I’ve been looking into investing my savings into an S & P 500 ETF. The problem is I cant decide which one is best. Originally I was worried about which financial service was the safest, now I’m confused about which ETF is the best. The one that has caught my eye is the iShares S&P 500 GBP Hedged UCITS ETF (Acc) IGUS. I like the look of this one as it is hedged, so it seems to be tracking the index more accurately than ETFs that aren’t hedged. The only thing is it has a total expense ratio of 0.20%, which is higher than others. Any help would be much appreciated
I wouldn’t get too hung up on TERs - the difference between 0.15% and 0.25% on £10000 is only £10. If losing out on that kind of sum concerns you it might be worth considering if a S&P tracker should be your choice of investment. ( Virgin Money do 1 year bonds at 3.32% )
** NFA obviously **
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The hedged version has underperformed the regular version because the Pound Sterling has depreciated against the dollar. The index is based on the dollar so the hedged version will tend to track it better in dollar terms. Hedged ETFs are more expensive because they use derivatives to protect against currency movements.
Over the long term currency pairings can fluctuate. The pound is currently very weak and if this continues this would be bad for the hedged version. If the pound strengthens then the hedged version will perform better.
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I prefer not having a hedged version.
Having assets in USD and income in GBP is enough of a hedge for me. I may change my mind once I stop earning in GBP.