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Anonymous
Is withholding tax efficiency or expense ratio more important for long term returns?
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Chris
19 Feb 2021
Owner and Writer at Tortoisemoney.com
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Taking EQQQ as the example, from their factsheet, it seems that the distribution yield is 0.39% (as of Jan 2021). Hence, the withholding tax impact is 0.0585% (derived from 15% 0.39%). On the other hand, QQQ's dividend yield is higher at 0.46%, which will give an impact of 0.138% (derived from 30% 0.46%). Hence, the cost benefit of EQQQ over QQQ is 0.0795%.
On the other hand, looking at expense ratio benefit, QQQ has an expense ratio of 0.2% vs EQQQ at 0.3%. As such, the savings from QQQ over EQQQ will be 0.1%.
Hence, using QQQ over EQQQ will beat from a pure cost standpoint. Moreover, QQQ has higher liquidity and higher AUM as a benfit as well. As such, I would likely pick QQQ.