Hey guys, it's sasha. I often talk about investing in the s p 500, either as part of a diversified portfolio or as a way of investing passively without having to actually pick your stocks and getting a really good rate of return in exchange. But there's a few different things to consider in terms of price when you're trying to invest what is the cheapest way to invest in the s p 500. You have to think about etf fees, ways of distributing and reinvesting dividends, availability of etfs of different brokerages brokerage management fees, which is interesting and also brokerage transaction fees, as well as brokerage foreign exchange fees.

There's a lot of things to consider, so you might not want to spend a few hours that it will take to figure out which one is the cheapest and exactly. Why so don't worry, i'm going to waste it a few hours instead, so you don't have to i'm going to give you the answer upfront. The answer is vusa, but let me explain exactly why it's exactly why it's not some of the other options. Some people think are cheaper how much it will cost and exactly what vusa is remember.

You can get yourself a free share with trading to one two or free trade. If you want to use them for investing in the sap 500. If you use my link in the description below, but just before, i get into the details of exactly why voos is so cheap and exactly why that's way i invest a quick disclaimer. I am not a financial advisor.

I cannot provide financial advice to you. This is purely for educational purposes. If you do need financial advice, please make sure you seek the help of a suitably qualified professional now, first off to point out the obvious: if you are based in the uk or europe, you cannot invest in u.s based etfs. So if you watch videos from us money channels et cetera, you can't go and invest, for example, in the vu vo oetf, which is the vanguard sb 500.

In the united states. There are ways around it by investing in the cfd, but i'm not going to get into that because that's a whole different thing and that option is still more expensive than the ones that i'm going to be talking about. Next risk is a factor to consider, but i'm not going to be confronting in this video, because i'm just talking about the price of s p, 500 etfs and i'm also going to be covering synthetic etfs. Now synthetic etfs work in a different way to normal ones.

That i personally invest in, they don't buy the actual stocks. What they do is. Instead, they buy swaps with other financial companies which mean that they still are able to go, get the same returns, but you don't actually own any underlying assets. There are some advantages to this, like, for example, you can essentially bypass having to pay the dividend withholding tax because you never actually received dividends, but those advantages to me are relatively small, given the risk - and they are typically a little bit more expensive as well.

For the privilege, so i personally don't want to quantify the risk of those swaps going wrong and some of the companies in the chain going down, etc. So i choose not to put my money there now when it comes to fees, the big vanguard and i shares s - p 500 etfs all cost pretty much the same, just not points not seven percent per year. This, in fact, is a really great price for the money and the etf will automatically adjust distributions between the various different constituent companies roughly 500, sometimes a little bit more depending on how they go and put companies in and take companies out. But you have to do absolutely nothing, so the next question is which out of these different options should you choose - and this is where i need to explain a few - really important things - i'm going to talk about vanguard here, because that's the one i use, but much Of the same logic will apply to the equivalent ishares equivalents as well.

First, these etfs are typically based in ireland because of tax reasons and there's a lot of depth and i'm going to go into them, but there's a lot of different versions. You might get a bit confused as to which one you should pick, but remember, they're, not actually separate funds. So if you go and look at the different names, for example, if you look at vuso or vuwak, for example, you're actually buying into the same fund. So the way that it is managed the way the companies are entered and exited from it.

It's the same basic pool of money if you like you're, just buying a different class of share where the rules around how that share earns its revenue and the rules about how money is paid out to the shareholders are slightly different. So that's one important thing to remember now: some of these are nominated in dollars. Others are denominated in pounds and some other euro equivalents exist as well. For example, there is vusa v-u-s-a, which is the pound equivalent of the distributing s - p 500 etf in the uk, but there's also the v-usd, which is exactly the same, except for it's nominated in dollars.

Generally speaking, there is no difference whatsoever between these there's a perceived difference, because when you look at your different portfolios, they will change in value based on fluctuation and currency, but in real practical terms, there's no real difference between them, because if you cash, your us dollar Etf and get your money back into pounds, you'll be exactly the same as if you held it in pounds in the first place, because the exchange rate will then apply at that point in time. But here is one really important point all the popular brokers where you can go and buy these just now charge some kind of foreign exchange fee, including trading 212, who are about to introduce it in just a few days time. So lesson number one from my perspective is to not invest in the us dollar equivalents because you're going to be paying that fee every time you buy in and out of that etf. So, for me it doesn't make any sense because you're just paying money, but you could go, invest in pound equivalent without having to pay any fees.

Next, let's talk about the difference between distributing and accumulating etfs and in this case, for example, let's compare vusa and vua because i know a lot of people say: oh sasha, you made a mistake: vuag is the cheaper option. Well, i'm going to explain exactly why it isn't a distributing tf pays out dividends to you so, for example, with vusa, if there are dividends paid which typically paid every quarter, they pay the dividends to you with an accumulating. It doesn't happen the same way. I'm going to explain that in a second, the underlying funds.

So when you have an etf for the s p 500, the underlying funds are actually based in the us dollars, even if you're buying the actual shares in etf in pounds and the reason that's really important is because the dividends do get paid out in dollars. Even if you have the pound shares of the etf, that means, when you receive those you'll, be paying the foreign exchange fee in order to convert them into pounds. This is something that most people are not aware of and just don't know now the accumulating vua etf will automatically put any dividends paid into the etf back into the fund, so you won't actually ever have to pay that for an exchange fee and that's why people Say hey: this is a really great option because you don't lose that money, but just remember with vuag. You do not buy more shares with that dividend.

Income as you would with, for example, voucher. If you chose to do it. The value of the shares just increases by the amount of the dividend, if that makes any sense, and so here is a big difference. If you go and compare say, vua versus visa over time, you'll notice that vuag actually grows a bit more.

It's a relatively new fund, so there isn't a lot of history and it is because of this there isn't any actual underlying performance difference. It's just because dividends are automatically increasing the share price rather than buying more shares of the same thing. But here is another really important factor that many people probably don't really know. The natural spread of these etfs is different spread is the difference between the buy and the sale price of any stock, any company, stock and etf, and in the uk it is illegal to mark up the spread for regular investing accounts.

So that means the spread is just a difference based on the market condition. So when your market maker has people willing, say, sell and people willing to buy, there's always going to be a small gap in the middle, because you know you never ever converge on exactly the same price in any market uh depending you know. What are you buying and selling so vusa is a much much more popular etf than vuag at the moment and therefore far more people trade it. As a result, the spread is tight.

As i'm making this video, i went and looked and took some screenshots. The spread on booster is 3.3 p and for volag it's 8.6 p, so that's 0.96 percent and not 0.17 respectively. So very roughly. This is how much you will lose by buying into the etf at some point and then selling out of that etf later due to spread that means with visa.

When you receive the money in dividends, you will lose money due to that spread with vug. You will not with visa also, although you probably will never notice it, because the amounts are going to be so small you'll be paying that 0.15 percent foreign exchange fuel trading, 202 or 0.45 percent, with free trade and with vulag. You will not pay that money either. So you would imagine from this that vulax should be the better option right, but dividends are only a small proportion of the total return you have in the s p.

500. The majority of the money that you earn comes from the growth in value in stocks, and this is why it's really important the spread will apply each time you invest in etf, on the entire amount that you put in, whereas the dividends are only going to be. You know 1.3 percent a year of your total, so any money you save off the 1.3 percent, which is going to be a tiny fraction of that is going to be relatively immaterial versus the spread on the overall etf, and that is why vusa for me is Still slightly cheaper because that factor is more important than the things that some people maybe pay more attention to. Now, although i like to invest in these vanguard etfs, it is actually cheaper to invest in them, not on vanguard, as i mentioned, vanguard charges a 0.15 management fee on top of the fund fee.

If you use their platform and not only that, but with vanguard. Some of the etfs that i just mentioned are not even available, for example, you're kind of going to invest in vue work, but anyway, that's beyond the point. Vusa is available in both trading 212 and free trade that i mentioned, and you don't have to pay any fees on top of this etf fee and the spread, if you invest in them, and that's why i am buying my etf shares over there and i'm buying Them in pounds - and if you do that, with both trading 2 and free trade, you will have to pay absolutely nothing. There's no deposit fee, there's no platform management fee, there's no transaction fee for buying in pounds.

So that means you can go and invest in them. Absolutely for free in either of those two platforms and if you do want to use one of those free platforms, make sure you use my link in the description below to get yourself a free share. When you go and sign up and make any deposit - and i will also get a free ship so once again, thank you so much for doing it. If you go and get that free share, you can actually go and sell that free share and then go and invest the proceeds of the free share into the s.

P. 500. If you choose to do so, if you are in europe, there are actually better platforms. Probably because vusa also trades in germany, i believe in ireland as well as a lot of the stocks, have changed and you can go and buy it in euros instead of pounds.

So you can go and avoid that foreign exchange fee. But i don't know the specifics. There's lots of different platforms, a different country, so you need to go and do some research of your own, so the total cost of investing in the 500 largest us companies through vusa is just not points not seven percent per year, plus the really small one-off cost. It's one off but splits into two when you buy when you sell, which is the spread, but that's it.

The spread is relatively hard to quantify, but it's going to be very low if you spread it between several years. If you want to invest through an isa, both trading 202 and free trade also offer one of them, although with free check, you have to pay a three pounds per month fee in order to open one. However, trading 202 right now are not actually accepting new accounts, so if you want to open one before the financial year starts on the 6th of april, you might need to go and use a different option. Make sure you smash the like button future algorithm.

If you enjoyed this video and found it useful, i would really really appreciate it. Thank you so much for watching. I really really like anyone getting right to the end of the video. Thank you so much and i'll see you guys later.