VUSD vs SPY – 8 Differences Between Them

VUSD vs SPY

There are many different S&P 500 ETFs for you to choose from.

So how exactly does the UCITS ETF (VUSD) differ from the US-listed SPY?

The difference between VUSD and SPY

VUSD is listed on the London Stock Exchange while SPY is listed on the NYSE. Both of them track the same S&P 500 index. They mainly differ in terms of the exchange they are listed on, their expense ratio and the taxes levied.

Here’s an in-depth comparison between these 2 ETFs:

Index tracked

Both ETFs track the 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, they should have almost the same performance in the stock market.

This is because both funds will have the same holdings in the same proportion.

SP 500 Top 10 Holdings

You can find out more about investing with the S&P 500 in Singapore with my guide.

The fund managers are different

VUSD is managed by Vanguard, while SPY is managed by State Street Global Advisors (SSGA).

VUSD was started in May 2012, while SPY started in Jan 1993. As such, SPY has a much larger assets under management (AUM).

VUSDSPY
AUM27,624 million332,446 million

They are listed on different exchanges

VUSD is listed on the London Stock Exchange (LSE), while SPY is listed on the NYSE. This does have certain implications on how you can buy these ETFs.

Both have the same minimum unit number of 1

The minimum units that you can purchase on the LSE and NYSE is 1. Compared to the SGX which has a minimum lot size of 10 units, this makes it really accessible for you to purchase either ETF.

Not all brokers allow you to trade on both exchanges

Some brokers do not allow you to trade on the London Stock Exchange. In contrast, the NYSE is being offered by many brokers.

BrokerLSENYSE
FSMOne
Interactive Brokers
Saxo Markets
Standard Chartered
Maybank Kim Eng
KGI Securities
OCBC Securities
Tiger Brokers
POEMS
TD Ameritrade
DBS Vickers

To invest in the LSE, you may need to find a specific broker to do so. You can view my guide to see what are the best ways to buy LSE ETFs from Singapore.

You can also view my comparison between Tiger Brokers and FSMOne to see which broker is better for you.

Commissions charged may be different

When you are trading in different exchanges, you may incur different costs. For example, here are some of the commissions when you trade in both markets:

BrokerUSLSE
Interactive Brokers1% of trade value
Minimum USD 0.35
0.05% * trade value
Minimum GBP 1
OCBC Securities0.3% of trade value
Minimum USD20
0.7% of trade value
Minimum GBP55

You can also consider Tiger Brokers which offers you a minimum of USD1.99/trade.

As such, you should try to find the lowest brokerage fees so that they won’t eat into your returns!

Unit Price

The unit price of each ETF is the price you’ll need to pay for 1 unit. Both VUSD and SPY have rather different unit prices.

VUSDSPY
Estimated Unit Prices$70 USD$370 USD

If you only have a small sum of less than $300 USD to invest, VUSD may be a better option for you.

This is because you are still able to purchase some units of VUSD with your small investment amount.

Dividend withholding taxes

VUSD is domiciled in Ireland while SPY is domiciled in the US. You will incur a lower dividend withholding tax when you invest in Irish-domiciled ETFs.

VUSDSPY
Dividend Withholding Tax 15%30%

If you are a non-resident alien to the US, you will incur the 30% dividend withholding tax.

However there is a tax treaty between Ireland and US. Any dividends issued from US stocks 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:

  1. From stock to ETF
  2. From ETF to you, the investor
Dividend Withholding Tax Layers

VUSD incurs the tax on the first layer

For VUSD, the dividends from the US stocks are distributed to an Irish-domiciled ETF. As such, the 15% withholding tax applies on the first layer.

VUSD Dividend Withholding Tax

SPY incurs the tax on the second layer

When the stock distributes its dividend to the SPY ETF, no tax is incurred. This is because it is from a US stock to a US-domiciled ETF.

US Stocks and US Domiciled ETF Dividend Withholding

However when the dividends are distributed to you, they will incur the 30% tax. This is because you are a non-resident alien.

SPY Withholding Tax

If you wish to track your dividends with taxes accounted for, you can consider trying out StocksCafe’s platform.

Dividends

Both VUSD and SPY are distributing ETFs. This means that they will issue a dividend to you each quarter.

However, you would still need to factor in the withholding tax! The taxes will eat into your returns, especially if you invest in SPY.

You can read my comparison between accumulating and distributing ETFs to see how they are different.

Estate tax

Another significant cost of investing in US-related assets is the estate tax. This can go from 18% all the way to 26%!

An estate tax is a tax on the right for you to transfer your assets after you have passed on.

Since SPY is domiciled in the US, it will be included in your taxable estate.

However, VUSD is domiciled in Ireland. Even though they own US stocks, you will not incur this estate tax!

If you wish to leave behind a legacy for your loved ones, VUSD may be the more ideal ETF to invest in.

Expense ratio

On top of the trading commissions you’ll need to pay the broker, you will have to pay an expense ratio to the fund manager as well.

This helps to cover some of the expenses that the fund manager incurred while managing the fund.

This expense ratio is usually deducted at the end of each year.

Here are the expense ratios for these 2 funds:

VUSDSPY
Expense Ratio0.07%0.0945%

Interestingly, SPY has a higher expense ratio compared to VUSD, even though it has a larger AUM!

Based on the costs and taxes incurred, VUSD seems to be the more attractive ETF to invest in.

Liquidity

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.

VUSDSPY
Average Trading Volume72,00071,315,000

SPY has a much higher trading volume than VUSD due to it being listed on the NYSE.

If you are a frequent trader, SPY will be a better ETF to invest in. This is because you will be able to buy or sell the ETF at your intended price.

Verdict

Here is the complete breakdown between VUSD and SPY:

VUSDSPY
Index TrackedS&P 500S&P 500
Fund ManagerVanguardSSGA
AUM27,624 million332,446 million
ExchangeLSENYSE
Estimated Unit Price$70 USD$350 USD
Dividend Withholding Tax 15%30%
Dividend DistributionDistributingDistributing
Estate TaxNoYes
Expense Ratio0.07%0.0945%
Liquidity72,00071,315,000

So which ETF should you choose?

Choose VUSD if you want to incur lower taxes

If you are a non-resident alien of the US, VUSD seems to be the more attractive option. You will incur a lower dividend withholding tax, and are not subject to an estate tax as well!

You will have significant tax savings when you invest in VUSD!

However, you will need to consider the trading commissions that you need to pay the brokers as well. Trading on the LSE is not as widely available compared to the NYSE.

As such, some brokers may charge you a higher commission to trade in the LSE.

Choose SPY if you are a frequent trader

Even though SPY is the larger fund, it is actually more costly to invest in SPY compared to VUSD!

The only main advantage that SPY has over VUSD is the higher average trading volume. If you are a frequent trader, trading in SPY may help you to buy or sell the units at your intended price.

Conclusion

Both ETFs track the same index, so their performances should be very similar. The ETF that you choose depends on a few things:

  1. The taxes that you wish to incur
  2. The exchange that you want to trade in
  3. The expense ratio you’re willing to pay

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