facebookWhy do people buy US ETFs instead of Irish domiciled ETFs that track same market despite the big difference in dividend tax? - Seedly

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Anonymous

25 Jan 2021

βˆ™

General Investing

Why do people buy US ETFs instead of Irish domiciled ETFs that track same market despite the big difference in dividend tax?

With the dividend tax being 30% vs 15% respectively - e.g VOO (US) vs CSPX (LSE)?

Discussion (3)

What are your thoughts?

Hi Anon,

Spread is smth most people overlook ehile focusing on getting a 15% discount on your dividend yield. this is the difference between your bid/ask price. US ETFs are much more liquid and have higher trading volumes.

e.g. A 50 cents difference on a $300 ETF share is 0.167% difference.

do remember that different ETFs have different dividend yields. The common ones like those that track S&P500 or Nasdaq do not even have that high of a dividend yield.

for e.g. VOO dividend yield is about 1.12% now. A 15% discount is only 0.168%.

with ETFs of lower dividend yield or as ETF prices go up (and hence dividend yield will drop accordingly) the amount you save on spread becomes much more significant.

I'm not saying Irish Domiciled ETFs have poor spread, the best of both worlds would be ideal where u can save on both tax and spread.

There are also many other reasons US ETFs are more preferred such as the availability of options/futures to trade the positions in different ways

thefrugalstudent

thefrugalstudent

18 Jan 2021

Level 13Β·Founder at thefrugalstudent.com

Hi Anon,

That's a good question. While it certainly seems to make the most sense to choose Ireland domiciled ETFs instead, there could be a few reasons why investors may choose US ETFs.

To add on to what Chris has already mentioned, it could also be due to lower expense ratio. Since the US ETFs are typically of a larger fund size, they are able to charge a lower expense ratio than its counterparts on other exchanges (0.03% for VOO vs 0.07% for CSPX).

Regards,
thefrugalstudent

Chris

Chris

18 Jan 2021

Level 14Β·Owner and Writer at Tortoisemoney.com

Some possible reasons could be:

  1. More liquidity in US ETFs. Generally, stock on US exchanges are ...

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