VUSA vs. VOO - 10 year performance comparison

Well it looks not so simple. After I looked at VOO vs. VUSD as it was suggested by @Bojack , there is hardly any difference between their prices. Probably there is a problem with the currency recalculation. Difference in market closing time can also affect closing prices (which are not NAVs) that we are looking at.

And after I was thinking about it, it started to make sense. Both funds track the same index, so more or less the same basket of stocks. If both funds would perfectly replicate the index, there would be no cash positions (all dividends are paid out immediately) and we would look at NAV without dividends reinvested, the relative price change should be exactly the same (in the same currency, USD). I mean, the ratio of fund unit prices should be a constant.

Now let’s think what in the real life is different from this idealized situation. I don’t think that funds’ composition and closing time can significantly affect price change. Cash positions are being accumulated before a distribution, and the pay out schedule is different. So one might see some deviations in short time scale around distribution dates. But in a bigger picture, the unit prices should change in a lockstep.

So I again used TradingView and looked at the evolution of the ratio VOO/VUSD. And it indeed looks rather constant during 10+ years (!) with occasional spikes up and down. So let’s say, the price change of two funds is the same.

Now the answer to the question, which fund has a better performance, becomes obvious: the one that you get more dividends from, that means you lose a smaller part from distributed dividends. We have reduced this problem to the one which I have already considered:

VOO has smaller TER and L2 withholding tax could be 15% or lower vs. 15% L1 withholding tax of VUSD. So, VOO should have a better performance. Calculating this performance is not straightforward as it was mentioned here, because you get reduced tax loss as a tax credit and so on.

Now a small note. If there is actually a tool that calculates total performance of VOO vs. VUSD, the results are most probably misleading. Such tool would rather calculate all distributions reinvested without losses for taxes (gross) or maybe calculate with for example 30% tax loss (net). The problem is that this reinvestment would be calculated with dividends already reduced for L1 withholding taxes for VUSD, but with gross dividends for VOO.

In fact the difference of performance between VOO and VUSD will be mostly determined by the effective L1 tax on dividends distributed by VOO, i.e. how much of 15% L1 withholding tax you can get back.