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.

https://public.freetrade.io/costs_and_charges/IE00B3XXRP09.html

https://public.freetrade.io/costs_and_charges/IE0031442068.html

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

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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.

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