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I-Shares and Power Shares vs Vanguard ETF
Old 05-22-2007, 10:34 PM   #1
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I-Shares and Power Shares vs Vanguard ETF

I am in the process of changing some of my equity investments from regular mutual funds to ETF’s. The following are the ETF’s I am considering for my large cap, small cap and international allocations.

For my domestic large cap allocation I am considering the following:

Vanguard Value (VTV) expense ratio .11
Or
I-Shares Dow Jones Select Dividend (DVY), expense ratio .40

For my small cap allocation I am considering the following:

Vanguard Small Cap Value (VBR) expense ratio .11
Or
I-Shares S&P 600 Small Cap Value Index (IJS) expense ratio .25

For my International Large Cap allocation I am considering the following:

Vanguard FTSE All World Ex-US (VEU) expense ratio .25
Or
Power Shares International Achiever (PID) expense ratio .65

I tend to lean towards value. Typically I go with low cost when selecting funds everything else being equal. What I am struggling with here is whether I reasonably can expect a better return and smoother ride to justify the higher expense of going with I-Shares and Power Shares fundamental approach versus Vanguards generally accepted approach of cap weighting index. I guess I could split the difference but in the interest of simplicity I want to stick with one ETF for each allocation

At the risk of being accused of polling the audience, I would appreciate the forum’s feedback on which way I should go and why.

Thanks
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Old 05-22-2007, 11:19 PM   #2
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I too have purchased an ETF, in my case EPP. I also own Fid SE Asia. One difference is how you handle dividends. Do you want to re-invest them? If so ETFs only trade in whole unit shares so fractional shares could be a problem.

These two funds closely track but over time the share value (not including reinvested dividends) of the ETF edges ahead of the mutual fund. I just received the ETF's Report to Shareholders. The ETF includes a broad array of equities in that market. I suspect the Fidelity fund is more concentrated. Be sure to look under the hood.

One issue going forward would be liquidating the ETF investment. What I saved in costs could be consumed in transaction fees. Don't be penny wise and pound foolish.
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Old 05-23-2007, 12:12 AM   #3
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I'd say it depends how deep value you want to go. I personally like RZV for small-cap value. It is both very small, and very value-ey. But it is more pricey than the iShares at .35%.

For large-cap value, you can't go wrong with the vanguard choice. Another good option is RPV, which is again very deep value and again weighs in at .35%.

Vanguard intl choice sounds as good as any other choice to me. You can't beat the expense ratio!
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Old 05-23-2007, 12:49 AM   #4
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Quote:
Originally Posted by Hydroman View Post
I-Shares Dow Jones Select Dividend (DVY), expense ratio .40
I-Shares S&P 600 Small Cap Value Index (IJS) expense ratio .25
Power Shares International Achiever (PID) expense ratio .65
One of the reasons I went with those three ETFs was the ease of buying & reinvesting dividends. I don't know if there's any difficulty at buying Vanguard's ETFs outside of Vanguard, but Fidelity reinvests the ETF dividends for free.

I don't know how Vanguard builds their index funds but you can probably trust Gus Sauter. (He is the guy doing Vanguard's indexes still, right?) The ETFs have fairly straightforward selection criteria although at least iShares (and probably Powershares) samples rather than completely replicates the index.

I would like to believe that Vanguard has no strings attached to their lower ERs. It'd be interesting to be able to buy the Vanguard ETFs from a Fidelity brokerage account without any hassles-- but there's gotta be a catch!
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Old 05-23-2007, 01:21 AM   #5
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I would like to believe that Vanguard has no strings attached to their lower ERs. It'd be interesting to be able to buy the Vanguard ETFs from a Fidelity brokerage account without any hassles-- but there's gotta be a catch!
Actually I do intend to buy my ETF's through my Fidelity brokerage account. I am not aware of any special catches or restrictions associated with buying Vanguard ETF's versus any other "brand". I am not aware of any restrictions on free reinvestment of dividends either. Nord's, was the ability to reinvest dividends at no cost your primary selection criteria?
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Old 05-23-2007, 08:10 AM   #6
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I would like to believe that Vanguard has no strings attached to their lower ERs. It'd be interesting to be able to buy the Vanguard ETFs from a Fidelity brokerage account without any hassles-- but there's gotta be a catch!
There's no catch other than having to pay a commission. I bought some VTV and VEU for my daughters at Fido. The dividend reinvestment operates just like it does for everything else at Fido.
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Old 05-23-2007, 09:37 AM   #7
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I too have purchased an ETF, in my case EPP. I also own Fid SE Asia. One difference is how you handle dividends. Do you want to re-invest them? If so ETFs only trade in whole unit shares so fractional shares could be a problem.
I have fractional shares in all my ETFs with Fidelity and I expect many other brokerages are the same.
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