S&P without FX fees?

Uriziel

I have been buying S&P 500 stocks on Trade212 but I noticed recently that when I buy company stocks I pay an FX fee since they are American but when I buy S&P 500 stocks which are also American I do not pay any FX fees and the share price is shown in GBP. The stock is even listed on the LSE which does not make sense to me.

Can someone explain how you can buy an American index fund without paying for currency and why it is listed on the LSE instead of US?

eskbanker

Uriziel said:

I noticed recently that when I buy company stocks I pay an FX fee since they are American but when I buy S&P 500 stocks which are also American I do not pay any FX fees and the share price is shown in GBP.

Probably worth clarifying exactly what you're comparing here?

EthicsGradient

eskbanker said:

Uriziel said:

I noticed recently that when I buy company stocks I pay an FX fee since they are American but when I buy S&P 500 stocks which are also American I do not pay any FX fees and the share price is shown in GBP.

Probably worth clarifying exactly what you're comparing here?

I suspect the OP should have read "...but when I buy S&P 500 index tracker stocks which ...".

OP, index trackers can potentially be listed anywhere (but for trading with most UK platforms, you'd use one listed on the LSE, and in practice , if an ETF, probably domiciled in Ireland for an S&P 500 index - the most tax efficient place for UK investors). You are trading shares (assuming this is  in the tracker, which will be bought and sold to others like you in sterling; the ETF owns company shares that would be traded in dollars in the US, but you buying or selling the ETF shares does not actually force a sale or purchase of company shares (demand can end up with shares going in or out of the ETF, but that is handled by corporate entities separate from the public like us).

ColdIron

Uriziel said:

I have been buying S&P 500 stocks on Trade212 but I noticed recently that when I buy company stocks I pay an FX fee since they are American but when I buy S&P 500 stocks which are also American I do not pay any FX fees and the share price is shown in GBP. The stock is even listed on the LSE which does not make sense to me.

If you buy anything that trades in dollars with sterling you will be paying Fx fees, it's a question of where it happens. If you buy a few fractional shares in Microsoft your platform will charge you directly which is likely a poor rate. If you buy a fund that trades in GBP (regardless of the underlying companies) the fund manager will be paying them, presumably at a better rate, but the charge is reflected in the unit/share price so you pay indirectly

Can someone explain how you can buy an American index fund without paying for currency and why it is listed on the LSE instead of US?

Any fund domiciled in the UK (or Ireland) can track an index but trade in GBP. You're paying for currency one way or another

wmb194

ColdIron said:

Uriziel said:

I have been buying S&P 500 stocks on Trade212 but I noticed recently that when I buy company stocks I pay an FX fee since they are American but when I buy S&P 500 stocks which are also American I do not pay any FX fees and the share price is shown in GBP. The stock is even listed on the LSE which does not make sense to me.

If you buy anything that trades in dollars with sterling you will be paying Fx fees, it's a question of where it happens. If you buy a few fractional shares in Microsoft your platform will charge you directly which is likely a poor rate. If you buy a fund that trades in GBP (regardless of the underlying companies) the fund manager will be paying them, presumably at a better rate, but the charge is reflected in the unit/share price so you pay indirectly

Can someone explain how you can buy an American index fund without paying for currency and why it is listed on the LSE instead of US?

Any fund domiciled in the UK (or Ireland) can track an index but trade in GBP. You're paying for currency one way or another

T212's FX fees are really good: spot rate + 0.15% fee. In a GIA when you sell you're not forced to convert back to sterling, you can continue to hold USD and earn some interest and/or buy the next USD denominated security with no fee.

Uriziel

ColdIron said:

Uriziel said:

I have been buying S&P 500 stocks on Trade212 but I noticed recently that when I buy company stocks I pay an FX fee since they are American but when I buy S&P 500 stocks which are also American I do not pay any FX fees and the share price is shown in GBP. The stock is even listed on the LSE which does not make sense to me.

If you buy anything that trades in dollars with sterling you will be paying Fx fees, it's a question of where it happens. If you buy a few fractional shares in Microsoft your platform will charge you directly which is likely a poor rate. If you buy a fund that trades in GBP (regardless of the underlying companies) the fund manager will be paying them, presumably at a better rate, but the charge is reflected in the unit/share price so you pay indirectly

Can someone explain how you can buy an American index fund without paying for currency and why it is listed on the LSE instead of US?

Any fund domiciled in the UK (or Ireland) can track an index but trade in GBP. You're paying for currency one way or another

If I buy £100k of US stock, for example NVIDIA, which is in USD... and then the GBP crashes hard... and I sell my NVIDIA stock without making any profit or gain... will I be receiving more GBP than I did before? So more than £100k depending on how hard it crashed? 

eskbanker

Uriziel said:

If I buy £100k of US stock, for example NVIDIA, which is in USD... and then the GBP crashes hard... and I sell my NVIDIA stock without making any profit or gain... will I be receiving more GBP than I did before? So more than £100k depending on how hard it crashed? 

Yes, any weakening of sterling benefits you if you're selling something denominated in another currency (and converting back to GBP), and obviously the converse applies if the pound strengthens....

ColdIron

How are you holding that £100k, $130k dollars or £100k sterling?

If it was dollars they would still be worth $130k but if you converted that back to sterling you'd get a lot more pounds than you laid out

If it was sterling they're simply worth more pounds than they were if you sold

But this has nothing to do with Fx fees (which you would still pay directly or indirectly), just currency conversion rates. The pound would be worth less than it was

wmb194

Uriziel said:

ColdIron said:

Uriziel said:

I have been buying S&P 500 stocks on Trade212 but I noticed recently that when I buy company stocks I pay an FX fee since they are American but when I buy S&P 500 stocks which are also American I do not pay any FX fees and the share price is shown in GBP. The stock is even listed on the LSE which does not make sense to me.

If you buy anything that trades in dollars with sterling you will be paying Fx fees, it's a question of where it happens. If you buy a few fractional shares in Microsoft your platform will charge you directly which is likely a poor rate. If you buy a fund that trades in GBP (regardless of the underlying companies) the fund manager will be paying them, presumably at a better rate, but the charge is reflected in the unit/share price so you pay indirectly

Can someone explain how you can buy an American index fund without paying for currency and why it is listed on the LSE instead of US?

Any fund domiciled in the UK (or Ireland) can track an index but trade in GBP. You're paying for currency one way or another

If I buy £100k of US stock, for example NVIDIA, which is in USD... and then the GBP crashes hard... and I sell my NVIDIA stock without making any profit or gain... will I be receiving more GBP than I did before? So more than £100k depending on how hard it crashed? 

It might not be a gain in dollar terms but in sterling terms it will be and for CGT purposes that's a capital gain.

masonic

Uriziel said:

ColdIron said:

Uriziel said:

I have been buying S&P 500 stocks on Trade212 but I noticed recently that when I buy company stocks I pay an FX fee since they are American but when I buy S&P 500 stocks which are also American I do not pay any FX fees and the share price is shown in GBP. The stock is even listed on the LSE which does not make sense to me.

If you buy anything that trades in dollars with sterling you will be paying Fx fees, it's a question of where it happens. If you buy a few fractional shares in Microsoft your platform will charge you directly which is likely a poor rate. If you buy a fund that trades in GBP (regardless of the underlying companies) the fund manager will be paying them, presumably at a better rate, but the charge is reflected in the unit/share price so you pay indirectly

Can someone explain how you can buy an American index fund without paying for currency and why it is listed on the LSE instead of US?

Any fund domiciled in the UK (or Ireland) can track an index but trade in GBP. You're paying for currency one way or another

If I buy £100k of US stock, for example NVIDIA, which is in USD... and then the GBP crashes hard... and I sell my NVIDIA stock without making any profit or gain... will I be receiving more GBP than I did before? So more than £100k depending on how hard it crashed? 

That's got less to do with the currency in which the stock trades and more to do with the fact you own an asset with expectations of future profit and therefore an intrinsic value. When you sell, you will receive the market's latest best guess at its value in whatever currency.

An S&P500 index fund or ETF trading in GBP gives you the opportunity to trade in your home currency and let the fund manager do the currency conversion, often at a better rate than you'd achieve. Since the price is in your home currency, the nominal gain or loss is more relevant to you. It is only if you buy a currency hedged share class that the gain or loss would be different than holding in the currency of the underlying assets.