DIY Investor Magazine
/
December 2015
33
(TCO) which means that the product with the lowest
TER may not actually be the cheapest. Then of course
you’ll need to consider the commission your broker
charges (particularly for regular investments) and the
‘cost’ of a bid/offer spread.
Other fees and charges, including any effect of
currency fluctuations, are internal to the fund but
can affect its overall performance in delivering the
performance of its index; this ‘tracking difference’ can
be seen as an additional cost to a holder of a fund that
under performs its benchmark.
Cripes, it sounds as though there should an electronic
publication available to help investors learn more about
ETPs, replete with educational content from key industry
participants.
We thought so, and in the compilation of this special
edition we are grateful for the support of justETF; if you
visit them at
you will find education
and tools to help you screen products, find the ones
that best serve your objectives and construct and
maintain your investment portfolio.
A historical difficulty has always been making an
‘apples and apples’ comparison of products that
purport to, or even imply that, they track a particular
sector, and that is neatly summed up herein by the
article by Matt Hougan and Rebecca Hampson of ETF.
com.
With reams of supporting literature and Key Investor
Information Documents (KIIDS) to plough through,
hopefully this guide will enable you to understand the
key points of differentiation between ETPs and start to
build a picture of what to look for in the construction of
your investment portfolio:
•
Does it physically or synthetically
replicate the index?
•
What are its top ten holdings?
•
What is its TCO?
•
What is its tracking error?
•
What currency is it issued in?
•
How has it historically performed
against its benchmark?
•
How has it performed against its peer group?
•
Does it reinvest or distribute income?
You won’t find all the answers here, but if you are
motivated to do so, you will be able to find many
sources of information including the product issuers
themselves, who realise that awareness and education
will be key drivers as the advised and the DIY markets
in Exchange Traded Products in the UK grow.
justETF is the independent knowledge
base for ETF strategies, providing
Portfolio simulations
and
