Both are based on US dollars but you buy VUSA in euros.
Both contain exactly the same stocks and use the same investment methodolgy.
Yet day in and day out, the gains and losses are out of sync with each other.
I see. But the currency used to buy the ETF is really only a wrapper, isn't it? I mean the true value is in the underlying stocks...so does it really matter whether one buys the S&P 500 with euros or dollars?
@Rekhib,
Thanks for that! I finally understand. The main concern I have about buying in USD is the estate tax. Is this a legitimate concern for those with more than 60k dollars, or are there ways around it?
Buying a USD fund in USD has no benefit for a EUR based investor. Your return is always (return of the fund)+ (return on the exchange rate). If you buy a USD denominated fund in e.g. the UK in GBP, your return is (return of the fund) + (change in exchange rate). The latter is (USD/ GBP and GBP/EUR), i.e GBP parts cancel out so the change in the exchange rate is the change in USD/EUR.It seems that CSPX when bought off London SE is denominated in dollars. However, it can be bought from the Swiss exchange in USD.
The US domiciled fund has a TER of 0.05% whereas the European fund has a charge of 0.09%pa
If you're buying a fund where the exchange and the base currency are different, you're also taking a punt on your home currency not strengthening to the point where the nominal gains are eroded.
If you overlay a chart of VUSA, VOO and EURUSD, you'll note how VOO and VUSA diverge perfectly as the EUR strengthens or weakens with respect to the dollar. Hope that helps.
For the first example I used the closing values on sep 10th 2013, and the current values today, sep 9th 2014. VOO gained 18.33%, VUSA gained 16.07% and the GBP gained 2.29% on the USD. Factoring in the GBP gain to the VUSA value, it gained 18.73%, a difference of 0.4% in a year.
For the second example I used the closing values on 12th August and current values today. VOO gained 3.17%, VUSA gained 3.7% and GBP dropped to 95.68% of its initial value against the USD. Factoring in currency, VUSA dropped to 99.22% of it's initial value, a difference of 3.99% in just a month.
Buying a USD fund in USD has no benefit for a EUR based investor.
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