Moving everything from one Vanguard fund to another

dllive

Hi guys

I currently have a large amount in Vanguard's FTSE Global All Cap Index Fund. The OCF is 0.23%.

What Id like to do is move it to Vanguard's FTSE Developed World ex-U.K. Equity Index Fund which is just 0.14% . As I understand it, both funds are much the same (albeit that the latter is ex-UK which only accounts for 4% of the world markets) but the latter's OCF is a lot cheaper.

Given the above (and Im happy to be corrected!) how best to balance out of FTSE Global All Cap Index into FTSE Developed World ex-U.K. Equity Index? For example, should I do it piecemeal, say £1k per month, or sell out of it at once entirely and immediately buy into FTSE Developed World ex-U.K. Equity Index Fund ?

Thanks

ColdIron

dllive said:

As I understand it, both funds are much the same (albeit that the latter is ex-UK which only accounts for 4% of the world markets) but the latter's OCF is a lot cheaper.

There is more difference than just the UK component. The All Cap index includes Emerging Markets which the Developed World doesn't and it also includes Mid Cap companies. All in all more diverse

If I were to swap I'd do it in one go, I can't think of any advantage of staggering it

eskbanker

dllive said:

I currently have a large amount in Vanguard's FTSE Global All Cap Index Fund. The OCF is 0.23%.

What Id like to do is move it to Vanguard's FTSE Developed World ex-U.K. Equity Index Fund which is just 0.14% . As I understand it, both funds are much the same (albeit that the latter is ex-UK which only accounts for 4% of the world markets) but the latter's OCF is a lot cheaper.

If you're that driven by lower OCFs, you could consider HSBC FTSE All World at 0.13%, unless you're using a platform that doesn't offer this, such as Vanguard's....

InvesterJones

Or the FTSE developed-world ETF they now offer on Vanguard at 0.12%

Notepad_Phil

dllive said:

...

What Id like to do is move it to Vanguard's FTSE Developed World ex-U.K. Equity Index Fund which is just 0.14% . As I understand it, both funds are much the same (albeit that the latter is ex-UK which only accounts for 4% of the world markets) but the latter's OCF is a lot cheaper.

...

Don't forget that you might find that the market rises between you selling and then buying on (hopefully) the next day. So it could take several years for you to make up for even a small market rise.

You might be lucky and find that the market falls, but if I were in your shoes then I'd probably keep the existing fund and only put new money into the cheaper fund.

eskbanker

Notepad_Phil said:

dllive said:

...

What Id like to do is move it to Vanguard's FTSE Developed World ex-U.K. Equity Index Fund which is just 0.14% . As I understand it, both funds are much the same (albeit that the latter is ex-UK which only accounts for 4% of the world markets) but the latter's OCF is a lot cheaper.

...

Don't forget that you might find that the market rises between you selling and then buying on (hopefully) the next day. So it could take several years for you to make up for even a small market rise.

You might be lucky and find that the market falls, but if I were in your shoes then I'd probably keep the existing fund and only put new money into the cheaper fund.

But OP says they have "a large amount" in the existing fund - surely you're not effectively suggesting that they're stuck with that until reaching the decumulation phase of their investment journey?

Swipe

I was always under the impression that the Vanguard platform 'switch fund' feature sold and bought at the same time so no time is spent out of the market or does it take place over a few days?

Barkin

From their website:

How long does it take to switch from one fund to another?

 

A switch usually takes 4 to 7 working days, depending on the funds you're switching between. To carry out a switch we need to sell one fund first and then buy into the other funds on your behalf. Each part of the process can take a few days. There will be a period where you aren't invested, with the chance that prices fluctuate.

For Exchange Traded Funds (ETFs), the switch is quicker and can happen within 1 day.

Notepad_Phil

eskbanker said:

Notepad_Phil said:

dllive said:

...

What Id like to do is move it to Vanguard's FTSE Developed World ex-U.K. Equity Index Fund which is just 0.14% . As I understand it, both funds are much the same (albeit that the latter is ex-UK which only accounts for 4% of the world markets) but the latter's OCF is a lot cheaper.

...

Don't forget that you might find that the market rises between you selling and then buying on (hopefully) the next day. So it could take several years for you to make up for even a small market rise.

You might be lucky and find that the market falls, but if I were in your shoes then I'd probably keep the existing fund and only put new money into the cheaper fund.

But OP says they have "a large amount" in the existing fund - surely you're not effectively suggesting that they're stuck with that until reaching the decumulation phase of their investment journey?

Say they have £1,000,000 in the fund, a difference of 0.09% is £900 a year, a small 0.5% rise in the market would be £5000. For me the difference in fund costs between two of the cheaper funds that can be bought wouldn't be the catalyst for changing funds - now if one fund had exposure to something that the other didn't then that might be for me a catalyst to change funds.

Swipe said:

I was always under the impression that the Vanguard platform 'switch fund' feature sold and bought at the same time so no time is spent out of the market or does it take place over a few days?

The OP hasn't said they are on the Vanguard platform, just that they are Vanguard funds. A quick google suggests a fund switch takes 4 to 7 working days on the Vanguard UK platform. Though ETFs seem they can be within one day.

---- Edit

I've just reread the first post and see that the OP has suggested moving the money across to the new fund in stages, which would help to average out the market chances, so if they do want to go with the cheaper fund then that would be my choice of how to do it.

eskbanker

Notepad_Phil said:

eskbanker said:

Notepad_Phil said:

dllive said:

...

What Id like to do is move it to Vanguard's FTSE Developed World ex-U.K. Equity Index Fund which is just 0.14% . As I understand it, both funds are much the same (albeit that the latter is ex-UK which only accounts for 4% of the world markets) but the latter's OCF is a lot cheaper.

...

Don't forget that you might find that the market rises between you selling and then buying on (hopefully) the next day. So it could take several years for you to make up for even a small market rise.

You might be lucky and find that the market falls, but if I were in your shoes then I'd probably keep the existing fund and only put new money into the cheaper fund.

But OP says they have "a large amount" in the existing fund - surely you're not effectively suggesting that they're stuck with that until reaching the decumulation phase of their investment journey?

Say they have £1,000,000 in the fund, a difference of 0.09% is £900 a year, a small 0.5% rise in the market would be £5000. For me the difference in fund costs between two of the cheaper funds that can be bought wouldn't be the catalyst for changing funds - now if one fund had exposure to something that the other didn't then that might be for me a catalyst to change funds.

Ah right, I misunderstood the point you were making - I thought you were arguing that time out of the market makes any move between funds best avoided, but yes, in the specific context of a move simply to save a minuscule 0.09% a year, all that and much more could very easily be wiped out by daily market movements!

GeoffTF

You do not have to be out of the market if you have some cash in your account and do the switch in stages, with purchases and sales happening simultaneously. Vanguard does not charge for buying or selling (except for real time ETF trades). You can still lose out however. Vanguard uses partial swing pricing for its OEICs and Unit Trusts. ETFs have market spreads and can trade at a premium or discount to net asset value. A low cost option with Vanguard option is VEVE with a market weight of VFEM (about 10%).