Looking for ETF that reinvests Dividends

None of Vanguard's ETFs (in the UK or the US) reinvest dividends unfortunately. You could use a couple of Vanguard mutual funds to get that exposure - or you could buy SWDA from iShares (it's an all-world ETF but it tracks Morgan Stanley's index rather than FTSE's). The iShares option is actually cheaper than Vanguard's and it accumulates - hope that helps @patrickjd.
 
rekhib said:
None of Vanguard's ETFs (in the UK or the US) reinvest dividends unfortunately. You could use a couple of Vanguard mutual funds to get that exposure - or you could buy SWDA from iShares (it's an all-world ETF but it tracks Morgan Stanley's index rather than FTSE's). The iShares option is actually cheaper than Vanguard's and it accumulates - hope that helps @patrickjd.
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Sounds interesting. Thanks!
 
For an investor in Ireland, it might be worth noting that most of iShares' funds are Irish-domiciled. That could result in extra taxing on your investment, but I'm only learning myself.
 
My understanding is that accumulating ETFs don't reinvest the dividends for you personally (e.g. by giving you more shares), but rather they just put the dividends back into the fund as a whole. As such, I would expect accumulating ETFs to underperform distributing ETFs.
 
@He-Man I have the same understanding. They'll use the dividends to purchase more of the index.

Since the fund then owns more stocks, the value of each unit of the fund should also increase in value. I don't understand it enough to know why that would or wouldn't mean that an accumulating fund would underperform a distributing ETF.
 
whytis said:
@He-Man I have the same understanding. They'll use the dividends to purchase more of the index.

Since the fund then owns more stocks, the value of each unit of the fund should also increase in value. I don't understand it enough to know why that would or wouldn't mean that an accumulating fund would underperform a distributing ETF.
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I don't see how owning more of the index would have any impact on the price of the share. If the index rises by 5%, the share price will rise by 5% minus the TER. If the index falls by 5%, the share price will fall by 5% minus the TER.

It doesn't matter whether the fund owns 100m in assets or 1bn in assets - it tracks the index, so its share price rises or falls in lockstep with that. The only other factors are TER and tracking errors, neither of which have anything to do with dividend accumulation. It seems to me the only benefit of an accumulating ETF is a possible reduction in taxation obligations. The Boglehead wiki has on EU investing.
 
Interesting discussion! I'd like to work this out.

From what I understand, an ETF is unit fund.

When you "invest in an ETF", you're purchasing a unit in that fund.

The value of that unit can increase when dividends of the fund are re-invested, since you still own the same percentage of the fund, but the fund itself just got bigger.

However, I think ETFs are open-ended unit funds, meaning that they can "create" more units. That's where I'm not sure at all if I'm on the right track, and it could mess with my assumptions above.
 
You can find a good list here in excel that has a filter for distributing/non-distributing

deutsche-boerse.com/dbg/dispatch/de/binary/gdb_content_pool/imported_files/public_files/10_downloads/31_trading_member/10_Products_and_Functionalities/40_Xetra_Funds/ETF_ETC_ETN_Master_Data_Sheet.xls
 
whytis said:
Interesting discussion! I'd like to work this out.

From what I understand, an ETF is unit fund.

When you "invest in an ETF", you're purchasing a unit in that fund.

The value of that unit can increase when dividends of the fund are re-invested, since you still own the same percentage of the fund, but the fund itself just got bigger.

However, I think ETFs are open-ended unit funds, meaning that they can "create" more units. That's where I'm not sure at all if I'm on the right track, and it could mess with my assumptions above.
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I would be interested to hear if someone has an answer to this question.
If you purchase shares in a accumulating ETF, the underlying stocks distribute dividends which are automatically reinvested back into the fund. The fund it self tracks an indice and the value of that share rises and falls only with the indice (ignoring TER,tracking error) regardless of any distributions. So what financial benefit is an accumulating ETF over a distributing ETF? Where does the dividend money go? Surely with the exact same tracker fund which was distributing, when you sold up you would get the same gain plus you would have received dividend payments during your investment.
Admittedly it's more of a tax headache to have an distributing fund.

Incidentally Rekhibs suggestion of
iShares Core MSCI World UCITS ETF EUR (IWDA)
Seems to be one of the cheapest out there TER 0.2%

Any other suggestions?
 
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That's actually not a bad deal, and decent diversification with whole world ETF. If you were to use https://www.degiro.ie to buy the above ETF at E2 + .02% (Degiro costs) means you could buy E1000 worth of ETF at E2 + .02% = E2.20, which is 0.22% overall, plus 0.2% TER of the fund, which is 0.42% for the investment, which is much less than 1% - 1.5% quotes by many life companies.

8 year rule is the main fly in the ointment then.
 
Meant to say "iShares MSCI World EUR Hedged UCITS ETF" is another option, but TER is 0.55%. Ticker is IWDE.
 
Also these from my research....

iShares Core Japan IMI UCITS (SJPA) 0.2 TER Domiciled in Ireland, currency in dollars, YTD UP 13.06, NAV $34.19, 52 week range 28.62-35.66

iShares Core Emerging Markets IMI UCITS (EMIM) 0.25 TER Domiciled in Ireland, currency in dollars, YTD UP 3.06, NAV $24.01, 52 week range ?

iShares FTSE 100 UCITS ETF (Acc) (CSUKX) TER 0.07 Domiciled in Ireland, currency in GBP, YTD UP 4.77, NAV £91.74, 52 week range 82.18-95.99

iShares MSCI EUROPE UCITS ETF (Acc) TER 0.33 YTD 13.7% NAV 46.87 denominated in euros.

iShares Core MSCI World UCITS ETF accumulating TER 0.2% YTD 3.53% NAV 43.43 Currency in dollars

BUT FROM MY PREVIOS POST I WOULD LOVE SOMEONE TO EXPLAIN WHAT AN ACCUMULATING ETF IS. WHAT IS THE FINANCIAL BENIFIT?
 
landlord said:
I would be interested to hear if someone has an answer to this question.
If you purchase shares in a accumulating ETF, the underlying stocks distribute dividends which are automatically reinvested back into the fund. The fund it self tracks an indice and the value of that share rises and falls only with the indice (ignoring TER,tracking error) regardless of any distributions. So what financial benefit is an accumulating ETF over a distributing ETF? Where does the dividend money go? Surely with the exact same tracker fund which was distributing, when you sold up you would get the same gain plus you would have received dividend payments during your investment.
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This can be a bit confusing but I'll give it a shot...

At launch, a fund with accumulating and distributing units will be issued at the same price. However, the income received by the fund (distributions or interest on the underlying securities in the fund's portfolio) will be reinvested in further securities pro-rata to the NAV of the accumulating units and the balance will be paid out to holders of the distributing units. Over time, the accumulating units will therefore cost more than the distributing units, simply because the relevant portion of the income received by the fund has been reinvested in more securities that are attributable to the accumulating shares. In other words, while accumulating units might be more expensive than distributing units at any given point in time, the expected return on both unit classes is identical (ignoring fees and taxes).

The fact that a fund simply tracks an index doesn't change this picture. An index fund is the same as an actively managed fund in terms of its basic structure - the only difference is that the stock selection is determined by the index provider (FTSE, MCSI, etc) rather than the judgment of the portfolio manager.

So far, so clear (I hope) but things get a bit more complicated when you move on to ETFs.

Remember that passively managed ETFs are still index funds - the only difference is that an end-investor acquires shares on an exchange rather than by subscribing for shares from the fund company itself. Like all on-exchange investments this involves broker commissions and bid-offer spreads so if you were to receive dividends and reinvest the proceeds into further ETF shares there would be a certain attritional cost. With an accumulating share class (often called capitalising shares in the ETF world) an investor will avoid these costs so accumulating ETF shares will generally have higher TERs than distributing shares.

Obviously the above ignores tax, which is a further complicating factor given the different tax treatments of dividends and capital gains in different jurisdiction (not to mention our own odd taxation regime for funds).

Hope that helps.
 
Thanks Sarennco....
Is this correct?

2 ETFS. Tracking the same indice......You buy €1000 of each
A is accumulating and cost €60 per share
B is distributing an cost €50 per share

A year later when you sell, the indicie you tracked showed 0 growth.

A The accumulating fund share price increased by approximately the value of the distributions (after costs...which as you say will be slightly higher).
B the distributing fund share price stayed the same (or perhaps showed a small drop due to costs), but you did receive some dividend payments over the year.
 
Yes, that's spot on.

Ignoring the (relatively marginal) impact of costs and taxes, the return will be basically identical over such a short period - in the case of distributing shares your cash balance will be slightly higher and in the case of accumulating shares your shares will be worth slightly more. In euro terms, it's basically a wash but don't forget the compounding impact of (reinvested) income over time.
 
For an EU Accumulating ETF it can be left alone for at least 8 years, without any tax headaches!!!!
Yes the final result is a 41% tax payment (as opposed to 33%...US ETF or Investment trust), but would this not be partially offset by paying tax on dividends....as for US ETF or Investment trust at a whopping 52% rate (40 income, 8 USC and 4 PRSI).

I feel like I could just invest the whole lump into this with no currency conversion costs too.....
iShares Core MSCI World UCITS ETF (EUR) (IWDA)

and re evaluate in 8 years time!! This strategy seems effective for the lump sum investor (as in only one CGT payment in 8 years to consider), who is exposed to the higher rates of tax,PRSI and USC on dividends.
I am going to look in more detail at this fund.
 
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These are all accumulating EU ETFs on the Amsterdam stock exchange in EUROS, with the correct EURO tickers

ETFs ACCUMULATING.....

iShares Core Japan IMI UCITS (IJPA) 0.2 TER Domiciled in Ireland, currency in EUROS,

iShares Core Emerging Markets IMI UCITS (EMIM) 0.25 TER Domiciled in Ireland, currency in EUROS

iShares FTSE 100 UCITS ETF (Acc) (CUKX) TER 0.07 Domiciled in Ireland, currency in EUR

iShares MSCI EUROPE UCITS ETF (Acc) (IMAE) TER 0.33 YTD 13.7% NAV 46.87 denominated in euros.

iShares Core MSCI World UCITS ETF (EUR) (IWDA) accumulating TER 0.2% YTD 3.53% NAV 43.43 Currency in Euros.
 
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I have found a fantastic source for accumulating EU ETF trackers on the German stock exchange in euros, many of which have extremely low TERs
I emailed them to ask how I can locate accumulating ETF's on their website. and got a response back...

you can look up those in our search tool here:
http://www.boerse-frankfurt.de/en/etfs/search
And set the "Use of profits" to accumulating.

I would imagine these would be listed possibly on the Amsterdam and French stock exchanges also , however would the total expense ratio differ from one stock exchange to another? I guess probably not if the denominated currency was the same.
 
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landlord said:
I have found a fantastic source for accumulating EU ETF trackers on the German stock exchange in euros, many of which have extremely low TERs
I emailed them to ask how I can locate accumulating ETF's on their website. and got a response back...

you can look up those in our search tool here:
http://www.boerse-frankfurt.de/en/etfs/search
And set the "Use of profits" to accumulating.

I would imagine these would be listed possibly on the Amsterdam and French stock exchanges also , however would the total expense ratio is very from one stock exchange to another? I guess probably not if the denominated currency was the same.
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Why not just buy them from the German stock exchange?
 
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