Which S&P 500 ETF to use

Hello everyone, I’m thinking of putting some of my money into a S&P 500 ETF since my bank interest rate is pathetic. The question is which one. Should I go with VUSA, SPXP or iShares? There’s also some that are traded based on different currencies too, do those even matter (I’m assuming not since they all have to be converted to GBP anyways).

Which one has the lowest fees, highest dividend and best return on my investment. Minimum time holding is 10 years btw.

Thanks for help in advance.

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iShares is the provider.

So iShares is IUSA

and the equivalent Vanguard’s VUSA

Both of those are distributing (rather than the dividends reinvested)

I personally prefer IUSA due to the lower price it trades at and GBX (pence) over GBP.

Both have almost exactly the same historical performance that you would expect from tracking the same things.

These are both the European equivalents of the US ETFs which aren’t tradable here.

The SPXP is accumulating instead of distributed that’s provided by Invesco.

CSP1 would be my accumulating choice instead of SPXP which is iShares.

So basically I would personally either pick IUSA or CSP1

I don’t actually do ETFs I want a higher risk and higher reward. IITU would be my other recommend focusing on Tech specifically.

Heres my thread on Freetrade pre-covid.

And just after stocks started recovering.

There isnt anymore after that as the CMO kicked me off the forums, complaining about the wibbly wobbly charts amongst other things.

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The vast majority of investors, gamblers, funds and analysts do not beat the S&P 500 year over year, it’s not only your bank interest rate :wink:

Usually Vanguard and Invesco have better fees than iShares, then it’s a matter of decide if you prefer the accumulated or distributed variants.

You can research this question using justetf.com. You can compare costs, size, return, etc.

in practice, it will not make much difference which you choose. I periodically switch back and forth between VUSA and IUSA to harvest capital gains to use against my £12.3k annual tax free limit and to set a new cost basis for future gains. The most relevant difference will be between distributing and accumulating funds. iShares CSP1 (accumulating) is the most popular fund with investors, which must tell you something. The most popular distributing fund is VUSA.

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@Richard.W, do you have a link to your Pie or Portfolio? If you don’t want to share it, I understand. :relaxed:

@libreus My portfolio is conservative and dull. It has accumulated over many years, contains funds, ETFs and shares. I enjoy reading about others investing more speculatively with Tesla, etc., but stick with being dull. It is currently 83% US. Just for fun my top holdings comprising about 60% are

Fundsmith Equity (LSX5)
PG
MSFT
JNJ
AAPL
Lindsell Train Global Equity (NBH5)
ADP
CVX COP PSX XOM (oils)
VERX EUE CS51 (European trackers)
Lindsell Train UK Equity (LS32)
INTC
TMO
ISF HRP3 (UK 100 and All Share trackers)
HON
PEP
SJPA VJPN (Japan trackers)
VZ
EMIM VFEM (Emerging market trackers)
ABBV

I have been putting this year’s ISA allowance into some pies since those became available. These two have been outperforming the S&P 500. The second is based on Fundsmith holdings.

www.trading212.com/pies/l7A5ZH374fYtzIYqc6jc6eR46uNN

www.trading212.com/pies/l7A5ZH374fYtzgdUbuMrI7zBT15F

In the speculative cloud space I have this

www.trading212.com/pies/l7A5ZH374fYtzgdUbuS8hIecs0Ie

Having shared that, I will of course be interested in your thoughts.

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Very interesting, thanks for sharing @Richard.W!
There are some companies I haven’t heard of yet and I’ll check them out.

Here’s the Pie I’ve put together and looking to start investing in www.trading212.com/pies/l7AEABFEhiIMD1Jb6BjxsmKxQ0zH. It’s tech heavy but I’m betting the next few decades will be heavily dependent on.

This is my current portfolio that I’ll transfer to the Pie above. I’m looking to sell GOOGL. It was an impulsive purchase at the beginning of my investment journey. I’ll keep some extra stocks for speculation and in some time maybe some dividend aristocrats as well. Since I’ve started at the beginning of August, I’ll take it slowly. I’m in for the long term.

Just for fun of discussion, I thought I would share this interesting article in the FT yesterday. I have always invested in VUSA and IUSA, but these are losing popularity as there are alternatives with better tax treatment for European investors.

Apparently the physically replicated S&P 500 ETFs like VUSA and IUSA have been losing investors as people switch to synthetic ETFs based on swaps.

"BlackRock’s shift accompanies a widening belief that synthetic ETFs are a better structure for US equity ETFs aimed at European investors than “physical” ETFs, which actually hold the underlying shares.

Physical US equity ETFs domiciled in Luxembourg and Ireland, the two main European hubs, face withholding tax of 30 per cent and 15 per cent respectively on the dividend income they receive from their holdings. Synthetic ETFs can escape this tax, potentially giving them a performance advantage, prompting investors to increasingly switch to the swap-based model.

This trend accelerated in the third quarter, with BlackRock’s $50bn iShares Core S&P 500 ETF — the fund it has launched a synthetic version of — seeing the largest net outflows of any equity ETF in Europe, according to data from Morningstar, leaking €1.1bn. Vanguard’s S&P 500 ETF, another physical equity ETF, was hit by the same trend, shipping €560m."

Invesco SPXP is a swap based S&P500 tracker that is available on the Trading 212 platform and indeed we can see that it does outperform IUSA and VUSA. What do others think?

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That’s a very interesting point, I will have a better look in that.

Thanks for sharing.

I prefer VOO. Low fees.

Yep, that one that cannot be traded in Europe, nice try.

You are completely correct! I held VOO on another brokerage platform. My bad. Maybe sometime in the future it will be allowed to be traded in Europe. Fingers crossed!

VOO is a US domiciled stock so it’s never going to be available in Europe. I assume you are living in the US :sweat_smile:

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In managing VOO, Vanguard does not have to pay a US withholding tax the way they must do for VUSA and that is why its nominal dividend yield to investors is greater. Currently 1.66% vs 1.38%. Americans investing in VOO pay appropriate dividend tax according to their income bracket. Investors in VUSA lose return to US withholding tax and additionally to local country tax.

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Thank you for sharing. I’m still at the early stages of my investment journey and was struggling with how to slice up the T212 pies. I like how you have split the 3 above here and in a way validates hat I was not too far off the mark. Cheers

Can I ask why you need to offset off your £12k UK capital gains allowance. Don’t you use t212s tax free ISA so all gains are tax free?

Also I thought you only pay capital gains if you sell and withdraw from T212…

I have not yet used my full ISA allowance this year, but probably will by the end of the tax year. Meanwhile, I like to make some investments in a taxable account. This is because they are the more risky investments and I prefer that HMRC will share in my losses if I have them, whereas if I buy those shares in ISA I would be hurting only myself if there are losses and it is harder to add new money to an ISA to make up the loss.

Some people have been investing for a long time, longer than ISAs have been available. Some may wish to invest annually more than the ISA allowance will permit. In taxable accounts full use of the annual allowance can help reduce pregnant gains. Another way to avoid capital gains tax and simultaneously reduce income tax is to gift shares to charity.

Yeah that makes sense. Good to know and yeah once you are putting away more than £20k a year it definitely becomes relevant

For those who are young it might be interesting to know that previous to ISAs there were Personal Equity Plans (PEPs), introduced in 1987, with a maximum contribution of £2,400. Then ISAs came in 1999, initially with a maximum contribution to stocks and shares of £7,000.

I figured that if you had invested the maximum amount allowed in PEP/ISA every year since 1987 and had obtained a constant annual return of 10% you would invested £289,880 and now
have £1,262,198. At constant 7% you would have £742,848.

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Interesting post on the predecesor to the ISA :smiley:.

Nonetheless, I wanted to ask you about the synthetic ETFs. I did not know about this, so previously I have favoured physical ETFs as they don’t have the “counterparty risk” (eg. Yahoo Link). I thought that it was convenient to remove this risk, despite it being very low. I might have to reevaluate this.

Does anyone know if there have ever been issues (historically) with synthetic ETFs?