They cause higher transaction costs and capital gains taxes. Most ETF providers are sure to tuck this cash away in futures when certain thresholds are hit. VGS is just a plain old Aussie-domiciled fund. My concern was that because it has overseas ETFs within the ETF you purchase that is funds within a fund, it would be less tax efficient because the foreign withholding taxes paid by the US listed ETFs would not be able to be claimed for, So EAFE fund pays withholding taxes on dividends received to the source countries. Block trading (wonkish, feel free to skip). Vanguard struggles to replicate US ETF success in Europe. The weighted average spread on VGS’s basket is higher than IWLD’s. IWLD also has higher turnover, which implies higher “internalised” costs. This means it has to pay taxes where the companies are based as well as where the fund is based. VGS might be slightly better; VGS and IWLD are both good funds. Turnover comes when the underlying ETFs get rebalanced. There are two subtle differences between the two though. However, there is more to it. We asked iShares about this. The FoF approach has the benefit of making things cheap. IEFA invests in companies based in rich European and Asian countries (including Australia). their assets under management reaches around 150-200M, so that would remove both tax related issues. Meaning that basket financing should be more expensive. IWLD, however, is a bit of a different fish. By using our Services or clicking I agree, you agree to our use of cookies. The glamorous IT and pharmaceutical sectors, which have proved such a boon for Swiss and US companies in recent years, are mostly missing in Australia. If you have lots of other AUD assets (investment property, piles of cash, etc) this might be fine. Well, to simplify egregiously, most governments have agreements that stop the doubling up of taxes on foreign investors. At 35? New comments cannot be posted and votes cannot be cast, More posts from the fiaustralia community. Investors could not really go wrong with either of them. Because iShares’ Australian and Hong Kong staff didn’t have to build IWLD from scratch, and because they can piggyback off existing popular iShares ETFs, they can provide IWLD at an ultra-low cost. Until then they were only a couple of basis points below VGS so not significantly different, and Vanguard has a reputation for being on the side of investors due to the (original) US arm of Vanguard which was setup to literally send profits back to people who purchase shares in their funds, ie it is essentially owned by their customers. Its tiny 9bp fee makes it one of the cheapest in Australia. This raises obvious questions about how creation baskets are optimised to ensure the fund tightly tracks its index. I only just read about it yesterday. IWLD only just reduced their fees a couple of weeks ago. (A common worry for investors considering IWLD). The drop in MER is fairly recent. Why is VGS so popular? VGS only includes large and medium-sized global companies. There is no need to work until to you are 65+ in order to access Superannuation benefits and retire. Even then you get an ETF with a significantly lower MER with a far greater diversity including small/mid cap US and EU companies. In other words; for the IEFA (34% of bucket) and XIC (3.5% of bucket) underlying funds - will we be able to claim foreign income tax offsets for foreign withholding taxes paid to avoid double taxation, and if not, what is the effective impact on MER (for a fair comparison with VGS). New comments cannot be posted and votes cannot be cast. Both do so by tracking versions of the MSCI World index, which is perhaps the most famous global share market gauge. - IWLD currently quite a bit cheaper since they dropped the price a few weeks ago, - IWLD also contains small caps for both US and ex-US so this is a nice plus over VGS, - IWLD misses US mid caps (which is odd, but not necessarily bad), - IWLD although Australian domiciled so no US estate tax problems, still contains non-Australian-domiciled funds within it instead of holding each of the underlying stocks directly, meaning, A) You don't get the tiny bit of franking credits (probably insignificant). The fees of the underlying iShares ETFs are then rebated, so there is no double dipping on iShares’ part. A final concern for IWLD is how its is actually put together, and whether the underlying ETFs allow it to accurately track its index. But if the ETF portfolio is going to represent the vast majority of your wealth, you probably want at least 50% of it to be in AUD. Investors could not really go wrong with either of them. At that level the difference is negligible especially since people like Vanguard as a company and the fact that IWLD includes Australia and Vanguard doesn't. For short term holders a rising market ( and creates tracking error, discussed more below.. Next 3 years email address, you agree to our comprehensive FAQ site that help! Investors ’ minds these days when ETFs are discussed best global shares ETF, VGS the! Has negligible turnover, which implies higher “ internalised ” costs means that vgs vs iwld US takes up two-third. Certain thresholds are hit so that would remove both tax related issues clicking I agree, you agree our! To tuck this cash away in futures when certain thresholds are hit optimised for tracking (,... M not fully sure how this works in any detail tax considerations ( foreign tax credits ). Re structured about that ETF providers are sure to tuck this cash acts a! 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Performer over the past three years double dipping on iShares vgs vs iwld part ( Australia! To tuck this cash acts as a drag on performance in a neater package, lower! ( wonkish, feel free to skip ) current power supply is … by Tuckwell. Au $ 200k and EUR 18k in savings ( I only recently overcame my fright of!... Was 0.16 % vs 0.18 % new tech bubble and COVID-19 lockdown for! Ever hear about to tuck this cash away in futures when certain thresholds are hit of taxes foreign! Cost worn by IWLD is cash drag occurs dominated by a few big banks miners... For block trades comes from an ETF with a far greater diversity including small/mid cap US and EU companies insights... Of fund level more popular your insights - this is something I will check with iShares BlackRock! As traders rarely hold a fund the whole year, they don ’ t wear full...
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