Quite a simple question that I should know the answer to, but have to admit that I don’t! I have a vanguard etf and pay a small fee (to vanguard) for having it. However, I see that I can buy “Vanguard” etf’s through T212. How is this possible as the vanguard etf’s are a vanguard product surely? Also, if I invest in a vanguard etf through T212 is there a charge payable for having it? Sorry for the basic question, but I really don’t know that answer.
Thanks in advance
Vanguard ETFs are available via numerous brokers. If you buy and hold them on the Vanguard platform you pay a 0.15% platform fee. Similarly, AJ Bell would charge you 0.25% and Hargreaves Lansdown 0.45%. On T212 there is no such fee The actual product fee, the OCF, such as 0.07% on VUSA is charged internally to the fund and you never see it explicitly.
Thank you rrw1 for your prompt reply. You have cleared it up quite nicely for me.
A Vanguard etf through T212 it will be then! Just gotta decide which one
The Vanguard range is pretty small, just 26 ETFs. Some like VWRL come in different currencies, and have both distributing and accumulating versions (VWRA, VWRP, VWRD). There are 29 Vanguard ETFs on T212, so it looks to me that they have the complete range. That helps to make your choice simple. By contrast, iShares offers 430 ETFs, so only a fraction of them are on T212.
My first venture into ETFs was with ISF, VMID, VERX, VJPN, VAPX, and VFEM. I made up an ETF portfolio matching the geographical regions distribution of the Vanguard 100% Equity Fund, excluding the US exposure which I did with my own US stocks. With hindsight I think that at 22% this was too overweight in UK. One may as well follow the world weightings in VWRL or SWDA where UK is 5.1%. The iShares SDWA omits emerging markets.
In my ISA, I decided to buy accumulating ETFs, whereas in my taxed account I preferred distributing ones.
Can I ask why you chose accumulating rather than distributing in your ISA? Cheers!
Good question. Several reasons. 1) With accumulating ETFs I would have automatic dividend reinvestment - so not have to pay my broker for that, and dividends get reinvested continuously by the fund manager rather than just 4 times a year when I do it manually, which generally means a better performance. 2) OCF was slightly less on the iShares accumulating ETF compared to the Vanguard distributing ones (at the time). 3) in a taxable account it is somewhat of a headache to figure out the nondistributed but reportable income that I have to declare for tax (and then to make adjustment to my cost basis with a view to CGT someday) - but this is not an issue in an ISA.
Now 1) about broker fees, is not an issue with T212 0 fees, and ability to buy fractional shares helps. Regarding 3) I have since realised that even with distributing ETFs in a taxable account one also has to deal with undistributed but reportable income, (not just the received dividends) so the tax reporting headache is not actually less for distributing ETFs than it is for accumulating ones.
There are pros and cons. Accumulating has the advantage of automatic dividend reinvestment and so perhaps slightly better perfomance. Distributing can produce some money quarterly with which to rebalance if you desire. But some distributing ETFs pay in USD or EUR which (if not with T212) means incurring an fx fee.
If you can accommodate all your yearly investment in your ISA then do that. If at any stage you want to invest in a taxable account there is no getting away from the fact that ETFs and funds are more of a tax reporting headache than are company share dividends.
It used to be that iShares ETFs were almost all accumulating, whereas Vanguard ETFs were mostly distributing. Now both companies offer both. Some ETFs seem more popular with traders and so have greater daily trade volume and smaller bid/offer spread, eg ISF seems more popular than VUKE for those looking for a FTSE 100 tracker. ISF has 8.6 billion and VUKE has 2.9 billion. The TEFs are 0.07% and 0.09%. The accumulating version of ISF, called CUKX, has only 657 million.