Vanguard US Equities tracking query

Nuggy96

Hi All,

Relatively new to investing, I am looking at the Vanguard U.S. Equities which apparently tracks the S&P Total Market Index.

The image below shows that the Benchmark (S&P TMI) has increased only 25.25% from 1st Jun 2020 to 31st May. However, looking at the performance of S&P TMI here (https://www.spglobal.com/spdji/en/indices/equity/sp-total-market-index-tmi/#overview) I noticed it's actually increased around 33% in that time period. Any ideas why it's so far off?

Thrugelmir

Vanguard UK will report performance in GDP not US $ terms.  When trading international stocks, currency exchange movements are another factor which need to be considered. 

Prism

Without being sure where the stats in your image come from I would assume it is priced in Pounds from the perspective of a UK fund. The SP Global link is priced in Dollars. 

Nuggy96

Thrugelmir said:

Vanguard UK will report performance in GDP not US $ terms.  When trading international stocks, currency exchange movements are another factor which need to be considered. 

It says it is benchmarking against the S&P Total Market Index not GDP though? I would expect currency exchange not to have that massive effect when its proportions?

MX5huggy

Dollar vs Pound

Nuggy96

MX5huggy said:

Dollar vs Pound

Given the pound is getting stronger compared to the dollar, that should mean it's doing better than the index..

Thrugelmir

Nuggy96 said:

MX5huggy said:

Dollar vs Pound

Given the pound is getting stronger compared to the dollar, that should mean it's doing better than the index..

No, you are holding $ assets. When they are liquidated you'll be receiving fewer £'s.  To gain from currency movements the £ needs to weaken not strengthen.  

MX5huggy

Let’s check in June 2020 it’s 0.8 pounds per dollar you invest £800 in Dollar stock so you get $1000 of the stock growth is 33% to June 2021 so $1330 of stock you sell up at 0.7 pounds to a dollar so you have £931 so a percentage return of 16.4%. 

Nuggy96

MX5huggy said:

Let’s check in June 2020 it’s 0.8 pounds per dollar you invest £800 in Dollar stock so you get $1000 of the stock growth is 33% to June 2021 so $1330 of stock you sell up at 0.7 pounds to a dollar so you have £931 so a percentage return of 16.4%. 

Yes, but given the fact I haven't liquidated any of my stock, the exchange rate should have little difference, if the stock rose 20% from $100 to $120, it is the same as a rise from £80 to £96..?

MX5huggy

The price has to reflect the actual effect of currency fluctuations or not at all. 

You would be mighty unimpressed is you had purchased £800 was told it was now worth £1000 said ok sell and got back £700 because the exchange rate had changed. If you want to hold dollar listed funds I’m sure you can buy Vanguard US ETF’s from someone like T212 (don’t do this).

If you are new to investing just buy a All World Index tracker.