ETF fees

Hey, hope you all had a lovely holiday season?

I’m looking for some clarification around ETF ‘costs and charges’. I will use the two S&p500 etf’s for comparison below:

Vanguard s&p500 (£VUSA) costs and charges:

Ongoing charges: 0.0701%
Transaction costs: 0.0105%

I shares s&p 500 (£IUSA) costs and charges:

Ongoing charges: 0.0700%
Transaction costs: -0.0006%

Firstly, how do these charges work? When are they taken from your account and how are they taken?

Secondly, with I shares having a minus transactional cost does that mean you would get money into your ETF from them or is it something else?

Sorry if this is a odd question but it’s something I can’t seem to find an answer for and would love some clarification.

Thanks :smile:

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They’re deducted from the ETFs value, you won’t see a physical transaction.

I’m assuming this is an error on Freetrades side @Viktor can you confirm?

I think it’s correct so would be getting a few pence back, but as mentioned you won’t see this a separate transaction.

If you scroll down to bottom there’s an example cost if you had put in £5000 over five years.

So the VUSA had a fee of £3.18 in transactions whilst in IUSA you were given 18p back.

Both a really small amounts in comparison to other ETFs.

That’s brilliant. Thanks for the info and helping me understand this a bit better :smile:

So I assume this happens yearly then? Or is this just a one off charge when you first purchase the stock?

Continuously, that means a part of the fee every day. Otherwise there would be massive arbitrage opportunities and inefficiencies.

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Ah yeah, that makes sense. Thanks.

Welcome to the world of MiFID and PRIIPs.

I’ve written a lot about transaction charges (positive and negative) elsewhere in this forum so search around if interested.

Short answer - yes, negative transaction costs are ‘real’. It’s entirely possible to generate profit from trading activity due to the mandated calculation used in the arrival/slippage Methodology!

google it, read it and despair at what regulators think make a logical outcome and helps retail consumers to make better investment decisions!

I’m a nerd in this area so ping any questions


Oh… and, another kicker to remember…

These ongoing fees are nearly always estimates. So you’ll never truly know what’ll you’ll actually pay down to the penny. You can find ex-post disclosures - but by then it’s been charged.

Transaction costs are calculated historically - so again you’ll never know what you’re actually going to pay in the future!

clear and simple right? Thanks regulators.


I believe IUSA is optimised sampling and not full replication like VUSA