Thank you to Emma for sponsoring this video! Don’t miss out on the Emma Sleep Early Summer Sale with up to 35% off and an additional 5% discount if you use my code PENSIONCRAFT Click the link here → www.emma-sleep.co.uk/sale/?PensionCraft&PENSIONCRAFT
Do free platforms make more money from the bid offer spread than platforms that charge a fee? Value for money can only then be judged in terms of the number of transactions you make. How an earth do you evaluate this?
@pensioncraft great video but I am seing the same withholding rate of 15% on art. 10 of the UK/LU treaty, art. 11 of the UK/IE treaty, and articles 10 of the US/IE and US/LU treaties. I am not sure where the 30% comes from.
Thank you very much for this video and all the previous. It is very helpful. You mentioned in your other videos that the majority of your portfolio is in FTSE Developed World UCITS ETF (VHVG/VEVE) denominate is in USD, what is the advantage of that denomination in USD over similar found you had before FTSE Developed World ex-U.K. Equity Index Fund (VDWXEIA) in GBP. The fee difference is 0.02%, but there is an additional one-off fee and higher transaction cost so in total accumulation versions difference is 0.06% + denomination in USD according to vanguard's 'Personal investor costs and charges information'. I'm very couriues as I hold both founds and I would like to switch to one. Many thanks in advance for your perspective.
Hi @MaciejBiernat VHVG trades in GBP. Its reporting currency is USD but that's irrelevant to us as investors. You can always check the traded currency for an ETF by going to the London Stock Exchange website and looking up the ticker e.g. www.londonstockexchange.com/stock/VHVG/vanguard/company-page shows that the fund trades in GBP. There's no additional fee involved in buying VHVG over FTSE Developed World ex-U.K. Equity Index Fund (VDWXEIA). Thanks, Ramin.
True @fcv-ew2gk although under MiFID II rules fund managers have to publish the transaction fees and it's a bit of a guestimate because it depends on lots of factors (inflows/outflows, varying market liquidity etc. which are unpredictable). Generally if you plot returns for accumulation funds (as I did at the end of the video) these are net of all fees including transaction fees, and there isn't much different between the large global equity funds. Thanks, Ramin.
Would be nice for more AT RETIREMENT videos. Fees play a big part in overall "take home" from funds. Would be great to see some good examples of implementation - e.g. x years easy access cash, longer term investments. How to use drawdown effectively. Too many vids out there explaining the options but none really go into how you would implement and manage going forward in retirement. I think it's great to get all this financial education out there to ensure folks understand what they need to do to build up their wealth pre-retirement. Please let's do more at-retirement vids.
If TER is an ongoing cost that is captured in the fund share price, why do we care about TER above the tracking difference/historic performance? And if a fund consistently outperforms its index why should I care about its TER at all? For background I use VWCE and am considering FWRG.
Ramin, excellent video again and fantastic points of interest rate differences on currency hedging! I am curious with your individual stock investments, have you had much luck using models such as DCF or valuation multiples to find positions? I'd like to know your experiences with them.
Some platforms allow you to pay their fee independent of your investments. That way you can stop it reducing the value of your fund(s) completely (assuming you don't mind paying it separately).
@@Pensioncraft Freetrade will take payment by direct debit , monthly so that it doesn’t eat into your ISA allowance - in this way you can invest the full amount.
@@Pensioncraft I do this with AJ Bell, you can request that their platform fee be taken from cash held in your dealing account rather than being taken from your funds.
Isn’t interactive investor the same? It’s a £12.99 subscription for a SIPP & it gets paid by direct debit. One other detail, ii has no extra fees for drawdown, it’s still £12.99
Thanks Ramin, I always learn something new from your channel. I hadn't thought of where my ETF is domiciled being important before. So good to learn this information. Fortunately all of my ETFs are domiciled in Ireland with the exception of 2 which are based in Luxembourg that don't pay any dividends.
Hi @user-sb6wo4vx7m that's great! Hopefully you're investing rather than actively trading but it's important to get started as soon as possible to maximise your time in the market. Thanks, Ramin.
Ramin, perhaps outwith the scope of your channel, but wondering if you would be able to do a video on home buying (i.e. higher/lower LTV vs investing what would be left over).
Hi @Duncan94 I do videos on the housing market too and I suppose in this case it's a graded version of the "Invest or Buy A House" video which I've done in the past. The distinction between Buy-To-Let and the house you live in is an important one as the house you live in has a negative carry cost (maintenance, debt servicing) whereas Buy-To-Let generates an income and has positive carry. Thanks, Ramin.
Thanks for mentioning synthetic etfs Ramin. I hold Invesco MXWS to avoid withholding tax. But the 0.18% expense ratio is a bit higher than a physical MSCI World tracker that you can get for 0.12% I have no idea if the 0.06% extra I am paying is outweighed by the tax savings to be honest 😆
Thanks for a great video. Could it be the case that some people have TER (total management charges) as low as 0.18 % . I left a company many years ago and I considered consolidating this pension (Aegon) into my vanguard SIpp however; when I checked the charge it was only 0.18% total…
Great insightful video. If you have a recurring investment in an etf, is it better to go monthly or bimonthly if the amount invested is say £300 or if bimonthly £600... fees are going to be less bimonthly but running the risk of missing out on potential gains??
Thanks, Ramin as always, what are your thoughts on leveraging QQQ and SPY. Many ETP sells 3 or 5 times leverage long SPY or QQQ. If we time it right after a crash we could gain good return?
Hi Ramin, one further question please. Is it more cost effective to have the accumulation or income version of a fund. What I mean is, is it cheaper for the institutional fund holder to reinvest the dividend payment (i assume yheyd still be charged the With holding tax,) or is it better to go income distribution fund and reinvest it ( be charged stamp duty though) Is there anything else to take into account? E.g. a spread or liquidity being better on one or the other? All things being equal if you dont wish to cash in the holding for decades is it more cist efficient to go accumulation or distribution with reinvestment of dividends please? Hope that makes sense what I'm asking?
What if the active funds outperforms the 6% assumption ? Might pay say 0.8% fee but grows by 10%, still better off that paying less fees and growing by 6% ? Welcome your thoughts on this.
Hi @simonwl I don't think so. But I have been told that my voice was handy for putting someone's baby to sleep which is an added bonus if you have littlies. Thanks, Ramin.
I'm new to trading, and I've lost a good sum trying out strategies I found in online tutorials. I would sincerely appreciate any recommendations you have.
Hi @Harry-er7gu I suggest you (a) have a long-term investment mindset (b) trade as infrequently as possible (c) don't look at your investments more than once a month and (d) let compounding do its thing over many years. Short-term investment is like betting on the flip of a coin. The only people that make money consistently with this approach are the snake-oil salespeople who sell the idea and courses (FX trading etc.). Thanks, Ramin.
Don't want to name and shame, but this is one of the the reasons I sold all my active managed funds and bought 1 x all world fund last month. Needless to say the broker was not happy. The hoops I had to jump threw were redicuoiis . 3 weeks later and I am still waiting for my managed platform to reflect my wishes. Be careful who you get in bed with.
What he means is the lost amount due to fees, compared to without fees. That difference is non linear and scales over time when annualised, "compound" might not be the best way to put it, but that is what he meant.
If you pay a fee of $1, then you've lost $1 that could have gone on to grow exponentially. Fees may not compound in a literal sense, but mathematically the effect is the same.
Fees do compound. You may have invested £1000 & have a total fee of say 1%, that's platform charge and total fund charge together for example. So first year fees are £10. And let's say in 5 yrs time your £1000 is now worth £1600. Now your total fees @1% are £16 a year. So they've increased by 60%. As you see percentage fees go up as your investments grow, they compound the same as the returns compound
Thank you to Emma for sponsoring this video! Don’t miss out on the Emma Sleep Early Summer Sale with up to 35% off and an additional 5% discount if you use my code PENSIONCRAFT Click the link here → www.emma-sleep.co.uk/sale/?PensionCraft&PENSIONCRAFT
It says the code isn't valid when you click the link.
Thank you, real currency hedging costs were always a bit of a mystery to me.
Do free platforms make more money from the bid offer spread than platforms that charge a fee? Value for money can only then be judged in terms of the number of transactions you make. How an earth do you evaluate this?
Excellent video - people often forget or don't realise that fees compound as well!
Thank you @MadderPrinciple, so true!
Great video. I had a Luxembourg fund which I switched to Ireland. It's surprising how small percentages make such a big difference.
I agree @shellyperera2010 I'm always surprised by how large the compounded difference in fees can be. Thanks, Ramin
@pensioncraft great video but I am seing the same withholding rate of 15% on art. 10 of the UK/LU treaty, art. 11 of the UK/IE treaty, and articles 10 of the US/IE and US/LU treaties. I am not sure where the 30% comes from.
Yet another reason to go the index route.
True @johnristheanswer! Thanks, Ramin.
What about paying for performance? Is that worth it? When in retirement with more bond funds and more diversity.
Thank you very much for this video and all the previous. It is very helpful. You mentioned in your other videos that the majority of your portfolio is in FTSE Developed World UCITS ETF (VHVG/VEVE) denominate is in USD, what is the advantage of that denomination in USD over similar found you had before FTSE Developed World ex-U.K. Equity Index Fund (VDWXEIA) in GBP. The fee difference is 0.02%, but there is an additional one-off fee and higher transaction cost so in total accumulation versions difference is 0.06% + denomination in USD according to vanguard's 'Personal investor costs and charges information'. I'm very couriues as I hold both founds and I would like to switch to one. Many thanks in advance for your perspective.
Hi @MaciejBiernat VHVG trades in GBP. Its reporting currency is USD but that's irrelevant to us as investors. You can always check the traded currency for an ETF by going to the London Stock Exchange website and looking up the ticker e.g. www.londonstockexchange.com/stock/VHVG/vanguard/company-page shows that the fund trades in GBP. There's no additional fee involved in buying VHVG over FTSE Developed World ex-U.K. Equity Index Fund (VDWXEIA). Thanks, Ramin.
@@Pensioncraft What about the bid offer spreads on etfs as opposed to index funds
What about transactions costs within a fund? Depending on which index an ETF tracks, this can be significant.
True @fcv-ew2gk although under MiFID II rules fund managers have to publish the transaction fees and it's a bit of a guestimate because it depends on lots of factors (inflows/outflows, varying market liquidity etc. which are unpredictable). Generally if you plot returns for accumulation funds (as I did at the end of the video) these are net of all fees including transaction fees, and there isn't much different between the large global equity funds. Thanks, Ramin.
Would be nice for more AT RETIREMENT videos. Fees play a big part in overall "take home" from funds. Would be great to see some good examples of implementation - e.g. x years easy access cash, longer term investments. How to use drawdown effectively. Too many vids out there explaining the options but none really go into how you would implement and manage going forward in retirement. I think it's great to get all this financial education out there to ensure folks understand what they need to do to build up their wealth pre-retirement. Please let's do more at-retirement vids.
If TER is an ongoing cost that is captured in the fund share price, why do we care about TER above the tracking difference/historic performance? And if a fund consistently outperforms its index why should I care about its TER at all? For background I use VWCE and am considering FWRG.
Brilliant, thanks Ramin!
Glad you enjoyed it @rafaelf6994
Sincerely amazing video. The level to which you take this analysis is amazing. Thank you !
Thank you! @goodq that is very generous of you. Ramin
Ramin, excellent video again and fantastic points of interest rate differences on currency hedging! I am curious with your individual stock investments, have you had much luck using models such as DCF or valuation multiples to find positions? I'd like to know your experiences with them.
Some platforms allow you to pay their fee independent of your investments. That way you can stop it reducing the value of your fund(s) completely (assuming you don't mind paying it separately).
Hi @mthw which platforms were you thinking of? I haven't seen this in the UK. Thanks, Ramin.
@@Pensioncraft
Freetrade will take payment by direct debit , monthly so that it doesn’t eat into your ISA allowance - in this way you can invest the full amount.
@@Pensioncraft I do this with AJ Bell, you can request that their platform fee be taken from cash held in your dealing account rather than being taken from your funds.
@Pensioncraft Vanguard allows it too (direct debit) so that it doesn’t eat ISA allowance
Isn’t interactive investor the same? It’s a £12.99 subscription for a SIPP & it gets paid by direct debit. One other detail, ii has no extra fees for drawdown, it’s still £12.99
Thanks Ramin, I always learn something new from your channel. I hadn't thought of where my ETF is domiciled being important before. So good to learn this information. Fortunately all of my ETFs are domiciled in Ireland with the exception of 2 which are based in Luxembourg that don't pay any dividends.
My pleasure @MarkCW
Your video was exactly what I needed to hear to overcome my fears and start trading. Thank you for the motivation!
Hi @user-sb6wo4vx7m that's great! Hopefully you're investing rather than actively trading but it's important to get started as soon as possible to maximise your time in the market. Thanks, Ramin.
Thank you Ramin, a gem of an episode!
Thanks so much @yordanpavlov7973
Ramin, perhaps outwith the scope of your channel, but wondering if you would be able to do a video on home buying (i.e. higher/lower LTV vs investing what would be left over).
Hi @Duncan94 I do videos on the housing market too and I suppose in this case it's a graded version of the "Invest or Buy A House" video which I've done in the past. The distinction between Buy-To-Let and the house you live in is an important one as the house you live in has a negative carry cost (maintenance, debt servicing) whereas Buy-To-Let generates an income and has positive carry. Thanks, Ramin.
Trying to minimise fees currently and had no idea about the bid offer spread…
Hi @josephhughes1498 I got burnt by that recently! I made a video about it too... Thanks, Ramin.
Very informative, I’m keeping this on my watch list
thanks so much @Dominic_Bolton
Thanks for mentioning synthetic etfs Ramin. I hold Invesco MXWS to avoid withholding tax. But the 0.18% expense ratio is a bit higher than a physical MSCI World tracker that you can get for 0.12% I have no idea if the 0.06% extra I am paying is outweighed by the tax savings to be honest 😆
Thanks for a great video. Could it be the case that some people have TER (total management charges) as low as 0.18 % . I left a company many years ago and I considered consolidating this pension (Aegon) into my vanguard SIpp however; when I checked the charge it was only 0.18% total…
Great insightful video. If you have a recurring investment in an etf, is it better to go monthly or bimonthly if the amount invested is say £300 or if bimonthly £600... fees are going to be less bimonthly but running the risk of missing out on potential gains??
How come synthetic ETFs stil pay out dividends if they don't receive them e.g. XWD1?
Thanks, Ramin as always, what are your thoughts on leveraging QQQ and SPY. Many ETP sells 3 or 5 times leverage long SPY or QQQ. If we time it right after a crash we could gain good return?
Hi Ramin, one further question please. Is it more cost effective to have the accumulation or income version of a fund.
What I mean is, is it cheaper for the institutional fund holder to reinvest the dividend payment (i assume yheyd still be charged the With holding tax,) or is it better to go income distribution fund and reinvest it ( be charged stamp duty though)
Is there anything else to take into account? E.g. a spread or liquidity being better on one or the other?
All things being equal if you dont wish to cash in the holding for decades is it more cist efficient to go accumulation or distribution with reinvestment of dividends please?
Hope that makes sense what I'm asking?
Luxembourg c.f. Ireland was a revelation! 😊
Hi Ramin. Are you sure the US withholding tax on ETF's from Luxembourg is 30%? I've read that it is now 15%. Or am I wrong? - Thanks!
What if the active funds outperforms the 6% assumption ? Might pay say 0.8% fee but grows by 10%, still better off that paying less fees and growing by 6% ? Welcome your thoughts on this.
Hi could you do a video on how to value stocks?
Entry and exit fee on the Etf or fund. That's something that should have been mentioned
Most cost effective platform?
I hope the sponsor has no impact on your video content Ramin. Well it hasn't sent me off to sleep. 😂
Hi @simonwl I don't think so. But I have been told that my voice was handy for putting someone's baby to sleep which is an added bonus if you have littlies. Thanks, Ramin.
@@PensioncraftSmallies Ramin 😅
I'm new to trading, and I've lost a good sum trying out strategies I found in online tutorials. I would sincerely appreciate any recommendations you have.
Stop trading
Hi @Harry-er7gu I suggest you (a) have a long-term investment mindset (b) trade as infrequently as possible (c) don't look at your investments more than once a month and (d) let compounding do its thing over many years. Short-term investment is like betting on the flip of a coin. The only people that make money consistently with this approach are the snake-oil salespeople who sell the idea and courses (FX trading etc.). Thanks, Ramin.
19% bid offer spread? Sounds like airport currency exchange business model...
Hi @declanmcardle, not a mistake I'll be making again! Thanks, Ramin.
Don't want to name and shame, but this is one of the the reasons I sold all my active managed funds and bought 1 x all world fund last month. Needless to say the broker was not happy. The hoops I had to jump threw were redicuoiis . 3 weeks later and I am still waiting for my managed platform to reflect my wishes. Be careful who you get in bed with.
Sounds like you no longer need a managed platform?
I was with SJP !!! Not any more
No, 1% x 25 = 25% (the lost amount of return). The fees do not "compound".
What he means is the lost amount due to fees, compared to without fees. That difference is non linear and scales over time when annualised, "compound" might not be the best way to put it, but that is what he meant.
If you pay a fee of $1, then you've lost $1 that could have gone on to grow exponentially. Fees may not compound in a literal sense, but mathematically the effect is the same.
Fees do compound. You may have invested £1000 & have a total fee of say 1%, that's platform charge and total fund charge together for example. So first year fees are £10. And let's say in 5 yrs time your £1000 is now worth £1600. Now your total fees @1% are £16 a year. So they've increased by 60%. As you see percentage fees go up as your investments grow, they compound the same as the returns compound
Fees not only compound, they work against your gains as well as *with* your losses.