I’m young and I’m quite starting to be concerned about investing for my future. Yes I came here because of EFTs since they seem a good way for the long run.
My question is, I’ve seen that differents brokers/companies offers funds based in the same index. Are they always the same and the difference are just the costs?
For example, I saw that iShares and Lyxor offer a fund based on MSCI World index (ISIN IE00B4L5Y983 and LU1781541179) and the first one offer more info on where the money is going but is more expensive than the second, for which I cant find a lot about on what are they using the money.
Since they should perform very similar if not the same, Does investing in one or another matter? If I decide for this index, Should I invest in the cheaper (Lyxor) or the iShares one has some benefit I can’t see?
I’m starting in these things, so thanks a lot for the help!
One of the most important thing you have to look out for is the expense ratio. An expense ratio is the cost of owning exchange-traded fund (ETF). Think of the expense ratio as the management fee paid to the fund company for the benefit of owning the fund.
If the expense ratio is the same, it should not really matter which one you choose if they track the same exchange. You can also look at past performance of both ETF’s and compare which one has been performing better.
Yes, that’s what I meant. The cost/TER for the iShares one is 0,2 while the Lyxor one has a TER of 0,12. The lyxor one is a bit new since it has around 3yo and the iShares has been around since 2009. And the differences in performance are just nuances, 1 point or so depending on period.
That’s why I don’t understand why one is more expensive than the other and why I should choose for example the iShares ETF instead the cheaper. And that’s for almost all etfs i’ve been following which replicate the same index…
So that’s why I’m asking (if this has an answer) if the manager matters and I should research about the company to decide, or the expense ratio is the thing I should care most
There’s multiple factors that determine an ETFs performance, TER etc. I found the below article very useful and it covers many aspects. One such aspect is replication method, which is explained in full in the article.
By the way this website also offers a tool where you can compare different ETFs side by side making it easier to compare them. Worth checking out to help you determine which ETF to buy.
PS Another thing to consider is if there are any tax implications for you depending on which ETF you choose. For example here in Belgium an accumulating ETF is found to be better by many small investors than a distributing one, due to how the dividends are taxed. But I don’t know if Spain makes the same distinction, so best to check with Spanish investors for that.