If you are looking to diversify your portfolio, you probably would have come across IWDA and VTI. Boththese funds provide you exposure to some of the world’s largest and most widely held stocks while spreading your portfolio over several sectors.
With both ETFs being a decent choice to add to your portfolio, you may be wondering what are the key differences between these two indices, and which should you invest in?
If you have been looking for a broker to invest or trade with, you would probably have come across Saxo Market’s SaxoTraderGO and SaxoInvestor.
What are the key differences between these two platforms and which should you use to invest in?
Here’s what you need to know to help you decide:
The difference between SaxoTraderGO and SaxoInvestor
SaxoTraderGO is more geared towards actively trading on the market, while SaxoInvestor is more geared towards a buy and hold strategy.
SaxoTraderGO is an award-winning trading platform that has the interface and tools to ensure smooth and seamless trading.
On the other hand, SaxoInvestor is more tailored towards investors who are newer investors. SaxoInvestor offers a lower barrier to entry and a more simplified user interface if you’re just looking to dip your toes into investing.
The similarities between SaxoTraderGO and SaxoInvestor
SaxoTraderGO and SaxoInvestor both share the same account, hence you would not need to create 2 separate accounts if you wish to use both platforms.
Both of these platforms have demo accounts as well, these paper accounts allow you to try out both platforms using simulated money to get a feel of the platforms first.
Available financial products
SaxoTraderGO offers a wider range of financial products to use on the platform such as forex, CFDs and futures. Meanwhile, SaxoInvestor is more limited in its options, having only stocks, ETFs, mutual funds and bonds.
Here is the list of the available financial products on the two platforms.
Products found in both platforms
Over 19,000 stocks across 37 international exchanges
Over 5,000 government and corporate bonds
Over 3,000 exchange traded funds across over 30 exchanges
Over 500 mutual funds with global investors
Defensive to aggressive portfolios adjusted to your goals
Regular savings plan
Defensive to aggressive portfolios from S$100 contributions per month
And here is the list of financial products only available on SaxoTraderGO:
Products only found on SaxoTraderGO
182 major, minor, and exotic FX pairs
Over 9,000 on stocks, indices, forex, commodities, options, or bonds
Over 200 futures across 23 exchanges internationally
Trade spot metals, corn, and Brent Crude or WTI crude oil
44 Forex vanilla options across major pairs
Over 1,200 listed options across 23 global exchanges
SaxoTraderGO comes out on top over SaxoInvestor by having a lot more products available. However, SaxoInvestor being a more beginner friendly platform, does not list the more complicated financial products which you may not touch if you’re a new investor.
This helps to keep the platform and user interface cleaner and easier to navigate with less of an information overload on the screen.
Likewise, for each platform’s functions, SaxoTraderGO has a wider selection of functions for traders while SaxoInvestor has fewer functions to not overcomplicate its platform.
While both SaxoTraderGO and SaxoInvestor allow you to buy and sell stocks, you can place different types of orders on SaxoTraderGO, such as:
Buying on margin
Shorting on margin
On SaxoInvestor, you are limited to simply buying and selling your financial product with your funds during market hours.
On the other hand, on SaxoTraderGO, you are able to buy and sell during the premarket and postmarket as well. To add to this, you are also able to use leverage and buy or shorton margin.
Pre- and post-market trading sessions allow investors to trade stocks between the hours of 4 a.m. and 9:30 a.m. during pre-market trading, and 4 p.m. to 8 p.m. for the post-market sessions.
Premarket in SGT: 4 p.m. – 9:30 pm
Postmarket in SGT: 4 a.m. – 8 p.m.
The margin is the collateral that an investor has to deposit with their broker or an exchange to cover the credit risk the holder poses for the broker or the exchange. An investor can create credit risk if they borrow cash from the broker to buy financial instruments, borrow financial instruments to sell them short, or enter into a derivative contract.
Why is this important?
If you are looking to actively take profits or enter positions before the crowd, it is crucial to be able to participate in the pre and after market hours. This will allow you to react accordingly to major catalysts that could cause shares to skyrocket, allowing you to take a position early during the run up.
Buying and selling shares on margin effectively amplifies your buying power and provides you the option of being able to profit from a downtrending market as well.
However, do take into consideration that losses on margin are similarly amplified. You may also suffer margin calls if the losses are too great and your account does not have sufficient funds.
A margin call occurs when the value of an investor’s margin account falls below the broker’s required amount. An investor’s margin account contains securities bought with borrowed money (typically a combination of the investor’s own money and money borrowed from the investor’s broker).
What about the type of orders?
Both platforms also differ in the type of orders they have. Again, SaxoTraderGO has a greater selection of orders as compared to SaxoInvestor, which only has the basic types of orders.
Here is the full list of the types of orders that both platforms have.
A stop order is an order to buy or sell a security when its price moves past a particular point, ensuring a higher probability of achieving a predetermined entry or exit price, limiting the investor’s loss, or locking in a profit.
Algorithmic trading uses a computer program that follows a defined set of instructions (an algorithm) to place a trade.
*Algo orders offer a wide variety of strategy that you can use, including: dark, iceberg, implementation shortfall, limit on close, liquidity seeking, market on close, peg, pre-market limit, TWAP, VWAP, with volume
SaxoTraderGO thus has more options for experienced traders, allowing more freedom in the style of trading, such as setting stop losses or buying in different lots. Meanwhile, SaxoInvestor only has the basic market and limit which is still sufficient for investors who are newer to the trade.
SaxoTraderGO and SaxoInvestor have the same cost structure. There are 5 different tiers that you can get depending on how much you pay each month: bronze, silver, gold, platinum and diamond.
These tiers will dictate your commission prices and other costs, with diamond being the lowest in cost and bronze being the highest in cost.
For comparison purposes, we will be looking at the fees for the bronze tier.
SaxoTraderGO has a higher barrier to entry, with a minimum deposit of S$3,000 for your initial funding, but there is no minimum deposit after that. Meanwhile, SaxoInvestor has no minimum deposit at all.
However, both platforms require you to make a minimum of S$2,000 for the initial funding of a regular savings plan!
Any funding after initial deposit
Regular savings plan
For those getting into investing, S$3,000 may be a little too steep to begin with. SaxoInvestor is thus easier and less cumbersome for those starting their investing journey as compared to SaxoTraderGO.
Incentives for higher funding
Saxo Rewards also offers Platinum and VIP accounts if you have a large amount of funds in your account. If you trade quite often, you are also able to earn points which will be used to upgrade your account to higher tiers.
Both CSPX and IWDA are funds under the iShares Core ETFs which are designed to provide you with immediate access to a diverse basket of stocks.
With both ETFs being a decent choice to diversify your portfolio, you may be wondering what are the key differences between these two indices, and which should you invest in?
Here is what you need to know to help you decide:
The difference between CSPX and IWDA
CSPX is a fund that tracks the performance of the Standard & Poor’s 500 Index (S&P 500), a benchmark made up of the biggest 500 large-cap stocks from the US. In contrast, IWDA is a fund that tracks the performance of the MSCI World Index, which includes 1560 holdings from across 23 different countries with different market caps.
The funds thus differ in the type of markets they expose you to, with the main difference between the number of countries they pull stocks from.
The similarities between CSPX and IWDA
The manager of both funds is BlackRock, one of the largest asset managers in the world. BlackRock has over $5 trillion in assets under management and offers a wide range of investment options for investors such as these two indices.
Both funds are also traded in USD on the London Stock Exchange (LSE) and are accumulating funds. This means that any dividends earned from the fund will automatically be reinvested into itself, increasing the value of your investment.
If you’re wondering what’s the difference between accumulating and distributing funds, you can view this comparison to find out more.
CSPX and IWDA are Ireland-Domiciled ETFs as well, benefitting from the US/Ireland tax treaty rate of only 15%. In contrast, if you were to invest in an ETF on the US stock market, you will have to pay a tax of 30% on dividend income as Singapore does not have a tax treaty with the US.
What’s more, you get to save on the rather hefty US estate tax as well.
As such, investing in CSPX and IWDA will be better for you compared to their US counterparts as you will save 15% from dividend income taxes.
The unit price of each ETF is the price you’ll need to pay for 1 unit.
CSPX and IWDA have vastly different unit prices, with CSPX being almost more than 5 timesmore expensive than IWDA as of 15th December 2021.
Estimated Unit Price
This makes IWDA a lot more accessible to invest in if you have a smaller amount you are able to invest in! IWDA is thus a cheaper way to diversify your portfolio if you are newer to investing.
CSPX includes US companies that fall under one of the 500 largest companies from the US that have a market capitalization of at least USD 11.8 billion.
On the other hand, IWDA includes holdings from 23 different developed countries. Here is the geographical breakdown in percentage of the shares IWDA has a stake in.
Other 14 developed countries*
*Austria, Belgium, Canada, Denmark, Finland, Hong Kong, Ireland, Israel, Italy, New Zealand, Norway, Portugal, Singapore, Spain
What does this mean for investors like you and me?
IWDA may be a better option if you are looking for a greater diversity of countries to invest in. Meanwhile, if you have a high conviction of the US market, CSPX may be a better option as all of its holdings fall in the US.
Types of stocks
CSPX contains the top 500 large cap companies from the US while IWDA contains the 1560 holdings which include both large and mid cap companies in developed countries.
A large cap company is one that has a market capitalisation of more than $10 billion.
Meanwhile, a mid cap company has a market capitalisation between $2 to $10 billion.
The market cap of a company can be determined by multiplying the stock price by the number of outstanding shares.
This is because of the indices that both ETFs track. If you’re interested in finding out more about the differences between the MSCI World Index and the S&P 500, here’s a comparison for you.
Here is a comparison between the top 5 sectors that are found in CSPX and IWDA as of 3rd December 2021.
Both funds have very similar weights, with IT being the top sector of both CSPX and IWDA with 28.9% and 23.5% respectively.
Since IT has been one of the fastest growing sectors in the past few years, the difference in the percentage of holdings in IT may skew in the favour of CSPX. This will be explored further in the difference in performance below.
Apart from a few slight differences, either one of the funds will give you a fairly balanced diversification, with a major portion of your investment in IT.
Now, let us take a look at the top 5 holdings of each of the funds.
Again, we can see that both CSPX and IWDA have very similar top holdings. The only difference is the stock allocation, with CSPX having a slightly higher allocation in these companies.
As these companies have been powerhouses in growth in the last 5-10 years, this has given CSPX a bit of an edge in growth as well.
Both funds have performed very well in the past 5 years, with CSPX having an average annual return of 17.4% while IWDA having a 13% average annual return.
If you were to purchase both funds 5 years ago, you would be up 123.7% for CSPX (more than double your initial investment). IWDA on the other hand, would have returned 82.4%.
As explained above, CSPX has outperformed IWDA by a small margin as it has a greater proportion of its holdings in the top US companies. These US companies have led the growth in the global economy, especially with major companies like Apple and Microsoft who are the biggest in the world.
However, past performance does not indicate future returns, so it will be good to do your own research first, before investing in either fund!
On top of the trading commissions you’ll need to pay to the broker, you will have to pay an expense ratio to the fund manager as well.
The expense ratio is charged by the fund manager to cover the costs of running the fund.
Based on the value of your assets in the fund, you will be charged an annual fee.
Here are the expense ratios for these 2 funds:
The expense ratio of CSPX is slightly lower than IWDA. This means that over time, you would be paying lower fees if you were to invest in CSPX as compared to IWDA.
As such, you may want to take this into consideration when deciding which to invest in!
If you are looking to actively trade using these ETFs, you may want to look at their liquidity. One of the indicators you may want to look at is the ETF’s average trading volume.
Choose CSPX if you are confident in the US economy.
CSPX tracks the S&P 500 which has historically been one of the best performing indices. Tracking the very best companies in the US, you are theoretically buying into the US economy as a whole.
CSPX has survived and eventually climbed to all-time highs after every major crash in the past decade. As such, investing in CSPX is a rather safe way of buying into an already diversified portfolio.
If you are looking for flat numbers, CSPX also just outperforms IWDA in its average annual returns. With a higher concentration in the US market, as the global economy continues to be led by the US’s economic growth, CSPX will continue to outperform IWDA in the long run.
Despite this, you may want to take note that CSPX is still very concentrated in just the US.
Choose IWDA if you want a more diversified portfolio across multiple countries.
IWDA has more than 3 times the amount of holdings than CSPX and is diversified across 23 different developed countries. Even though it may still have the majority of its holdings in the US (68.32%), it is still more diversified than CSPX which is limited to only the US.
Despite not performing as well as CSPX, IWDA has also similarly climbed to all time highs after major crashes. An average annual return of 13% is still a healthy amount for a long term investment.
IWDA is also more insulated against a major crash in the US stock market as it still has over 30% of its holdings held in other countries. This makes IWDA a relatively safer investment if you are slightly more risk averse.
In the event that another country outperforms the US, you will still be able to be exposed to it, as compared to CSPX which is solely concentrated in the US!
Both funds allow you to purchase into a diversified portfolio that can benefit from the growth in the global economy.
The main considerations you should have include:
How confident you are in the US market
How diversified you want to be outside of the US market