New VG ETFs

[FinanceDude]

FD, I'm just busting your chops. I know you are one of the good guy FA's, right? My comments are addressed towards the lumpen slums of FA's that sell load funds inside variable annuities inside IRAs.

Like the lumpen slums reference.........

SPY still has an ER that is 50% higher than VG's VOO. You'll only save $30 a year on a $100,000 position. And right now there is only a penny bid-ask spread (0.02%), and enough bid/ask size to handle at least $80,000 in one trade without moving the market. If I was in the market for some SP500 ETF, I would probably buy VOO. But I wouldn't worry about selling and paying cap gains on SPY to save a few bucks a year in expense ratio.

A little humor from the dark side. I was at an FA meeting in Chicago a few years ago. They had some guy talk as filler before Nick Murray was scheduled to speak. He talked about how low the ER ratios were at VG. I remember his quote clearly:

"Why of course their ER are low, they are index funds, it's not like their managers DO ANYTHING"!!!!

 

[copyright1997reloaded]

SPY still has an ER that is 50% higher than VG's VOO. You'll only save $30 a year on a $100,000 position. And right now there is only a penny bid-ask spread (0.02%), and enough bid/ask size to handle at least $80,000 in one trade without moving the market. If I was in the market for some SP500 ETF, I would probably buy VOO. But I wouldn't worry about selling and paying cap gains on SPY to save a few bucks a year in expense ratio.

A big savings will be for those having a brokerage account at VG, they can trade free on the ETFs now. If they are buying multiple ETFs on a periodic basis that is.

I dunno if I agree with the first part of your assessment. Looking now provides a more difficult decision on the two. Looking at the two trading side by side (I'm using quote tracker), I see VOO tracking with a much smaller bid and ask size, tiny volume (compared to SPY), and sometimes higher spread (this particular capture only has a penny spread but even that is a higher percentage due to a lower stock price). Also important is the underlying market cap (under $15 million compared to $80 BILLION).

I can't comment on tracking error, but that would be an interesting analysis. I'm pretty sure some enterprising folks already have an arbitrage model set up (w/automated trading) between them.

But, maybe your right. Most people won't look at market depth or spread or underlying liquidity which shows its ugly head under 'difficult' market conditions, but will only look at the expense ratio. The good news is that all the other factors would improve as fungible money flows to a lower-cost solution. My bet is that if Vanguard can get this going (e.g. by providing liquidity) SPY will eventually be forced into reducing expenses.

 

[FinanceDude]

My bet is that if Vanguard can get this going (e.g. by providing liquidity) SPY will eventually be forced into reducing expenses.

Doubt Wall Street thinks that they need to lower it from 9 bp..........

 

[FUEGO]

I dunno if I agree with the first part of your assessment. Looking now provides a more difficult decision on the two. Looking at the two trading side by side (I'm using quote tracker), I see VOO tracking with a much smaller bid and ask size, tiny volume (compared to SPY), and sometimes higher spread (this particular capture only has a penny spread but even that is a higher percentage due to a lower stock price). Also important is the underlying market cap (under $15 million compared to $80 BILLION).

I can't comment on tracking error, but that would be an interesting analysis. I'm pretty sure some enterprising folks already have an arbitrage model set up (w/automated trading) between them.

All valid points and concerns. It would be silly to save 0.03% in ER and lose 0.5-1% to paying a premium to NAV that may not be arbitraged away as easily on VOO as SPY. Until the volume picks up.