No More Vanguard: Why I Started Buying Another ETF

guys it finally happened I purchased the new ETF something I haven't done in a very long time over the past few years my wife and I only invested into a single ETF the Vanguard futsi o world first in its Distributing version and then later the accumulating version due to the latter being more tax efficient it remains an excellent choice that's easy to recommend for anyone that wants to build a globally Diversified portfolio containing thousands of stocks via a single lowcost ETF now due to my recent exit from peer Landing I had a big pile of cash to invest all at once so I finally ended up pulling the trigger on a new world ETF that had been on my radar for a while in this video I'll tell you exactly which one I went with my reasoning for this decision the best way to buy it to get the lowest possible spread and fees and if this is going to change anything about my investment strategy going forward and yes I do feel like a bit of a hypocrite after saying that I was going to wait until the end of the year before looking at similar ETFs with lower fees compared to Vanguard in a video a bit over a month ago but oh well I'm only human I am far from perfect and sometimes plans change all right I'm not going to make you wait any longer the ETF I started buying in July is the accumulating Invesco fi o World here are the five reasons why I finally decided to start buying it instead of the Vanguard footsie o for now reason number one is clearly the difference in fees with a total expense ratio of 0. 15% per year its internal fund fees are 32% lower compared to vanguard's tr of 0. 22% per year and yes just looking at these fees in actual numbers the difference is only 0.

07% per year which amounts to70 cents for a € 1,000 portfolio €7 for €10,000 and €70 per year for portfolio size of €100,000 so it's definitely not a dramatic difference especially when considering we're expecting a long-term average return of 7% per year from a globally Diversified ETF by the way the actual average yearly returns my wife and I have been getting using our simple ETF investing strategy since 2017 are about 11% per year but I prefer being a bit more conservative in my long-term expectations which brings me to reason number two the Invesco fi o also had a significantly better tracking difference compared to Vanguard in its first year the tracking difference shows how close an ETF is tracking the performance of the underlying index it's trying to replicate in this case the footy o world according to invesco's homepage the ETF even managed to perform 0. 36% better compared to the underlying index from June 2023 to June 2024 no idea who did this incorrect calculation here on the right by the way while the Vanguard FY oal quote unquote only managed to Beat It underlying index by 0. 01% over that same period we can also see this performance difference of around 0.

3% when comparing the two using just ETF or the Germans side fonts web as a second source so far that's four times the difference you would expect when just looking at the 0. 07% difference in yearly fees and yes I'm aware that one year is a short period of time but it's still looking promising so far since Invesco is a well-known experienced investment management company with over $1. 4 trillion in assets under management and a great track record I have have no doubt they'll do a good job in this regard over the long run before we move on you can find my links to the best Locust brokers in Europe for ETFs Down Below in the description which is a great way to support me if you'd like to and don't forget to subscribe if you haven't yet this brings me to reason number three the ETF is covering the same broad-based index I was already investing in the vanguard's ETF so it's perfectly in line with my simple 1 ETF investment strategy the footy o world is a massive index that covers close to 4,300 stocks from all over the world not only from developed markets but also emerging markets in fact the bottom 5% of the index will be classified as small cap Stocks by MSI so you're getting a bit of exposure to smaller companies as well the reason I invest this way is because I like to keep things as simple as possible I'm aware that I can't predict the future and I never want to ask myself in a decade or more why I excluded companies from Emerging Markets like India for example which could have a very promising future there's just no way of knowing ahead of time which country stocks are going to perform best going forward so prefer not worrying about it by simply buying them all waited by the respective Market a single ETF ensuring I captur the performance of the global market as a whole reason number four the etf's fund size is now large enough to be safe from Liquidation at around 382 million currently and the spread so the difference between buying and selling prices has also become better and better with the past couple of months for example right now on a Wednesday at 1:48 p.

m. Central European Time on the gex exchange the Vanguard fot o has a spread of 0. 032% while inesco ETF spread is not that much higher at 0.

49% Vanguard still wins this round due to its larger trading volume but in vasco's offering has been getting a lot closer by the way just a quick reminder that no matter which European broker you're using you should try to place your order at the time when the largest public exchanges are open so between 9 to 17:30 cental European Time on workday that's because spreads tend to increase significantly outside of this time frame which brings me to reason number five why I pick this ETF I'm happy to support fund providers like Invesco that try to push ETF fees lower in Europe and I think it makes sense to invest my future savings wherever I feel and being treated best at the time right now I feel that's the case with invesco's ETF over the past 2 years I've been patiently waiting for Vanguard to react in some way to what their competition has been doing but have been surprisingly quiet and non-reactive so far considering they almost revolutionized the European ETF Market 5 to 10 years ago when they undercut their competition in fees for different indexes and investment strategies this is a bit surprising to me the last time the Vanguard f o saw a cut of its expense ratio was almost 5 years ago and even then they only reduced it by 0. 0 3% one thing we need to understand as investors is that fund providers have fairly incentive to change the fees of their existing ETFs especially if they're already as massive as the one by Vanguard with 12 billion in assets under management that's because they know very well that investors are unlikely to sell their existing shares to move their money to another ETF simply due to lower ongoing costs not only because it's inconvenient to do but most importantly for tax Reasons I'm also not planning on selling any existing shares of mine that are in profit simply because another fund is offering slightly lower fees at the moment that's because the taxes I will be forced to pay by realizing these profits already now instead of later on in retirement when I actually need the money would far outweigh any small difference in yearly fees as a result I always make sure that whichever ETF I end up buying is in line with my Global investing strategy and then I'm willing to hold it longterm ideally forever you can see this in the ETF portfolio I Shar with my wife where we're still holding on to shares of a Distributing XT trackers MSA World ETF which we purchased back in 2017 to 2018 after all these are currently up 82% plus paid out dividends since then okay since we're talking about fees I have to mention amundi recently launched Prime Old Country World ETF as well since it comes with an even lower total expense ratio of only 0. 07% per year after only being available as a Distributing ETF since February amundi even launched an accumulating version recently so why didn't I pick that one instead excellent question here's why I decided against it first amundi has a poor track record when it comes to Simply leaving its funds untouched what do I mean by this if you search on Reddit or other investment forums you'll find countless reports from investors that had their ETF merged with another one or it was suddenly changed to an ESG version sometimes combined with an increase in fees or to a different index they initially had no intention of investing in there were also plenty of cases where amundi suddenly changed its fund domicile for one of its ETFs for example from Luxembourg to Ireland that's one of the worst things that can happen to you as an investor since that is a taxable event in most countries like Germany and Austria due to it being counted as if you had sold your entire investment forcing you to fully tax your unrealized profits up to that point in short in my opinion amundi has not had a good track record in recent years and there's a chance they'll be inclined to somehow change their Prime Old Country World ETF as well further down the line perhaps to some ESG index in order to collect more brownie points with the EU or some other reason of course this is pure speculation on my part and I hope that never happens but I still thought you should know that other investors have been burned after choosing one of their ETFs in the past second the index that's being replicated is comparatively smaller the fotsy O World used by Invesco and Vanguard contains a 22.

7% larger number of stocks 4,291 compared to 3,497 stocks in the solactive GBS Global markets index used by the amundi prime all country world as of July 15th amundi also physically holds a significantly smaller number of stocks in its ETF only 1,788 compared to Invesco 2,648 companies I expect both of these to get closer to the number of Holdings in the index over time but it does seem as though Invesco is adding a larger amount of stocks on a monthly basis last but not least there's a personal reason why I'm picking invesco's ETF which relates to how ETFs are taxed in Austria if you're not a resident in Austria this part is completely irrelevant for you based on its first Austrian tax report which came out a few days ago and other physical Invesco ETFs none of which had negative surprises in the past it looks like invesco's fund will be just as tax efficient as vanguards ETFs meanwhile the same may not be true for amundi looking at a similar ETF the amundi prime Global by the way in case in case you're interested in how ETFs are taxed across 22 different European countries including Austria make sure you check out this recent video of mine okay now let's finally see how this is going to impact my investment strategy going forward and what I've done so far first of all I want to reiterate that in my opinion the Vanguard fozi old is still one of the best passive lowcost ETFs out there and I have zero issues recommending it to anyone looking to invest long term whether that's a close family member or any of you guys I'm not planning on selling any shares and neither should you simply due to slightly lower fees in Invesco especially if they're in profit that's because you would then be forced to fully tax those profits already which is likely to far offset any difference in fees and it's always possible Vanguard is going to react by lowering its fees as well in which case you would definitely regret that decision there is also no need to switch to Invesco FY old ETF if you're perfectly happy with vanguard's fund perhaps partly due to its upsides like the larger number of Holdings significantly bigger fund size and lower spreads due to much higher volume on exchanges you may also want to keep things as simple as possible by sticking with the single ETF in your brokerage account that's a valid point I totally get and support I simply want to be honest with all of you guys about what I'm doing and the reasoning why so starting in August my wife and I will be buying the accumulating Invesco foi o instead of vanguards farmed on a monthly basis I already changed my recurring monthly 1,000 investment on interactive brokers to it you can find Invesco ETF using the ticker FW and select in bbme as the exchange to buy it in Euros the upside of buying it as a recurring investment instead of a direct order is that it guarantees you pay the lowest possible I fees no matter what primary exchange the ETF is listed on meaning 0. 05% of the trading amount with a minimum of €1. 25 using the tiered pricing model on trade Republic I also changed my commission free monthly recurring investment of €500 to invest go accumulating fi oldf here you can find it using the tier fwi and using some of the money I got back from Peter ping already bought 1,000 worth of the ETF manually on trade Republic as well as around € 6,800 on the austan broker flat tax where can currently be purchased Commission free either via a saving plan or when you place an order of €1,000 or more using one of these exchanges just like with other ETFs make sure you place your order at a time when the largest public exchanges are open so from 9: to 17:30 Central European Time on weekdays that way you get the lowest possible spread otherwise make sure you set a limit order for a specific price this is irrelevant for recurring Investments by the way as those are always executed during regular Market hours all right there you have it after several years of only buying vanguards ETF my wife and I will now be Invesco accumulating footsy o world at least until Vanguard decides to finally match or perhaps even beat its 32% lower fees of 0.