fund or ETF?

gravlax

With larger traded funds and ETFs, Vanguard, iShares, L&G, Blackrock etc., assuming both have similar holdings, what are the reasons if any to favour holding a fund rather than ETF?

coastline

Posted in May

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masonic

Aside from lack of FSCS protection, which isn't really worth worrying about with the providers you mention, ETFs may trade at a premium or discount to NAV during periods of high volatility, they have a bid-offer spread which OEICs generally do not, and the live pricing can be a pro or a con depending on how it influences your behaviour. Most ETFs are not UK domiciled, so you have to remember to look up and include excess reportable income in your dividend income if held outside an ISA or a SIPP. Income may be distributed in USD or another currency resulting in forex charges. There are probably other factors as well.

ColdIron

• Usually no spread when you buy and sell
• Often no transaction charge
• You can buy fractional units
• Usually both Acc and Inc classes available
• FSCS protection

dunstonh

• Knowing the difference between synthetic replication and physical.
• UT/OEICs dont suffer dealing costs.
• ETFs can be traded (mostly) in real time.
  

mika_dm

On some platforms, to keep UT/OI+EICs you pay a % as platform fee. For ETFs is capped at a lower price(Fidelity and HL has a £45 cap on ISA for ETFs)

Thrugelmir

iShares is Blackrock. 

gravlax

Thanks all. The excess reportable income isn't something I had come across. That could be a big drawback if it means getting specific data and calculating for tax. If that doesn't apply to funds then holding funds has the advantage in terms of admin.

masonic

gravlax said:

Thanks all. The excess reportable income isn't something I had come across. That could be a big drawback if it means getting specific data and calculating for tax. If that doesn't apply to funds then holding funds has the advantage in terms of admin.

It applies to funds and ETFs that are not UK domiciled. It is just that most ETFs are not UK domiciled (they are commonly domiciled in Ireland or Luxembourg), whereas most funds are. Read more here: https://monevator.com/excess-reportable-income

Albermarle

Also as someone without a background in finance , when I looked into the structure of ETF's , I found it pretty complicated and difficult to understand. Whereas funds seem more straightforward.
On the basis of that you should not invest in something you do not fully understand, then I suppose I should not have any ETF's but actually I do . To take advantage of the capped platform fees mentioned previously.

csgohan4

Some people choose funds, because their platform is cheaper for it, while others, ETF's is cheaper to hold on their platform.