You will be able to compare share classes, costs, listing currency and trading hours of Irish-domiciled ETFs.
Hakim was ready to switch his monthly purchase to an Irish-domiciled fund after lesson 5.2. Then he looked it up in his broker app and found four versions of it. Two had "Acc" in the name and two had "Dist". Two traded in US dollars and two in British pounds. The bid and ask prices were further apart than on the US-listed fund he had been buying, and the market seemed to be closed every time he checked.
None of that was a reason to walk away. It was a list of trade-offs that the forum post had skipped.
Many Irish-domiciled funds come in two share classes. An accumulating class keeps the dividends inside the fund and reinvests them, so the unit price rises by that amount and you receive no cash. A distributing class pays the dividends out to you, usually a few times a year.
The withholding at fund level, from lesson 5.2, How Irish domicile changes the dividend tax, is the same for both classes, because it is taken when the US companies pay the fund. The difference is what happens next.
With an accumulating class, there is nothing to convert or reinvest, so no FX spread on small dividend payments and no cash sitting idle. With a distributing class, you get cash you can spend or reinvest yourself, which some people want for income, but each payment may need converting and reinvesting at a cost. For a Singapore individual, neither class creates a Singapore tax bill, as lesson 3.3 explained. Build and run an ETF portfolio, lesson 4.1, Two ways a fund can handle its dividends, covers how to choose between them as part of a portfolio.
Many Irish-domiciled ETFs list on the London Stock Exchange, and the same fund can trade there in US dollars on one line and in British pounds on another. The fund is the same. The line you choose decides the currency you pay in.
If you hold US dollars already, the US dollar line avoids an extra conversion. If you buy the pound line, you convert Singapore dollars into pounds, and the module 2 costs apply to that route instead. Check how your broker handles each currency before you pick a line.
London trades during the Singapore afternoon and evening, with the exact hours shifting when the UK changes its clocks. That is easier for many people here than New York's overnight session, which lesson 6.1 covers. Check the current hours on the exchange's own website.
The total expense ratio, or TER, is the yearly charge the fund takes for running itself, stated in the factsheet as a percentage. Irish-domiciled versions sometimes have a slightly higher TER than the US-domiciled twin, sometimes the same.
The TER does not tell the whole story. Tracking difference is how far the fund's return fell short of, or occasionally beat, its index over a period. It includes the TER and everything else: trading costs, how dividends were taxed and handled, and any income from lending shares. The Irish fund's withholding advantage shows up here as well. Compare tracking difference over several years from the fund's own reports or factsheet, against the same version of the index. Build and run an ETF portfolio, lesson 3.2, Tracking difference is what you actually lost to the index, explains the method in more detail.
The bid-ask spread is the gap between the highest price a buyer offers and the lowest a seller asks. You pay roughly half of it each time you trade. The most heavily traded US-listed funds often have very tight spreads. An Irish-domiciled version, especially on a less busy currency line, can trade less and show a wider spread.
The spread is a one-off cost per trade, while TER and withholding are yearly. For someone who buys monthly and holds for decades, a slightly wider spread may matter less than a yearly saving. For someone who trades often, it may matter more. Look at the spread at the time of day you would actually trade, since spreads are often wider near the open and close and outside the busiest hours. Your broker's order screen shows the live bid and ask.
Hakim did not switch that week. He wrote down, for the US dollar accumulating line of the Irish fund and for his US-listed fund, the TER, the tracking difference over the last few years, the share class, the trading currency and the spread he saw at the time he would trade. The numbers fit on one line each.
That is the activity: add expense ratio, tracking difference, share class, listing currency and typical spread to the two-fund comparison you started in lesson 5.1. Lesson 5.4 turns the finished comparison into a yearly cost figure.
Add expense ratio, tracking difference, share class, listing currency and typical spread to your two-fund comparison.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).