Create own ETF (Alternatives to ETFs)

S

sparkdev

Registered User
Messages
41
Due to the tax reasons, I am searching for alternate options to ETFs. I am thinking of creating my own ETF of diversified portfolio of world index companies (with equal weight) using Trading212 as it allows to own fractional shares and low fees (0.15% FX fees). Anyone tried this option here? Any suggestions on this are highly appreciated.
 
You can’t own fractions of shares and it is extremely unlikely that you have sufficient funds to replicate and ETF of any significance. The fact that you think that you can……

Stick to some kind of investment trust as an alternative.
 
Thanks for your reply. Do you know why I can't own fractional shares in Trading212 platform? or Revolut? Did you use them before because I am using them now, and I found that I can buy/own fractional shares. Is there any catch I am missing, if so, kindly elaborate please.
 
How are you going to rebalance this to maintain the equal weight? There are currently 1,555 in the MSCI World Index. Amazon is trading at $3,381.83. If you want equal weight you will need $5,258,745.60 for your ETF. If you have that amount of money, there are better choices available to you...
 
Why do I need $5,258,745.60, if I can buy fractional shares? not full share of each of the companies.
 
You will get increased efficiency (ie higher return for lower risk) by diversifying ad including more shares - but any shares added above 20 or 30 does not improve the efficency of your portfolio much. Sure you could buy shares in a 100 or even 100s of companies, but that is really a bit pointless
 
I wouldn’t fully agree with that analysis - only a tiny number of stocks account for the overwhelming majority of market gains -

https://www.irishtimes.com/business...stocks-account-for-all-market-gains-1.3973200

What if your portfolio of 20 shares missed out on the small number of big winners?

Having said that, the idea of trying to administer a portfolio of 1,000 plus individual stocks would be my idea of hell.
 
Because no company sells its shares in fractions…. Read all of the information supplied by your broker and try to understand exactly what you actually own.
 
Jim2007 said:
Because no company sells its shares in fractions…. Read all of the information supplied by your broker and try to understand exactly what you actually own.
Click to expand...
You can buy fractional shares Jim through a lot of online brokers.

Trying to cover an index of 1,555 different companies through fractional shares is a lot of work though and the rebalancing of it would be near on impossible and create a lot of work regarding CGT calculations.
 
Nope you can't. Read the T&Cs what you end up with is not actually ownership of a share.
 
Jim2007 said:
Nope you can't. Read the T&Cs what you end up with is not actually ownership of a share.
Click to expand...
I'd imagine that they have unitised the share so they can divide it up. For the purpose of what the OP wants to do, some online brokers will allow fractional shares. Without boring myself with reading the t&c, I believe you in that there would be something in there about who ownership.
 
I agree that we might not be owning the shares technically by buying fractional shares, just like owning an ETF doesn't mean I own full share of each of the company in that ETF. But for the purpose of this discussion, I think it is valid to assume that one can hold fractional shares and it is relatively easy to make an investment group (pie) in trading212 with the shares we want and then instruct to autoinvest a certain amount into these groups everymonth. I would like to know if anyone has done that or what are pitfalls of my strategy except the tedious work of setting it up and quarterly re-balancing?
 
This sounds incredibly tedious, would it not be much more straightforward to put the money in an Investment Trust and achieve the same goal of diversification?
 
And since you don't own the shares you are a general creditor of the firm and since they also do instrument lending..... There is no such thing as a free lunch.
 
Jim2007 said:
And since you don't own the shares you are a general creditor of the firm and since they also do instrument lending..... There is no such thing as a free lunch.
Click to expand...
Are you even that?

I would have thought a fractional shareholder in a company actually owns some sort of instrument that’s meaningless in the context of the company.
 
Last edited:
interested21 said:
This sounds incredibly tedious, would it not be much more straightforward to put the money in an Investment Trust and achieve the same goal of diversification?
Click to expand...

I have read a bit of Investment trusts, but couldn't feel confident after knowing the cons mentioned in the below link.

Investment Trusts in Ireland Blog 159

informeddecisions.ie

Are there any investment trusts that just hold the low-cost ETFs?
 
Why’s he talking about outflows?

The whole point of an IT is that it’s a closed pool of capital that’s then listed.
 
Trading 212 has investment pies with which you can sort of replicate large cap etfs. Last I looked they were limited to around 100 shares per pie, so something like the S&P500 is out, and adding/removing companies would be manual to.
The pies do have an add only rebalance function, meaning money in goes towards rebalancing instead of selling to rebalance. This is the only real option in Ireland. If you actually rebalancing via selling, the pattern and number of trades would likely cripple anyone from the calculations required for tax and Revenue might also decide you are trading enough to be classed as a professional trader.
 
You must log in or register to reply here.
Menu
Log in
Register