Vanguard VUSA ETF? Trading hours and value

Prism

sebtomato said:

So the conclusion is that it's speculation between 8:30 in the morning (UK time) when VUSA starts to be traded, and 14:30, when the NYSE opens. Price is then supposed to be set to the S&P500 index price at that point (considering the GBP/USD exchange rate too).
However, does that mean Vanguard keeps adjusting the composition of its ETF? Daily? Hourly? Surely, they have to buy and sell shares to create an index tracker and keep it...tracking?

Also there is a fair bit of out of hours trading for US stocks. It starts at around 4am Eastern Time and ends at 8pm. There is also the S&P futures index which can be used for S&P500 shares pretty much at all times. All of these can be used to set the value of any fund including ETFs

MX5huggy

sebtomato said:

So the conclusion is that it's speculation between 8:30 in the morning (UK time) when VUSA starts to be traded, and 14:30, when the NYSE opens. Price is then supposed to be set to the S&P500 index price at that point (considering the GBP/USD exchange rate too).
However, does that mean Vanguard keeps adjusting the composition of its ETF? Daily? Hourly? Surely, they have to buy and sell shares to create an index tracker and keep it...tracking?

No that’s a misconception of how an index tracker works. There’s no buying and selling required to track in normal times. They only need to buy and sell when money goes in or out of the fund or shares are added or removed from the index. 

Because if you imagine an index of say 5 companies all worth 20% of the index on day one, If you have 100 units of this fund. Then Acompany doubles in value Bcompany halves others don’t move the index is now worth 110% of what it was you still have 100 units but each one is worth 10% more no buying and sell has taken place. 

sebtomato

MX5huggy said:

Because if you imagine an index of say 5 companies all worth 20% of the index on day one, If you have 100 units of this fund. Then Acompany doubles in value Bcompany halves others don’t move the index is now worth 110% of what it was you still have 100 units but each one is worth 10% more no buying and sell has taken place. 

Yes, but then your investment does track the index anymore.

Company A no longer accounts for 20% of the index, nor Company B. The only way to track the index again is to sell half of Company A shares and buy twice of Company B shares. Rebalancing is required.

masonic

sebtomato said:

MX5huggy said:

Because if you imagine an index of say 5 companies all worth 20% of the index on day one, If you have 100 units of this fund. Then Acompany doubles in value Bcompany halves others don’t move the index is now worth 110% of what it was you still have 100 units but each one is worth 10% more no buying and sell has taken place. 

Yes, but then your investment does track the index anymore.

Company A no longer accounts for 20% of the index, nor Company B. The only way to track the index again is to sell half of Company A shares and buy twice of Company B shares. Rebalancing is required.

No it is not. If the shares are bought by market cap weighting, then the change in share price changes the weighting in the fund and the index equally, so the fund and index match while the company remains in the index. This is why market cap weighted index tracking is so low cost.

coyrls

sebtomato said:

MX5huggy said:

Because if you imagine an index of say 5 companies all worth 20% of the index on day one, If you have 100 units of this fund. Then Acompany doubles in value Bcompany halves others don’t move the index is now worth 110% of what it was you still have 100 units but each one is worth 10% more no buying and sell has taken place. 

Yes, but then your investment does track the index anymore.

Company A no longer accounts for 20% of the index, nor Company B. The only way to track the index again is to sell half of Company A shares and buy twice of Company B shares. Rebalancing is required.

It's not 20% by number of shares, it's 20% by value.  No buying or selling is required to track share prices.

JimLad

Minus 3% on VUSA today...OUCH...thats gotto be the biggest red day ive seen for a while

masonic

JimLad said:

Minus 3% on VUSA today...OUCH...thats gotto be the biggest red day ive seen for a while

US inflation figures have come out. VUSA is also pricing in some of the 2% drop that happened after UK markets closed yesterday. Would be worse if it wasn't for the pound also weakening.

grumiofoundation

sebtomato said:

MX5huggy said:

Because if you imagine an index of say 5 companies all worth 20% of the index on day one, If you have 100 units of this fund. Then Acompany doubles in value Bcompany halves others don’t move the index is now worth 110% of what it was you still have 100 units but each one is worth 10% more no buying and sell has taken place. 

Yes, but then your investment does (did you mean to put a not in here?) track the index anymore.

Company A no longer accounts for 20% of the index, nor Company B. The only way to track the index again is to sell half of Company A shares and buy twice of Company B shares. Rebalancing is required.

See post above - I think you have a fundamental misunderstanding of what a market weighted index tracker (e.g. VUSA) is.