once daily vs. instant pricing/trading?

masonic

aroominyork wrote: »

So back to my OP - the only difference is once daily vs. instant pricing/trading?

There is also a difference in bid/offer spread, and depending on platform, trading cost.
Edit: also, if holding outside of an ISA, most ETFs are non-UK domiciled, so there is excess reportable income to potentially declare. And since you're considering VUSA, there's income paid in USD that can lead to delays and forex charges, although dividends are small. I'd recommend CSP1, which is accumulating, if holding a US ETF at II.

aroominyork

masonic wrote: »

Edit: also, if holding outside of an ISA, most ETFs are non-UK domiciled, so there is excess reportable income to potentially declare. .

What is "excess reportable income" please, and need it be declared in a SIPP?

masonic

aroominyork wrote: »

What is "excess reportable income" please, and need it be declared in a SIPP?

http://monevator.com/excess-reportable-income/

It doesn't need to be declared in a SIPP.