You will produce a side-by-side comparison of two versions of the same index fund, built from their own documents.
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. This exercise turns them into one sourced sheet and one number: the estimated yearly cost difference between the two funds on a holding her size.
You need the two funds from lessons 5.1 to 5.3, their factsheets, prospectuses and latest annual reports from the fund issuers' websites, and a spreadsheet. The worked example uses made-up figures throughout.
Use the fund issuers' own documents for every number. Comparison websites are useful for finding funds, but their figures can be out of date, use different periods or mix up share classes. For each figure, note the document, its date and the page.
Your sheet has one column per fund and these rows: domicile, listing exchange and trading currency, share class, withholding rate on US dividends at fund level or to you, dividend yield, total expense ratio, tracking difference over the longest period both funds report, typical bid-ask spread at the time you would trade, FX route, and estate treatment.
For the made-up funds in the example, the US-domiciled fund has a TER of 0.03%, a typical spread of 0.02%, trades in US dollars, and has 30% withheld from its dividends when paid to you. The Irish-domiciled fund, on its US dollar line, has a TER of 0.07%, a typical spread of 0.08%, and 15% withheld at fund level. The index pays dividends worth 1.5% a year. Both trade in US dollars, so the FX route is the same.
Calculate the costs that repeat every year, on a S$20,000 holding.
For the US-domiciled fund, the TER costs 0.03% of S$20,000, which is S$6. The withholding costs 30% of the S$300 in dividends, which is S$90. The total is S$96 a year.
For the Irish-domiciled fund, the TER costs 0.07% of S$20,000, which is S$14. The withholding costs 15% of S$300, which is S$45. The total is S$59 a year.
The estimated yearly difference is S$37 in favour of the Irish fund in this example. Notice that the higher TER took S$8 back from a S$45 tax saving. With a lower dividend yield or a bigger TER gap, the result could shrink or reverse, which is why you calculate it instead of assuming.
The spread is paid when you trade, not every year. You pay roughly half the spread each time you buy or sell. Buying S$20,000 costs about S$2 in spread on the US fund at 0.02% and about S$8 on the Irish fund at 0.08%. Selling later costs about the same again. If you buy in monthly pieces, the total spread paid over a year is about the same as buying in one go, because it scales with the amount.
Put the FX route in words. If both trade in US dollars, as here, the conversion costs from module 2 are the same for both. If one trades in pounds, add that conversion route and its cost.
Then add the estate treatment row from lesson 4.2: US-domiciled, likely US-situs; Irish-domiciled, generally not. This row has no yearly cost, but for anyone whose numbers in lesson 4.4 came near the exemption, it may outweigh everything else on the sheet.
Your estimate in step 2 is built from parts. Tracking difference is the fund's actual result. Put the two side by side. If the Irish fund's tracking difference over several years is better than the US fund's by roughly what your estimate suggests, your parts add up. If not, look for what you missed: share lending income, a different index version, or a change in fees during the period.
The finished sheet lists every row for both funds with a source and date, the estimated yearly cost on S$20,000, the one-off spread cost, the FX route and the estate treatment. Below the table goes a short paragraph naming which costs drive the difference for your holding size.
Rachel's paragraph said that withholding was the biggest yearly cost in both funds, that the TER gap took back close to a fifth of the saving, and that the spread was small enough to ignore for a monthly buyer holding for years. She added that the estate row mattered more to her than the S$37, after her father's numbers.
That paragraph is not a decision about how much to put in each fund. How to split your money between holdings is an allocation question, taught in Build and run an ETF portfolio. This sheet tells you what each fund costs. Complete it for your own pair, using your own holding size, and write the paragraph.
Complete the two-fund comparison sheet and write a short paragraph on which costs drive the difference for a holding your size.
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