I am sometimes asked whether Monevator is a stealth site run by Vanguard to promote its activities in the UK.
Chance would be a fine thing!
So far not one of the pennies collected by the Monevator Empire has sallied forth from Vanguard’s coffers, so far as I’m aware.
Indeed, it’s a bit of a sad reflection of the UK financial media that some people’s first thought is that if you’re writing about a product or investment, you must be being paid by that company to do so.
Now don’t get me wrong – I’d absolutely love the opportunity to run Vanguard advertising on this website.
But even in the absence of such a pleasant happenstance, we’ll continue to write about the best products and services for the likes of you and me – and right now that means heavy lashings of whatever is being served up by the private investor friendly Vanguard.
Cheap as chips
My co-blogger The Accumulator spent the weekend helping his extended family with its finances – whether by going through their accounts or offloading their junk at a car boot sale he didn’t say – and so he requested a week off posting duties.
I know! Slacker.
In his stead I’d like to draw your attention to four new ETFs that Vanguard has just brought to the UK market.
| ETF name | Ticker | TER |
| Vanguard FTSE Developed Europe UCITS ETF | VEUR | 0.15% |
| Vanguard FTSE Developed Asia Pacific ex Japan UCITS ETF | VAPX | 0.22% |
| Vanguard FTSE Japan UCITS ETF | VJPN | 0.19% |
| Vanguard FTSE All-World High Dividend Yield UCITS ETF | VHYL | 0.29% |
Note: TER figures from Vanguard.
These Vanguard ETFs are all physically-backed funds – as opposed to the synthetic funds that some commentators consider more risky.
You can find out more information (including a prospectus and factsheet for each fund) at Vanguard’s website.
Rampant Vanguard-ism
The launch of these new ETFs seems a tad opportunistic for Vanguard.
I’ve heard more investors talking about Japan this year than in the previous five years put together, and now along comes a very cheap ETF from Vanguard that enables you to get exposure.
The Developed Europe ETF, with its TER of 0.15%, is also a very competitive offering. It’s certainly cheaper than its closest iShares equivalents, and with 499 holdings according to the factsheet I’m pretty sure it’s more diversified, too. (It does have over one-third of its money in UK shares, so keep that in mind when figuring out your overall asset allocation if your idea of Europe is more like UKIP’s!)
But I think that the new High Dividend Yield ETF could be the most interesting of the bunch, at a time when yield-chasing is still so rampant.
Holding over 1,000 globally distributed stocks (albeit with one-third of the index in the US, reflecting the large size of that market, and another 13% in the UK, perhaps on account of our emphasis on yield) this new ETF could be a cheap one-shot way to create a diversified equity income stream.
The factsheet is touting a forecast dividend yield of 4%. Time will tell if that’s what anyone purchasing this ETF actually receives.
Indeed as this ETF is brand spanking new, you’ll probably want to look into the FTSE Index it’s based on to best understand what you’re buying.
Of course, whether you ought to pursue value-tilted indices such as higher yield versus vanilla market cap weighting with your investing is an open question.
Comments on this entry are closed.
I love the low fees. I believe that is key to maximizing your return over time. I am a big believer in index funds for the small investor.
The high dividend yield ETF peaked my interest last week but on further inspection, the FTSE All-World High Dividend Yield Index seems pretty correlated to the FTSE All-World Index. Similar total returns and volatility and with an obvious overlap of stocks for anyone already tracking the FTSE All-World Index, I’m not sure how much diversification this actually offers. What am I missing?
Thanks for the update Monevator. Now I no longer have to press refresh on the Vanguard site every few weeks to see if new ETFs or Mutual Funds have been released.
I agree with you that the High Dividend Yield ETF will definitely attract the most attention. Great for income investors. 4% sounds high as you say.
Investor, do you know which platforms will sell these … Could not see them on H & L ?
@TCA
It doesn’t offer diversification if you already have a global equity portfolio. The point is if you want to draw money out in retirement then that fund alone could easily cover your entire equity exposure with plenty of diversity and a better stream of dividends than a normal world index incur selling fees when moneys needed.
@jon
ETF’s. You buy and sell on the london stock exchange through a share dealing broker, not a fund broker.
Someone has mentioned Vanguard to me as a good way of investing, but I’m not sure I quite understand it. Can anyone help me?
I have just over £1,000 accumulated from my project and am wondering if this is a good way to go. Would people recommend it for that amount? Do I have to pay an initial fee to buy them, and then what are the ongoing fees?
I agree with TCA, the graph on the Factsheet here
http://www.ftse.com/Analytics/FactSheets/Home/FactSheet/ProductRegions/HIGHDY/1/WRLD/1?fromftse=true
shows the FTSE All-World High Dividend Yield Index Total Return apparently tracking the FTSE All-World Total Return very closely. Quite remarkable considering that the high yield has been yielding between 1.5% to 3% more.
I’d like to see Vanguard introduce some world small cap / value tracker ETFs. They already have a Global Small-Cap Index Fund following the MSCI World Small Cap Index.
I think you can now use Vanguard’s ETF to track the world’s markets even more cheaply
Your stock selection would look like
50% Vanguard US
25% Vanuguard Europe (I *think* the UK is in their Europe ETF)
10% Vanguard Japan
5% Vanguard Developed Asia
10% Vanguard Emerging Markets
I’m going to do some more looking at their new ETF documents and probably switch my funds from their unit trusts in July
I think its going to save me about £500-1000 a year in charges
@neverland- which platform will save you money like that? I’m with ATS and think it would cost the same in dealing and account fees whether I used funds or ETFs. Sippdeal cheaper for an ETF only portfolio but not THAt much, I don’t think!
Interesting comments all. Just on the tracking the All-World Index point, I agree it’s pretty startlingly close on that five year graph. But I’d caution that five years isn’t a particularly long time (and also and more tentatively as index construction certainly isn’t my strong suite, that this last five years has arguably been one dominated by a search for yield, so perhaps similar drivers have been in play in terms of what has delivered the returns for both these two universes of shares?)
Also, as mucgoo suggests, there’s more to an investment choice than maximizing your total return.
For some people, buying a significantly higher diversified income that they can have a high degree of confidence will just turn up in their account every quarter without them having to make any trading decisions — and that will very likely grow with inflation over time — is an attractive option, even if it does over time deviate from a vanilla index or eventually prove to under-perform a cheaper or more widely diversified option.
@Vanguardfan
I’m with ATS, which isn’t the cheapest for me, but I like the stability and transparency of the parent company. I sat down and worked out that I could save maybe £300 a year with SIPPdeal, but I’m not sure I can be bothered
I’m looking at switching funds of Vanguard’s UK FTSE All-share and All-world tracker into the ETFs
The All-World is a nice product (I have the accumilation units) but the TER is 0.3% a year when half of it is in the US
I can track the US S&P 500 with a Vanguard S&P 500 ETF which charges less than 0.1% TER a year
The saving with the European element is smaller but still significant
The extra cost will be a few more £15 dealing costs because I won’t have accumilation units any more, but I’m sure it will be a net win
FYI As I understand it Vanguard are due to offer a short dated govt/ high quality bond fund shortly. I think it would be an interesting addition to a portfolio but not sure about the yield.
Do you think Vanguard will offer their Lifestrategy funds as ETF’s, and if so do you think the TER would be significantly different? I believe they offer Lifestrategy ETF’s in America.
Having a Lifestrategy fund in my SIPP since Vanguard became available with HL it has increased by just under 25% (around £10k) – so I am happy to sing their praises.
Just to let you know that Monevator has become my go to site for investing/financial articles. I recommend you to anyone prepared to listen to me (financial ignorance is alive and kicking out there still).
Yup – tipsters have been promoting Japan for some time now and querying China and other BRICs. It makes sense – the world downturn will adversely affect manufacturing and material goods suppliers while we still need to eat and burn oil. Meanwhile the printing presses are busy in the US and UK as well as AbeLand. All that is needed now of for the burghers of Frankfurt to get off their behinds and start doing something to promote jobs in south EZ…. Fat chance with Merkel facing election.
@William — Very glad you’re enjoying the site. We have no special insight into what Vanguard plans to do next, but I think it’s likely that the LifeStrategy funds will *eventually* reach us here, given that they seem to be slowly moving their US passive offerings to the UK. Of course that hunch is absolutely no use in terms of saying when they’ll do it!
Does it seem likely that Vanguard will release a GBP hedged index fund at some point. I really appreciate the TER competition that they’ve introduced into the UK ETF market but as someone with a globally focused portfolio I’m reluctant to over-expose myself to USD.