Choosing ETFs


(Jeff puckering) #1

Tapping into the more experienced here, as a first time investor and extremely lucky early tester I need to choose between ETFs specifically FTSE/S&P type trackers. Other than the charges displayed in the KID what are the key things I should be comparing against, since they are essentially tracking the same sets of companies.

My gut tells me to just go with the lower charge but can the performance be so varied over a long term that a 0.4% charge is justified over one that charges 0.3% for example?


#2

Good question.

On top of what you mentioned. I try to find the makeup of the ETF as well since the weightings vary. HL provide a easy way to see the Top 10 holdings for a ETF, just Google the ETF and then scroll down to Top 10 Exposures.

It’ll be interesting to see what other people look for…


Edit

Some screenshots for ISHARES PLC CORE FTSE 100 UCITS ETF (DIST) (ISF) from HL




#3

If you look at the iShares website (if thinking of iShares etf) they give lots of info on holding and stuff.

They also give guidance on core holding recommendations.

At this time I personally am invested in MSCI world (as it gives global exposure, though USA is heavily weighted) and ISF (for additional exposure to ftse than msci gives me) as my core funds. Then I have iukd as my outsider to give me increased dividends.

Yes there is overlap but I’m happy with that.


#4

Just to add to my strategy: I am heavily invested in financials (through my funds) so I might up some sectors by buying either sector specific etfs (when available) or individual companies, to complement my holdings.

Next month I am looking to maybe add Shell alongside my regular core funds. Yes Shell is included in my etfs but I might want to increase my exposure - not sure yet still thinking on it.


#5

If you want a income, you might look at the Dividend Yield. Also you might want to consider the combination of the dividend yield and the fees, for example:

  • 4.06% dividend but a 0.07% fee for FTSE 100 ( ISF )
  • 4.32% dividend but a 0.30% fee for UK Dividend ( UKDV )

#6

Does the fee come out of the dividend? Or just the value of the fund? (I know that in itself will impact the dividend but it will be less)


#7

They are taken from the assets normally.


#8

I shall keep an eye on my income, make sure it is worth the investment.


(Harry) #9

Really good topic!

Key things for an ETF is yes the charge, but also see if you can find information on tracking error (how closely it tracks the index) and the methodology (is it exact replication or sampling method etc). Also double check base currency, pretty much everything will be sterling or dollar but worth checking.

You’ll probably find a play off between cost and tracking method - if it’s for a broad index such as FTSE 250 personally I would be inclined to go for the cheaper option so long as the tracking error is small.

If it’s for a more specialist use (Electric vehicle or something) then do some digging on the methodology as that would probably be more important than 0.1% fee difference.


(Harry) #10

@alex.s is there a blog anywhere about how Freetrade select the ETF provider on the platform? There are a number of providers that provide S&P500 etc and would be cool to get your team’s rationale for selection.


(Alex Sherwood) #11

Not yet but we’re going to share more info about our rationale for choosing particular ETFs :soon:


(Martin) #12

Is the ETF salt (SLT) Available on Freetrade ?


(Alex Sherwood) #13

Not right now, you can see the stocks & ETFs that we are / are hoping to offer in the Stock Universe.

You can request that ETF here - http://freetrade.io/stock-request.