After reading a lot of posts on this forum, I noticed there seems be a lot of mention, talk and even hype about ETFs’ Total Expense Ratios. Vanguard ETFs in particular seem to benefit from this focus, due to their low expensive ratios. Sometimes I even can’t help but think it all reads a bit like stealth marketing for them (which I wouldn’t allege or insinuate that to be the case).
Now I can somehow get the advantages of lower costs vs. higher costs, and also the tax advantages of investing in U.S. securities through U.S.-based funds, etc… I can also imagine possible reasons why different ETFs do fare slightly differently trying to track the same index.
But is is just me, or do actual performance and/or tracking error of funds seem to pale a bit in the discussion (compared to the focus on TER)?
Case in point: Let’s go to justetf and take what should be one of the more popular indices tracked by ETFs, the S&P 500: 17 ETFs listed for Swiss individual investors, with TER ranging from 0.05% to 0.22%. The Vanguard product (IE00B3XXRP09) has the second lowest TER with 0.07%. Yet performance-wise, if we sort the rows by returns over periods…
- over 6 months, the Vanguard ETF ends up on a (shared) 15th place, as one of the “worst” funds.
- over 1 year: same thing
- over 3 year: the Vanguard comes up in the very last position
- even over 5 years, it fared below average (12th)
Over all periods, it is bested by the UBS accumulating ETF (IE00B4JY5R22), which with 0.22% has more than three times the Vanguard’s given TER.