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Anonymous

Posted on 02 Aug 2020

New to investment, choosing between VUAA (S&P 500) or VWRA (FTSE AW)?

Recently got my finances in check, thanks to Seedly's Framework and 50/30/20 budget guide.

As I want to invest internationally, I opened an IBKR account, sourced for Ireland-domiciled ETF to minimize costs, and narrowed down to VUAA (S&P 500) or VWRA (FTSE AW).

In comparison, VWRA (FTSE AW) provides more diversification than VUAA (S&P 500) but has higher TER (VWRA @ 0.22% vs. VUAA @ 0.07%).

Plan to DCA monthly with limited funds, not sure which factor is more important.

0 comments

5 answers

Discussion (5)

Frankie Rappaport

Frankie Rappaport

Level 16. Sage

Updated on 02 Aug 2020

Hi, You did already a very good job (cheap broker with IE domiciled fund unverse, planned asset allocation).

Since the better diversified MSCI ACWI ETFs have relatively high fees,

You could still consider instead MSCI World ETFs (accumulating) with each 0.12% TER:

Lyxor Core MSCI World (DR) UCITS ETF - Acc ISIN LU1781541179

SPDR MSCI World UCITS ETF ISIN IE00BFY0GT14

or distributing the cheapest (0.15% TER) being

SPDR MSCI World UCITS ETF ISIN IE00BFY0GT14​​​

2

Question Poster

03 Aug 2020

Thank you veyr much for providing MSCI World as alternatives. However, because of the slightly lower diversification, which is a double-edge sword depending on the financial situation, it would still require some portfolio rebalancing to "weather all storm" in a sense. For now, I am slightly leaning towards swallowing the higher TER but more whole rounded VWRA to avoid the whole "put all your eggs in one basket" situation.

Frankie Rappaport

Frankie Rappaport

03 Aug 2020

Yes, diversification is broader then, which is o.k. but there are also critics to emerging markets investing. the EM allocation minus China seems anyway rather low. Also many advisors would recommend to extend the asset allocation also to bonds/fixed income and commodities. I would disagree, particularly with an ultra longterm investing horizon.

Post

X

X_X

Level 7. Genius

Updated on 02 Aug 2020

Don't worry about the diversification aspect of VWRA. It's not as 'diversified' as you think. The United States GDP is 24.26% of the world economy (source: TheGlobalEconomy), with big MNCs around the world. Getting into the S&P 500 provides you with enough diversification. Just look at the correlation of VWRA LN vs VUAA LN. It's 0.9770.

You can get more charts of these 2 funds via the following link and make comparisons to decide which one you want to commit capital into.

Link: https://dl.orangedox.com/fund-analysis-pdfs

File Names:

VANG FTSE AW USDA (VWRA LN Equity)_updated_020820

VANG S&P500 USDA (VUAA LN Equity)_updated_020820

Via the link, I tackle the following questions:

  • How has the NAV been trending since inception?

  • How has the fund been performing quarter on quarter since inception?

  • How has the dividend been trending since inception?

  • How has the fund size been growing?

  • What are your probabilities to make/lose money?

  • What are your average (+) and (-) returns?

  • Is your fund outperforming or underperforming the benchmark? (For Actively Managed Funds)​​​

2

Question Poster

02 Aug 2020

Thank you very much for the detailed breakdown, that is so useful and easy to understand. Based on that, it seems like both VWRA and VUAA are rather similar in prospect, with the only difference currently being that VUAA is trending upwards, which is understandable due to the current global situation. So, while I am tempted to join in the ride, I am also unsure if it maintain the pace over the long-term that I have in mind.

X_X

02 Aug 2020

You are welcome. I acknowledge your concern, no one has a crystal ball of the future. Investment is all about having a systematic investment framework to calculate probabilities. That's why from the link, you can see that I use the full historical data of the funds to understand what the past have told me, so that I can have a glimpse of the future. There is no reward without risk.

Post

Hi there,

If you do take a look of the top holdings for VUAA and VWRA, they are slight similar in n...

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