You may decide to invest in a S&P 500 ETF by Vanguard. However, you see that Vanguard offers both VUSA and VUSD!
So how exactly are these 2 ETFs different?
Table of Contents
The difference between VUSA and VUSD
VUSA and VUSD are exactly the same ETF. However, VUSA is denominated in GBP while VUSD is denominated in USD. You should have a very similar performance between either ETF when you compare them in the same currency.
Here is an in-depth comparison between these 2 ETFs:
Both ETFs track the same index
Both ETFs track the same S&P 500 index.
The S&P 500 is a stock market index that measures the performance of 500 large companies listed in the US.Source: Wikipedia
As such, both funds should have the same holdings in the same proportion.
You can find out more about investing with the S&P 500 in Singapore with my guide.
Different currency denomination
VUSD is denominated in USD, while VUSA is denominated in GBP on the London Stock Exchange (LSE).
The LSE do not have a minimum lot size. As such, you can purchase 1 unit of each ETF!
This is how both ETFs look like on Tiger Brokers.
However, VUSA can be denominated in other currencies when it is listed on other exchanges!
Besides the LSE, VUSA is listed in 4 other exchanges:
- SIX Swiss Exchange
- NYSE Euronext
- Deutsche Börse
- Borsa Italiana S.p.A.
Here are the different currencies that VUSA is denominated in based on the exchange:
|London Stock Exchange||VUSA||GBP|
|SIX Swiss Exchange||VUSA||CHF|
|Borsa Italiana S.p.A.||VUSA||EUR|
You can view all of this information on Vanguard’s S&P 500 UCITS ETF factsheet. You can view my guide to see what are the best ways to buy LSE ETFs from Singapore.
One thing you might want to note is that all S&P 500 ETFs will have their underlying assets in USD. However, the currency in which they are denominated in depends on the exchange this ETF is on.
Performance is the same
You will need to scroll down to the ‘Performance‘ tab of each page to see how these 2 ETFs have performed.
As such, when you invest in either ETF, there should not be any significant differences between both funds.
Both are distributing ETFs
VUSA and VUSD are both distributing ETFs. They will pay you a dividend every quarter.
This is different from accumulating ETFs which reinvest your dividends instead.
This is great if you wish to receive some dividend income every 3 months!
Dividends are paid in USD
Even though the ETF may be denominated in another currency, the base currency of this fund is in USD.
As such, your dividends will still be distributed in USD, even though the ETF is listed in another currency.
Since they are the same UCITS ETF, both VUSA and VUSD are Irish domiciled.
This has some implications on the taxes you’ll incur:
15% dividend withholding tax for non-resident aliens of USA
However there is a tax treaty between Ireland and US. Any dividends you receive from an Irish-domiciled ETF will only incur a 15% withholding tax!
2 layers of taxes
For any ETF, the fund manager buys the stocks based on the index they are tracking. The dividends that they distribute are collected from the stocks in their fund.
As such, there are 2 layers where you may incur some taxes:
- From stock to ETF
- From ETF to you, the investor
Both ETFs incur the tax on the first layer
For both ETFs, the dividends from the US stocks are distributed to an Irish-domiciled ETF. As such, the 15% withholding tax applies on the first layer.
No estate tax for non-Irish citizens
Even though both ETFs own stocks that are from the US, both ETFs are domiciled in Ireland.
With this fund structure, you will not incur the dreaded US estate tax if you invest with these UCITS ETFs!
This will give you significant tax savings, as none of your assets will be taxed.
However, you may still be taxed under the Irish laws if:
- Either you or your beneficiary is an Irish citizen
- You own a property in Ireland
Since VUSA and VUSD are essentially the same ETF, they will have the same expense ratio as well.
The expense ratio helps to cover some of the expenses that the fund manager incurred while managing the fund.
Both ETFs have the same expense ratio of 0.07%.
As such, the cost of investing is the same even if you invest in either ETF.
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 trading volume.
Here are the average trading volume for both ETFs listed on the LSE:
|Average Trading Volume||212,000||270,000|
VUSA has a slightly lower trading volume compared to VUSD. However, this difference in trading volume may not really make much of a difference in the end!
There are so many similarities between these 2 ETFs. So which one should you invest in?
VUSA is suitable if you live in the UK
Your base currency is in GBP if you live in the UK. As such, it may be better if you invest in VUSA instead.
This is because you do not need to exchange your GBP to another currency to start investing in this ETF!
By investing in VUSA, you will save on any currency conversion fees you may incur. Moreover, you are not subject to any fluctuations in the exchange rate!
VUSD is suitable if you live in the US
If you live in the US or other countries that have the USD as your base currency, VUSD may be the more suitable choice.
Again, you do not need to change your currency to another one. This means that:
- You do not incur any currency exchange fees
- You are not subjected to any currency fluctuations
Either ETF is suitable if your base currency is neither GBP or USD
If you live in other countries, your base currency will not be in USD or GBP. As such, you’ll still need to convert your base currency to either USD or GBP to invest in this S&P 500 ETF.
It does not really matter which currency you choose. Ultimately, both ETFs will give you very similar returns!
VUSA and VUSD are 2 different names for exactly the same ETF. In the end, the only thing you’ll need to consider between these 2 ETFs is the currency you wish to invest in!