Do you want a piece of one of the most successful stock markets in the world? Well, do you? I suspect so, which is why we’ve put together this guide to the Best S&P 500 ETFs and the best S&P 500 index funds.
In this post, we’ll explain how to pick the best S&P 500 trackers and narrow down the array of choices to a worthy few.
Best S&P 500 ETFs – compared
| Tracker | Cost = OCF (%) | 10y returns (%) | Replication | Domicile |
| Lyxor S&P 500 ETF – Dist (USD) | 0.07 | 14.6 | Synthetic | Luxembourg |
| Xtrackers S&P 500 Swap ETF 1C | 0.15 | 14.5 | Synthetic | Luxembourg |
| Invesco S&P 500 ETF Acc | 0.05 | 14.5 | Synthetic | Ireland |
| iShares Core S&P 500 ETF (Acc) | 0.07 | 14.6 | Physical | Ireland |
| Vanguard S&P 500 ETF | 0.07 | 14.7 | Physical | Ireland |
Source: Trustnet and fund provider’s data. Returns are nominal annualised returns.
S&P 500 ETFs are a type of index fund that track the performance of the 500 largest stocks in the US.1
Index funds are designed to match – as closely as possible – the return of a particular section of an investible market. The part you gain exposure to is defined by the ETF’s benchmark index. That’s the S&P 500 in the case of the trackers we’re focussing on today.
By replicating the performance of their index, S&P 500 ETFs (and S&P 500 index funds) enable you to efficiently diversify across Corporate America’s most profitable companies at minimal effort and for an incredibly low cost.
Our post on ETFs vs index funds explains the key differences between the two types of investment tracker.
There isn’t normally much to choose between the two tracker flavours. But when it comes to the US stock market, the best S&P 500 ETFs are superior to the best S&P 500 index funds.
Best S&P 500 ETFs – what to look for
The table above lists the key criteria that separate the best S&P 500 ETFs from the also-rans.
As you can see from the 10-year return column, the practical difference between the top dogs is extraordinarily slight.
That said, it’s not quite like picking baked bean tins off the supermarket shelf. Some S&P 500 trackers are more equal than others…
Replication
The ETF’s index replication method matters when it comes to US stocks.
That’s because the best S&P 500 synthetic ETFs have the edge since they don’t have to pay US withholding tax on dividends.
Contrast that with physical ETFs domiciled in Luxembourg. These must pay 30% withholding tax on US dividends. Irish-domiciled ETFs pay 15%.
(The withholding tax advantage helps explain why the physical ETFs in the table are both based in Ireland.)
Though the two physical ETFs listed above (from iShares and Vanguard) are marginally ahead over 10-years, it’s a different story across the longest timeframe we can get data for:
Source: justETF. Returns are nominal cumulative return.
Over 13 years, the three synthetic ETFs get their noses in front of the physical iShares S&P 500 ETF (the red bar). And the Vanguard ETF drops out of the comparison. It wasn’t launched until 2012.
The synthetic ETF’s tax advantage springs from the interaction of US legislation and the design architecture of this type of fund. It’s not a dodgy loophole.
Indeed, fund houses that traditionally specialise in physical replication have been forced to launch their own synthetics in order to compete.
What is the difference between a synthetic and physical ETF?
As you’d expect, a physical ETF actually holds the underlying stocks that comprise its index. No surprise, since that’s the most direct way to mimic the performance of a benchmark.
In contrast, a synthetic ETF delivers its index return by using a financial derivative called a total return swap.
Essentially, a swap is a contract agreed between the ETF provider and a counterparty – usually a large global financial institution.
The counterparty pays the ETF provider the index return to be passed on to the fund’s investors. In exchange, the counterparty receive collateral and cash which they hope to make a tidy profit on.
US legislation exempts swaps from incurring withholding tax when they’re applied to certain stock market indices, including the S&P 500 and the MSCI World.
Costs
Index trackers beat active funds on average thanks to their lower costs.
Higher fees subtract from returns. They negatively compound to drag down your profits over time.
It follows, therefore, that lower-cost ETFs and index funds should dominate their pricier brethren.
The most visible measure of cost is a fund’s Ongoing Charges Figure (OCF). ETF providers compete on this measure in a ceaseless price war that does have a winner – the consumer. Yay!
But the OCF is not the last word in performance. Take a look at this chart:
The graph shows the cumulative return of the cheapest US large cap ETFs (including non-S&P 500 indices), with their current OCFs overlaid in green.
We’ve also added Xtrackers’ S&P 500 Swap ETF 1C. This is one of the most expensive S&P 500 ETFs around – and yet it is also a top performer.
There’s no clear correlation on OCFs here. Rather, the point is that the cost gaps between the best S&P 500 ETFs (and rival indices) are so slim that they’re not a deciding factor when it comes to performance.
By all means choose a keenly-priced tracker. But don’t stress about every last pip of difference.
Long-term returns
Naturally we’re drawn like groupies to the best performers on the stage.
But two points of caution.
Firstly, the current Number One may not lead the pack in the future. There’s just no guarantee that any small advantage eked out today will persist.
Additionally, as the next chart shows the difference between leading S&P 500 ETFs is marginal anyway:
All of these ETFs have delivered exceptional performance over the last 11 years, because they mirror the S&P 500. And these US large caps have produced stellar returns over the period.
Every single one of those trackers did its job. True, we can see that some did it slightly better than others – in hindsight and with our magnifying glasses out – but you don’t need to get Sherlock Holmes on the case when you’re choosing between me-too products.
Note that every table and chart in this post uses a slightly different timeframe. And the single best S&P 500 ETF – as measured by return – changes with almost every time period.
There is a core set of five ETFs that have maintained a slight edge (as reflected in our Best S&P 500 ETFs table). But performance is only one factor worth thinking about.
Also, forget about any conclusions drawn from less than three years of data. The longer the timeframe, the better the perspective. Temporary wins are planed away by the law of averages.
Our approach is to find the best long-term data we can, then place our pick in the centre of the Venn diagram of relevant factors.
A balance of low cost, long-term performance, and an ongoing tax advantage will get you to the right place.
Best S&P 500 and US large cap index funds – compared
| Tracker | Cost = OCF (%) | Index | 10y returns (%) | Domicile |
| HSBC American Index Fund C | 0.06 | S&P 500 | 14.3 | UK |
| Fidelity Index US Fund P | 0.06 | S&P 500 | 14.3 | UK |
| iShares US Equity Index Fund (UK) | 0.05 | FTSE USA | 14.2 | UK |
| L&G US Index Trust I | 0.1 | FTSE USA | 14.1 | UK |
| Vanguard US Equity Index Fund | 0.1 | S&P Total Market | 13.6 | UK |
Source: Trustnet and fund providers’ data. Returns are nominal annualised returns.
There are many fewer S&P 500 index funds available than ETFs. Hence we’ve drafted in other flavours of US large cap tracker fund to bolster your options.
You can see that the best S&P 500 index funds trail the best S&P 500 ETFs over the long-term.
But the lag isn’t egregious and is worth living with if you’ve chosen a percentage fee broker that offers zero-cost trading on index funds, since you’ll be saving extra dosh that way on investing fees.
Once your portfolio is worth over £12,000 in a stocks and shares ISA – or roughly £60,000 in a SIPP – then it’s time to think about the long-term cost advantages of switching to ETFs.
- The Monevator broker comparison table will help you to choose the best platform at either stage.
Compensating factors
Another good reason to pick an index fund is that such funds are eligible for the £85,000 FSCS investment protection scheme.
ETFs do not qualify for compensation under this scheme.
The only vehicle that is covered by the FSCS is a UK domiciled Unit Trust or OEIC (Open-Ended Investment Company).
All of the index funds listed in our table are one of those two types.
And just in case you’re wondering, index funds all physically replicate their indices. There’s no synthetic, withholding-tax-swerving option here.
Best S&P 500 ETFs vs MSCI USA ETFs
Finally, it’s worth knowing that trackers based on the S&P 500 have consistently beaten other indices that represent US large caps over the periods we’ve been looking at:
ETFs based on the MSCI USA index are the most commonly offered alternative to S&P 500 tracker funds. Our chart shows that they have consistently come off worse against S&P 500 stablemates.
The MSCI USA is slightly more mid-cap orientated than the S&P 500. But the US tech giants have swept all before them for well over a decade, benefitting the famed US mega-cap index.
But academic research has previously found that smaller companies in aggregate beat large companies over the long-term.
There’s reason to believe then that recent returns will prove to be an anomaly.
S&P 500 forever?
On a related note, Corporate America has been the winning bet globally for more than a decade, too.
In fact if you’re looking for the best S&P 500 ETF or index fund then you’re probably motivated by the total ass-smashing our Trans-Atlantic cousins have handed the rest of the world in recent years:
However Team USA does not always win, as shown by a longer-term analysis of the S&P 500 vs the MSCI World.
In fact the dominance of the US is likely to contain the seeds of its future reversal.
If America looks like the only market worth investing in, then returns must decline eventually as prices are bid up.
The higher the price, the less likely it is that you’ll make outsized returns – because, ultimately, there’s no reward without risk.
We can’t know when any trend will reverse. But the reason we diversify is because it usually does.
US stocks seem overvalued by the best historical measures we have – though such metrics are not bulletproof, and they don’t explain why the S&P 500 has been apparently defying gravity for years now.
The Monevator view is that it’s best to spread your bets around the world. Easier said than done though when even the best global tracker funds are now 60% concentrated in the US, thanks to the latter’s outperformance.
All the more reason to keep a good chunk of change in the best bond funds and ETFs. And perhaps to read our thoughts on the best commodities ETFs, too.
Take it steady,
The Accumulator
- Size is determined by market cap – the total market value of a firm’s publicly traded shares. Standard and Poor’s uses a few other criteria too, which means the S&P 500 may not strictly represent the 500 biggest publicly-traded US companies. In fact, you can’t even rely on the 500 bit because the index contains 503 entries at the time of writing! [↩]
I’ve watched the films ‘Margin Call’ and ‘The Big Short’….., derivatives, swaps, counterparty risk.
That’s why I avoid synthetic replication. VUSA for me.
Thanks for the article, it was a good read.
My instincts might be off here, but I just feel inherently uncomfortable about the idea of investing in a synthetic ETF based on swaps for a period of 20-30+ years.
It could just be down to my lack of understanding of the mechanics/risks involved, but when it comes to long term investing I’ll probably stick to physical replication funds/ETFs.
I would like to understand what happens if the counterparty in the swap folds for whatever reason, for example like Lehmann did back in the day.
Yep, I think those of us who lived through 2008 are scarred for live on the tail-risk fear of Swaps, and so will always choose Physical ETFs.
But 15 years on, I guess it’s not as big an issue for many as it was.
Forgot to say, very good piece!
Index nerdery is quite something, but S&P500 is a cracker. I didn’t know MSCI USA had more mid-caps.
Separately will forever mystify me why Russell 2000 remains the small-cap benchmark – such a crap index.
Excellent article as always!
Just buying and holding an S&P 500 low-cost index fund and letting it compound over time can often be one of the best ways to go if you are not sure what to do and need to make a start. Including global stocks would probably also be a good idea for the future.
Thank you @TA. A superb job, flawlessly executed as always. Very informative, well researched and well written.
Thoughts:
– The S&P 500 is the biggest whale by far out there in the global equity market space.
– Its $32.26 tn capitalisation dominates, with 99.43% of it in companies worth over $10 bn apiece, and the remaining smidgen of 0.57% in those worth $2 to 10 bn each.
– It’s biggest constituents are individually nearly as large in valuation as the whole capitalisation of the FTSE 100!
– For as long as I can remember now, the overwhelming consensus has been that the S&P 500 (along with the NASDAQ 100) was/is significantly overvalued (on basically every measure going) compared to, ….well, compared to any anything (other than the NASDAQ).
– Throughout this long period, based upon the index’s total return performance, that consensus has been consistently wrong.
– Eventually though, that consensus (since at least 2009) will stop being wrong and will finally (at least for a time) become right. Even a stopped clock keeps the right time twice a day etc.
– Given that, perhaps there could be some merit to considering different options and approaches to simply pure cap weighting the S&P 500.
– Accordingly, might there be scope for a future follow up piece on Equal Weight S&P 500 ETFs (if any are available to UK investors now)?
– Additionally, taking another approach again (to both equal weight and to pure cap weight), might it also be possible, in any future follow up piece, to cover the options, and perhaps the pros and cons, for leveraging up a 60/40 using the S&P 500 for the 60% equity element (e.g. with something like the 1.5x leveraged Wisdom Tree US Efficient Core UCITS ETF – USD Acc)?
Again, my thanks for such a useful, readable and detailed analysis of the fund and ETF landscape for the S&P 500 cap weight market.
I can understand why synthetic ETFs may feel like an unnecessary risk. There’s something ‘unnatural’ about the structure that invites suspicion. Certainly in the aftermath of the regulatory failure of the GFC. Just bear in mind that physical ETFs may also be taking counterparty risk too e.g. if they engage in securities lending, so that’s worth checking out.
@ TLI – cheers! I was stunned to see that 19 out of the top 20 MSCI World constituents were US. With plucky Danish upstart Novo Nordisk coming in at no.19.
I made a firm decision 15 years ago not to invest in a dedicated Nasdaq 100 or S&P 500 tracker precisely because of the overvaluation risk you cite. I’ve regretted it ever since… 🙂
But with the MSCI World now 70% US, and global trackers at the 60% mark, I think the case for tilting in the opposite direction continues to build.
With swap based ETFs, the return on a basket of securities is swapped for the return on the index. For example, a swap agreement between an investment bank and the ETF provider would involve the investment bank receiving the total return (capital gain+ dividends) of the basket and the ETF provider receiving the total return of the S&P 500. The payment schedule would be part of the swap agreement, typically monthly for something like this. It might even be weekly or daily these days, I am out of touch. So over 1 month if the return of the basket exceeds the return of the index, the ETF provider pays the bank the difference. If the return on the index exceeds the return on the basket then the bank pays the ETF provider.
This means that at any point in time, the counterparty risk is equal to the difference in performance of the basket/index since the last payment. The risk is there, but it should not be significant and swap counterparties tend to be highly rated investment banks.
iShares have an interesting synthetic S&P 500 ETF (I500 https://www.ishares.com/uk/individual/en/products/314989/ishares-s-p-500-swap-ucits-etf). I500 is an accumulating ETF and for the first 2 years it did not post any excess reportable income. I think this is because the underlying basket of shares did not pay dividends, or paid very little. This year the ETF has posted a small amount of reportable income. Reportable income is subject to income tax in GIAs, so I500 offers the possibility of investing in the S&P 500 with lower drag from income tax than a similar physical ETF. I have not managed to find out though whether it is an intentional policy to continue investing in zero or low yielding shares.
Over the last 3 years I500 has consistently outperformed the iShares physical S&P500 ETF CSPX. Total 3y return in USD to end October 34.18% vs 33.28%. That compares to 34.30% for the iShares US listed ETF IVV and index return of 34.41%. IVV is not suject to withholding taxes and has a TER of 0.03% compared to 0.07% for I500 and CSPX. The difference in performance is essentially explained by differences in management fee and dividend withholding tax.
ps, there is a distributing version of I500 (I50D) which manufactures semi-annual dividends. Not totally sure how that dividend is taxed, but I suspect just like regular ETF dividends.
Thanks Naeclue, that’s a good point. Reminds me that a lot of synthetic ETF providers post more collateral than they strictly need to in an effort to reassure investors that they’re covered.
Yes, any dividends from a synthetic ETF paid out to the investor, or accumulated and reported on the excess reportable income doc will be taxable as normal
Regarding weighting, the US market does trade on a higher p/e, p/b, CAPE, etc. than non-US developed markets, but the earnings growth rate has also been much higher. Taking earnings growth rate into consideration, the US market does not look unreasonable to me, so personally I am happy to stick with market weights. I would only change my mind if it becomes silly, as Japanese share valuations once did.
There’s an interesting article in the weekend reading post that describes the alarming concentration risk in the S&P 500. It may say 500 on the tin, but that’s not quite what people have been getting.
@ Time like infinity. I use Invesco S&P 500 Equal Weight ETF. Started building a position in this recently for some of the reasons you mentioned. As I understand it, equal weight tends to be more volatile but over 20y has marginally beaten the S&P500. But diversification was more my driver than performance. And yes, I think a deeper dive into the pros and cons of equal weight would be interesting.
Equal weight has tended to do better than market cap weighted with most indices.
If I recall correctly this is due to the size factor; equal-weighted gives more weight to smaller companies, which over most periods have outperformed large caps.
Of course recent history is not one such period, which is how we’ve ended up with seven megacaps driving S&P 500 returns in 2023, for instance.
I think a passive purist would say stick to market weight, because what do you know better than the market about which companies are the most valuable? (i.e. If smaller companies were going to do better they’d already be priced higher — so they’d say the size factor doesn’t exist, or is paid for with volatility at most).
See this post from Lars:
https://monevator.com/why-invest-in-alternatively-weighted-index-tracker-funds/
Personally I’d seriously consider going equal-weighted in the US if I was choosing right now, but I’m a superstitious active investor type who is happen to diverge from market returns for my sins. 🙂
Thank you for sharing @Mr H. Looks like a good product. 0.22% OCF, so only 15-17 bps over the cheapest S&P 500 cap weighted ETFs in @TA’s list above.
@TI: philosophically agree with Lars, but there’s also a powerful practical argument that when things approach extremes then some caution is advisable, & hedging by diverfiying a bit away from cap based market weights might make risk/ reward sense.
Amongst the many treasure troves of wisdom on this site is your pearl that you don’t have to go all in.
As of Oct 23 S&P 500 made up ~80% of US equity cap which, in total, was ~45 tn out of ~106 tn of global all cap. Rather than go with a ~60% allocation to S&P 500 in line with global DM large cap trackers, one could use only~35-40% upon basis of the true weight in the whole universe of global all cap. This would keep a large US exposure but without letting the S&P 500 & Magnificent 7 dominate to the worrying extent now seen in many DM trackers.
Alternatively, one could go with say a 10% sleeve of an Equal Weight S&P tracker plus 52% in the WisdomTree 1.5x levered 60/40. This gives, in effect, ~57% in S&P 500 (10% EW + ~47% cap weighted), ~31% equiv in Treasury Bills & 38% for the rest of world (RoW), so ~1.25x levered overall . The RoW exposure can then be tilted to small cap, value and small cap value to further hedge the large cap growth of S&P 500, e.g. for the European equity share, spilt it between Euro market cap weight, Euro small cap & Euro small value ETFs. Then again, this may be too complicated.
Well, the promise of risk factors like small cap is the possibility that they pay a higher reward in exchange for higher risk i.e. they’re a source of concentrated equity risk premium.
Other explanations involve persistent human behaviour e.g. overvaluing growth stories and neglecting the unfashionable (i.e. small value beats small growth) or market distortions (e.g. limits to leverage or short selling causing over-pricing of high beta equities).
If true / plausible then it makes no less sense to diversify into risk factors than to go 100% equities.
The market portfolio is something of a misnomer given none of us try to hold the global market allocation of, for example, bonds.
There’s an Xtrackers S&P 500 Equal Weight ETF out there too. It’s been absolutely panned by the market cap S&P 500 since launch but then so have most things.
Very interesting piece, thanks. I picked the Vanguard US Equity Index Fund for the UK domicile / FSCS protection and broader market coverage. Clearly not the best choice in hindsight, but who knows the future. The bigger mistake was underweighting the US vs MSCI World. The US market looked overvalued by CAPE 7 years ago, and went on a tear since.
I don’t know how to gauge the risk from the swap structure, so I stay away.
When I checked, *all* providers of physical ETFs did securities lending, which brings some counterparty risk too. Vanguard had the most stringent rules for lending. This is a good reason to prefer Vanguard; the others may just be buying their slight outperformance with more tail risk.
From IBKR/Morningstar regarding XSPX (XTrackers Synthetic ETF):
The fund uses synthetic replication to capture the performance of the S&P 500 (which includes dividends reinvested net of tax). Instead of holding the securities in the index, the ETF enters into unfunded swap agreements with multiple counterparties. Prior to March 2016, the fund used its parent company, Deutsche Bank AG, as the sole swap counterparty. Through the swap agreements, each counterparty delivers a basket of securities, which becomes property of the fund, and commits to pay the index performance in exchange for the performance of the basket delivered. As a generic policy, exposure to each swap counterparty is capped at 5% of the notional value of the basket delivered. In practice, however, Xtrackers ensures that net swap counterparty exposure is either zero or negative at the end of each day, meaning that the ETF is either fully collateralised or overcollateralised. The fund’s substitute basket, which can change daily, is made up ofliquid stocks that belong to eligible indexes and are traded on recognised exchanges. Should a swap counterparty default, another counterparty would be found. Alternatively, the fund’s assets would be sold and the cash returned to investors, or the ETF would be switched to physical replication. The fund does not engage in any securities-lending activity.
@ Sparschwein – you did exactly the right thing with the information you had at the time – you chose the most diversified US index you could. That’s the problem with judging ourselves by measures of past performance. We’re apt to beat ourselves up for making the ‘wrong’ call rather than pat ourselves on the back for following the right process. I guess it’s hard to care about process when the numbers come in. I too underweighted the US for the same reason.
@time like infinity
Thank you so much for your input about the wisdomtree 1.5 leverage etf WTEF in gbp. I wish they had also launched the international share leveraged option in the uk as an etf – hopefully soon.
Some people may comment that is is easy to more cheaply do the 60/40% s&p500/treasuries so why bother with this? I like the idea mainly because the leverage allows extra “space” to put in other diversifiers – i have about 25% in my pf covering managed futures / trend / cta funds and also macro fund BHMG. However to get this “space” you need a big helping the WTEF like you said – how do you view doing this on a newly launched £1million AUM fund even though it is backed by wisdom tree and is physical not synthetically backed – treasury futures aside ?
Any thoughts ?
Best in advance
MtBatch
Thank you ever so much @mrbatch #21. That’s super appreciated & very kind. I share the apprehension about a newly launched product with a micro AUM, albeit one that’s a clone of a fairly well established WisdomTree product which has got at least some traction in the US.
The redemption process between ETF authorised participants and ETF sponsors ‘should’, in theory, arbitrage away spreads between NAV (of the basket of shares representing the S&P 500 @90% of the ETF weight, and the notional value of the futures representing the 60% equivalent allocation to US Treasuries). In principle, unlike for a closed end vehicle like an investment trust, the currently v. tiny fund size should not be an issue on that account. But is that actually true in practice??? There have been examples, mostly momentary, when NAV & ETF market prices meaningfully decoupled, although (so far as I’m aware) this has mostly been with esoteric ETFs, e.g. inverse leveraged ones using total return swaps etc. OTOH, WisdomTree’s UK offering here is not exactly plain vanilla either. This is not something which, I suspect, Vanguard UK would want to get into, for example.
My best guess, and it really is a guess here, is that a big risk is that this ETF doesn’t get enough AUM & so ends up quickly getting liquidated @NAV, & that’s the end of that. This has happened to me before with the former Vanguard UK momentum ETF (VMOM, IIRC) which was going great guns (although not as well as the iShares equivalent) when, with no forewarning, it was liquidated. I logged into my ISA to see it sold/redeemed. I can see that happening here too. This is likely going to be a niche product and UK listed /UCITS ETFs tend to need >£100 mn AUM (£200k p.a. fees here) to cover their fixed costs.
So I haven’t pulled the trigger on this yet, but I am thinking about it. I have quite a high risk appetite though (at least I’m continually surprised at my lack of negative reaction to big draw downs. I basically just wish that I had more spare cash available to buy at the cheaper prices). Even v. modest (1.5x) leverage with an attempt at a built in stabiliser for the 90% equity holding using Treasury futures will suit only a smallish minority of investors.
IMO, it’s definitely worth subscribing to Moguls to read the 2 leverage ETF articles by @Finumus, especially the first here:
https://monevator.com/leveraged-etfs/
An ungodly number of the comments on that article are my own, charting the recent development & change in my own thinking about this topic.
Bogleheads also have an interesting series of posts about a more aggressive version (3x leverage) of the same idea called ‘HFEA’ (for HedgeFundie’s Excellent Adventure). The backtest from 1955 to 2018 is interesting.
It also mentions (somewhere among the literally thousands of posts on Bogleheads about HFEA) the US $ product version of the WisdomTree 1.5x leverage S&P 500 (60)/US Treasuries (40).
Hope that this helps.
@time like infinity
Thank you again for taking the time to reply and write a long response not just a yes or no 🙂
I will do some reading- one half of me thinks all funds must start with micro AUM at some time and initial investors fear being first in for the reasons you have noted, but etf’s generally launch and grow. There are some new cheap equal weight s&p500 etf from Invesco that have small AUM but seem to be growing.
The facts linked below here show NAV and AUM in USD which i presume covers all classes of the etf issue ie usd, gbp & eur with current NAV at $26.576 vs share price at $26.49 so assume look for big deviations here for decoupling worry. The index it tracks WTNTSXU was rated at base value 200 on Index Inception Date 06/30/2023 with current value Current Index Value 201.45
https://www.wisdomtree.eu/en-gb/etfs/efficient-core/ntsx-wisdomtree-us-efficient-core-ucits-etf—usd-acc
Food for thought ! I do like the idea and the fact its 60/40% theory based with big simple components eg s&p500 with treasuries, rather than as you say esoteric value/momentum/factor etf
Best again,
MrBatch
@time like infinity
Good article here from a summary of the HFEA adventure specifically about NTSX specifically. Good news is only bond leverage rather than both equity & bond, and that the duration is intermediate at 7 years – seems sensible.
Notes at end show growth in the intl & EM markets 1 year down the line so hope this etf follows suit
https://www.optimizedportfolio.com/ntsx/
MrBatch
What an really excellent & v. useful review by Optimized Portfolio. Thank you ever so much @mrbatch. It’s a great source of reassurance that the leverage is on the historically signicantly lower volatility bonds’ side and not the equities. Like you, I just wish that the UK version already had, say, £100 mn in it rather than a measly million as presently. But, as you say, someone has to be the 1st investor in an ETF.
I was thinking about concentration risk today with the so called ‘Magnificent 7’ stocks that are pushing towards a third now of the S&P 500 market cap & came across a piece by Michael Batnick in the stateside Irrelevant Investor blog on ‘7 Deadly Stocks’ in which he makes the point that, whilst the Magnificent 7 are up 105% this year while the S&P 493 are up just 7% (such that the index, as a whole, is up 21%, with the index outperforming 73% of its constituents), the top 7 were down 48% in 2022, so over 2 yrs the top 7 have only just outperformed the remaining 493.
Booked 10.5k of WTEF today
Also found another review noting WTEF as well as Resolve’s return stacking which is getting quite a few headlines regarding stacking either bonds, managed futures and equity. Corey Hoffstein from Newfound talks alot about this and is involved with product launches i believe.
MrBatch
@mrbatch: following the optimized portfolio piece, I’m now thinking for the SIPP: 60% into WTEF; 10% into ZPRV for Small Cap Value USA, 10% into ZPRX for SCV Europe & 10% into DGSE for SCV-ish of Emerging Markets; and with the last 10% evenly split across the three UCITS multifactor ETFs.
@time like infinity
really interesting PF – the WTEF at that % really opens up opportunities. I hold USSC – shame it is USD not GBP so had to pay % fx to buy it .
I’m seeing WTEF if it were established fund as
30% WTEF
30% allworld or dev world etf
4% macro BHMG
16% managed futures / CTA
20% individual gilts
This gets me about 57% eq, 38% bonds/gilts, 20% managed futures & macro (long/short) so 115% with modest 1.15 leverage. I have a higher WTEF option which is more agressive on USA equity that gives total leverage about 1.25 but retains macro/CTA futures
Will you buy WTEF ?
Lets hope WTEF survives. I have seen some other wisdom tree etf’s that are small AUM but still going after a few years eg DHSG $1million launded 2016 in usa equity income fund so hopefully they let things run a while.
https://www.justetf.com/uk/find-etf.html?query=wisdomtree&groupField=none&sortField=fundSize&sortOrder=asc
What are your 3 ucits mulitfactors?
Many thanks indeed @mrbatch #28.
I think that I will go for it with WTEF, but I am in no rush.
If we’re into another bull market run for the US then, IMHO, it’s likely to be still be in its early days, as the low will have only been back in Oct 2022.
And if we’re not into another bull market, then there’s no rush to buy into the US using a leveraged product. Instead I can just sit it out in VWRL ETF & Vanguard Global All Cap Fund.
But WTEF looks to me to be a (potentially) v. interesting product indeed & one which could be ‘complimented’ by its opposite equity style, namely Small Cap Value.
I hold some BHMG in a GIA (as no dividends & have used up both the Pension AA & ISA allowance for last tax year).
Global Macro & Trend (e.g. Winton Trend & Montlake Dunn) are potentially useful uncorrelated return diversifiers.
Also thinking about turning some cash savings into linkers for the GIA as Index Linked Gilts have no CGT & the low coupons mean that more of the return can be delivered as tax free gains rather than as taxable interest payments. This, of course, assumes rates fall.
On multifactor ETFs, my choice is going to be dictated as follows:
– IQSA ETF is out as, for some reason, HL seems to think it’s the MSCI Saudi Arabia Capped UCITS ETF and not the Invesco Quantitative Strategies ESG Global Equity Multi-Factor UCITS ETF.
– The Amundi Index EQ Global Multi SMART Allocation Scientific Beta UCITS ETF (‘SMRT’, possibly the most hyperbolic name ever for an ETF) is out because it’s listed in Euros.
– The Franklin Global Equity SRI UCITS ETF (‘FLXG’) is probably out because it’s a quite small fund ($39 mn).
– The JPMorgan Global Equity Multi-Factor UCITS ETF Accumulating (‘JPLG’) is in both as it’s a decent size (£118 mn) & as it has a good fee (@0.2% p.a.)
– iShares Edge MSCI World Multifactor UCITS ETF USD Accumulating (‘FSWD’) is in as, despite it’s name, it’s actually listed in £Stg, & despite it’s highish fee (0.5% p.a.), @The Accumulator rated it highly when he reviewed factor ETFs last, IIRC.
– HSBC Multi-Factor Worldwide Equity UCITS ETF USD (HWWA, Distributing) is in because the fund is big/liquid (£912 mn), it’s also listed in £Stg despite its name & the fee is also pretty small (@0.25 p.a.).
@time like infinity #29
Thank you – more great info on multifactor. I will research as I have not really looked at these.
Yes oddly my CTA / trend holdings are Winton Trend, Dunn WMA institutional and Schoder GAIA BlueTrend. I am hoping ii puts the new dbmi DBMF ucit on their platform which gives an replicated managed futures CTA/trend approach. With WTEF this could be a very simple portfolio.
Good luck on your investment travels – lovely exchange of thoughts and ideas.
MrBatch
Recently launched is the SPDR £SPXL S&P500 ETF with ongoing charge/TER of 0.03%. Physical replication. Available on Freetrade platform. Alternatively for a Developed World ETF, Amundi have PRIW ETF with ongoing charge/TER of 0.05%. Physical replication. Available both on Freetrade and Investengine platforms. Would people hold these over iShares FTSE100 (ISF) with ongoing charge/TER of 0.07%.
Charlie Bilello on (appropriately enough) 4th July:
“Over the last 16 years, US stocks have gained 502% vs. 104% for International stocks and 65% for Emerging Markets. This is by far the longest cycle of US outperformance that we’ve ever seen”.
Tread carefully out there. The S&P 500 could *the* place to be in the next decade or it could be *the* place not to be.
Noone can tell in advance but, whilst there’s tremendous promise in earnings and in the quality of the businesses in the top performers in the index, it’s now quite hard to make a case that the S&P 500 is actually ‘cheap’ (a reasonable case can still be made for this though, but it’s getting to be ever more of a stretch); and most metrics pitch it somewhere on the expensive end of the scale.
Of course, most metrics can be wrong, expensive can get more expensive, and an index of companies can also get cheaper through fast earnings’ growth, rather than by earnings’ multiple compression.
So, just be careful and think things through critically if you are thinking about overweighting the S&P 500. It could work out fantastic for you, or it could end really quite badly.
To reiterate, always remember that nobody *knows* for *sure* about the future, and that ignorance can either work for you or against you, but you’ll only ever find out which after the fact.
I’m very much a beginner but isn’t VANUISI an SP500 tracker fund rather than an etf?
No one seems to mention it compared to VUSA and i wonder why?
Ooh, well spotted pkpk. It doesn’t seem to be widely available. Even Vanguard don’t seem to offer it on their retail site: https://www.vanguardinvestor.co.uk/what-we-offer/all-products
Hargreaves Lansdown list it though.