Build a side-by-side comparison of two versions of the same index fund, using the funds' own documents.
Put both funds in one spreadsheet, one column each. Take every figure from the issuer's own documents, and write the document, its date and the page beside it. The sheet exists to produce one number: the gap between the two funds' yearly cost totals on the amount you plan to hold.
Rachel has spent three lessons collecting facts about two funds on the same index. Her notes are spread across a factsheet, two prospectuses, a screenshot of a spread and a forum post she no longer trusts. The sheet turns those notes into one sourced table and one number, which is the estimated yearly cost difference on a holding her size.
You need: the two funds you chose in lessons 5.1 to 5.3 each fund's factsheet, prospectus and latest annual report, taken from the issuer's website a spreadsheet
Comparison websites are useful for finding funds. Their figures can be out of date, can cover different periods, or can mix up share classes. Use the issuer's documents for every figure, and for each one record the source document, its date and the page.
Set up one column per fund and fill in every row for both. The rows are domicile; listing exchange and trading currency; share class; withholding rate on US dividends, stating whether it is withheld at fund level or from you; dividend yield; total expense ratio (TER); tracking difference over the longest period both funds report; typical bid-ask spread at the time you would trade; FX route; and estate treatment.
The recurring yearly costs of a fund are its TER plus the dividend withholding tax. For each fund, the TER cost is the TER multiplied by your holding. Dividends are the dividend yield multiplied by your holding, and the withholding cost is the withholding rate multiplied by those dividends. Add the TER cost and the withholding cost to get each fund's yearly total. Then subtract one fund's total from the other's to get the yearly difference.
Rachel holds S$20,000 (an invented figure, as are all of Rachel's figures below). She is comparing a US-domiciled fund and the US dollar line of an Irish-domiciled fund. The US fund has a TER of 0.03%, and 30% is withheld from the dividends paid to her. The Irish fund has a TER of 0.07%, and 15% is withheld at fund level. Both trade in US dollars. The index dividend yield is 1.5% a year, so her dividends are 1.5% of S$20,000, which is S$300.
For the US fund, the TER cost is 0.03% of S$20,000 = S$6. Withholding is 30% of S$300 = S$90. Her total is S$6 + S$90 = S$96 a year.
For the Irish fund, the TER cost is 0.07% of S$20,000 = S$14. Withholding is 15% of S$300 = S$45. Her total is S$14 + S$45 = S$59 a year.
The estimated yearly difference is S$96 - S$59 = S$37 in favour of the Irish fund. The Irish fund saves her S$90 minus S$45 = S$45 in withholding, and its higher TER takes back S$14 minus S$6 = S$8 of that saving. S$8 of S$45 is about 18%, close to a fifth. With a lower dividend yield or a bigger TER gap, the Irish fund's advantage could shrink or reverse. Do the calculation for your own pair and don't assume the result will match hers.
The spread (bid-ask spread) is a one-off cost you pay when you trade, so it stays out of the yearly total. You pay roughly half the spread each time you buy or sell. Each trade therefore costs about half the spread multiplied by the amount traded. Rachel's US fund has a typical spread of 0.02% and the Irish fund has 0.08%. Buying S$20,000 costs her about S$2 in the US fund (half of 0.02%) and about S$8 in the Irish fund (half of 0.08%). Selling later costs about the same again. Spread cost scales with the amount traded, so buying in monthly pieces costs about the same total spread over a year as buying in one go.
Describe the FX route in words. If both funds trade in US dollars, the conversion costs from module 2 are the same for both. If one fund trades in pounds, add that conversion route and its cost to the sheet.
The estate row comes from lesson 4.2. A US-domiciled fund is likely US-situs, and an Irish-domiciled fund generally is not. The row carries no yearly cost. If your numbers in lesson 4.4 came close to the exemption, though, this row may outweigh everything else on the sheet.
Your yearly estimate is built from parts. The tracking difference is the fund's actual result. Put the two side by side. If the Irish fund's tracking difference over several years beats the US fund's by roughly the estimated amount, your parts add up. If they do not match, look for what you missed. Common causes are share lending income, a different index version, or a fee change during the period.
The sheet is finished when every row for both funds has a source and date. It also needs to show the estimated yearly cost on your holding, the one-off spread cost, the FX route and the estate treatment. Under the table, write a short paragraph naming which costs drive the difference.
Rachel's paragraph says that withholding was the biggest yearly cost in both funds. It says the TER gap took back close to a fifth of the saving (S$8 of S$45, about 18%), and that the spread was small enough to ignore for a monthly buyer holding for years. She adds that the estate row matters more to her than the S$37 because of her father's numbers.
The sheet tells you what each fund costs. It does not tell you how much to put in each fund. Splitting money between holdings is an allocation question, and it is taught in the Build and run an ETF portfolio course.
Complete the sheet for your own pair, using your own holding size, and write the paragraph.
Fill in the two-fund comparison sheet, then write a short paragraph on which costs make the difference for a holding your size.
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