Investor newbie question.

[LearnIT]

Hi,

I am an extreme newbie in investment. I stay in New Zealand so I compared many platforms in NZ to let me invest in the S&P500. I’ve narrowed it down to Superlife which offers Smartshare US500 (USF) which track is vanguard S&P500 (VOO).

On a short time frame, I found USF chart is not identical to VOO. Even the candle sticks are different. USF has a breakout (yellow highlight) but not the VOO. (Fig 1 & 2)

Qn:
1) Why are the 2 charts different? The USF is supposed to track (copy) VOO.

2) Should I do my technical analysis, Moving Averages, MACD, Stochastic, Price Action and Candle Stick analysis on VOO chart or USF chart if I buy the Superlife US500?

3) Is there any point in doing any kind of analysis on USF chart since it is copying the VOO?


4) On long time frame, it does follow the VOO but USF is lower (Fig 3).
Why is the USF always below VOO? I will lower return with USF compared to buying VOO.

I am so confused.

Please pardon if my concept on ETF is haywire.

 

[tangent314]

One is in USD the other is in NZD? Just a quick guess. So the difference may be in the currency variations.

 

[BBCWatcher]

Most probably part of the difference is due to the management fee differential. Smartshare US500 (USF) charges an annual management fee of 0.34%, and Vanguard's S&P 500 ETF (VOO) charges 0.04%. I don't know if that 0.34% is added to Vanguard's or includes Vanguard's -- probably the former -- but either way there's a management fee uplift that reduces returns.

It also looks like there's a currency conversion cost. USF is quoted/traded in New Zealand dollars from what I can tell, and VOO is obviously quoted/traded in U.S. dollars. The fund manager thus has to convert from NZD to USD for purchases and then from USD to NZD for redemptions. That's not free, although presumably the fund manager gets a great conversion rate -- better than you'd get an airport currency exchange booth, for sure.

You're also going to have New Zealand exchange trading commissions, presumably, and those commissions/fees should be properly factored into total returns. Vanguard lets you purchase and sell VOO directly from Vanguard without any commissions (if you're in the U.S. anyway), so it's reasonable/fair for Vanguard to report total returns data with zero commissions/fees assumed.

Anyway, to net it out, you're paying for the convenience of having a New Zealand dollar denominated, locally listed, U.S. S&P stock index fund. Maybe that convenience is worth the cost, maybe not. I don't have enough information in front of me to figure that out, and it'll probably depend in part on New Zealand tax-related considerations.

 

[LearnIT]

Thank you both for shedding some light on the difference in the chart! i learn something today.

I am learning technical analysis to time my entry/exit/stop-loss/target buy price.

I know USF track VOO, but since both chart is not identical:


Does it make sense to do technical analysis on VOO chart when im actually buying USF ?

 

[Maeda_Toshiie]

Thank you both for shedding some light on the difference in the chart! i learn something today.

I am learning technical analysis to time my entry/exit/stop-loss/target buy price.

I know USF track VOO, but since both chart is not identical:


Does it make sense to do technical analysis on VOO chart when im actually buying USF ?

Wait, do you intend to do short term trading of the S&P500, or are you intending to buy for the long term? If the former, you should do with whatever counter you are actually buying (and I do find it a little strange to do short term trading with some broad market index like the S&P500). If the latter, why are you using technical analysis?

The Smartshare US500 holds VOO, but it is priced in NZ dollars while the VOO is priced in USD (and its holdings are all priced in USD). You have to figure in the exchange rate. The NZ fund also has a far higher expense ratio (and I won't be surprised if it is on top of the expense incurred within the VOO. The NZ fund seems to have a ~0.59% gross yield, which is different from VOO's 1.74%. In other words, the NZ fund is probably not paying out everything but instead reinvesting some of the dividends collected from VOO to result in capital gains.

Finally, unless buying UK listed shares has bad tax implications for NZers, buying the VUSD from London may be a better choice.

 

[BBCWatcher]

Wait, do you intend to do short term trading of the S&P500, or are you intending to buy for the long term? If the former, you should do with whatever counter you are actually buying (and I do find it a little strange to do short term trading with some broad market index like the S&P500). If the latter, why are you using technical analysis?

I'm with Maeda on this one. I would strongly discourage you from trying to time the market, especially (but not only) as an "extreme newbie." That's just gambling, really, and horses are more interesting to look at than S&P 500 charts. You can also do some really sophisticated "technical analysis" of horses.

If you insist on gambling, then you'd probably go do it using S&P 500 options, and as a newbie you'd start with a simple straddle or strangle. You'd also tune into CNBC's "Options Action" program, which attracts something like 38 viewers on a good day (almost not exaggerating) as those gamblers discuss gambling. And then you should quickly figure out that options trading is indeed gambling, and you really ought not do it. There are a very few people who gamble responsibly, meaning they can afford it and only do so occasionally as a form of entertainment. But did I mention the horses? You can have a fabulous afternoon of entertainment once a month wagering $20 total ($2/race for a 10 race card) on the ponies, plus $5 for a hamburger.

 

[LearnIT]

I'm with Maeda on this one. I would strongly discourage you from trying to time the market, especially (but not only) as an "extreme newbie." That's just gambling, really, and horses are more interesting to look at than S&P 500 charts. You can also do some really sophisticated "technical analysis" of horses.

If you insist on gambling, then you'd probably go do it using S&P 500 options, and as a newbie you'd start with a simple straddle or strangle. You'd also tune into CNBC's "Options Action" program, which attracts something like 38 viewers on a good day (almost not exaggerating) as those gamblers discuss gambling. And then you should quickly figure out that options trading is indeed gambling, and you really ought not do it. There are a very few people who gamble responsibly, meaning they can afford it and only do so occasionally as a form of entertainment. But did I mention the horses? You can have a fabulous afternoon of entertainment once a month wagering $20 total ($2/race for a 10 race card) on the ponies, plus $5 for a hamburger.

Hi BBCwatcher, thank you for yr advice I think ill invest in SP500 and forget it. If i want to learn technical analysis, ill do it in a simulator.

 

[LearnIT]

Wait, do you intend to do short term trading of the S&P500, or are you intending to buy for the long term? If the former, you should do with whatever counter you are actually buying (and I do find it a little strange to do short term trading with some broad market index like the S&P500). If the latter, why are you using technical analysis?

The Smartshare US500 holds VOO, but it is priced in NZ dollars while the VOO is priced in USD (and its holdings are all priced in USD). You have to figure in the exchange rate. The NZ fund also has a far higher expense ratio (and I won't be surprised if it is on top of the expense incurred within the VOO. The NZ fund seems to have a ~0.59% gross yield, which is different from VOO's 1.74%. In other words, the NZ fund is probably not paying out everything but instead reinvesting some of the dividends collected from VOO to result in capital gains.

Finally, unless buying UK listed shares has bad tax implications for NZers, buying the VUSD from London may be a better choice.

Hi, thanks for yr advice and showing me what i do does not make sense.