Short-term money market fund versus ETF

dont_use_vistaprint

Looking to park around 200,000 for opportunistic trading, maybe 3 to 5 trades per month. If the platform fees are equal, do you think the slight leakage of an ETF in the bid/ask is less cost than the days out of the market using a fund.

is it possible to model this using data over the last 12 months of say CSH2 vs Royal London short-term money market, are the differences significant on this amount of money.

The ETF seems much more sensible to me but I'd be interested in other peoples feedback

eskbanker

Can't see any reason why you couldn't model that, if you have the requisite data and the time, inclination and expertise to do so!

The time lag for OEICs will sometimes represent an opportunity cost but conversely will be a benefit sometimes too....

poseidon1

dont_use_vistaprint said:

Looking to park around 200,000 for opportunistic trading, maybe 3 to 5 trades per month. If the platform fees are equal, do you think the slight leakage of an ETF in the bid/ask is less cost than the days out of the market using a fund.

is it possible to model this using data over the last 12 months of say CSH2 vs Royal London short-term money market, are the differences significant on this amount of money.

The ETF seems much more sensible to me but I'd be interested in other peoples feedback

Selling an ETF with immediate same day settlement obviously more beneficial in trying to capture a specific buying price  opportunity for a shareholding  or other etf one wishes to trade. 

The 2 to 3 day settlement periods for STMM's   ( and unit trusts generally ) clearly does not work for 'traders' who  wish to realise cash for immediate opportunistic share/etf purchases.

Generally the concept of trading unit trust funds does not have the precision or predictability of trading etfs/shares.

As an example I hold shares in Ashworth Group for the high dividends.
However, an unexpected 18% 1 day rise a week or so ago, allowed me to cream off the unexpected profit on the day. That kind of 1 day revaluation movement on a unit trust fund would be extremely rare, but one could not expect to be able access such gains from units trusts ( if it occured)  in any predictable fashion. Not at all sure how one would begin to 'model' random trading situations  of that ilk.

aroominyork

It sounds like this would be unwrapped - not in SIPP/ISA. If so, be aware of the uncertainty about whether CSH2's ERI is taxed as interest or capital gains, as discussed in this long thread.

masonic

If you wish to be opportunistic, then the cost of being held up by even one day can be significant.

aroominyork

The bid/ask spread on CSH2 hovers around 0.04%. Sometimes it creeps above 0.10% but by using limit orders I have got as low as 0.01%.

artyboy

I've got 7 figures parked in CSH2 - with apologies for the w@lly waving tone of that comment - but it shows where I stand on that question!

GeoffTF

artyboy said:

I've got 7 figures parked in CSH2 - with apologies for the w@lly waving tone of that comment - but it shows where I stand on that question!

That is more than today's on book turnover on the London Stock Exchange. How do you do large trades? Do you split them?

artyboy

GeoffTF said:

artyboy said:

I've got 7 figures parked in CSH2 - with apologies for the w@lly waving tone of that comment - but it shows where I stand on that question!

That is more than today's on book turnover on the London Stock Exchange. How do you do large trades? Do you split them?

It's spread across a few SIPP platforms. And within those, some have annoyingly small trade limits - eg CMC only lets you buy about £25k at a time...

dont_use_vistaprint

I just converted my daily interest with Royal London to an AER and it appears to be currently sat at 4.69% Based on today's interest only of course. This is way higher than I expected is CSH2 doing  the same? I thought they would be closer to or just below the BOE rate 

today's growth / today's  balance  = 0.00012549 per day

(1 + 0.00012549)^{365} - 1 =  0.04687

eskbanker

dont_use_vistaprint said:

I just converted my daily interest with Royal London to an AER and it appears to be currently sat at 4.69% Based on today's interest only of course. This is way higher than I expected

Surely extrapolating to an annual rate from a single day's movement is subject to too wide a margin of error?