indexfundfan @ indextown

After a delay of about one week, Vanguard’s FTSE All World Ex USA equity index ETF (ticker VEU) finally started trading today. It ended the day with a respectable volume of more than 110k shares. Looking at the intraday trading action, the spread is on average no more than 8 cents per share.

I think this spread is very reasonable for a new ETF. Assuming that the NAV is somewhere in between the ask and bid prices, the ‘purchase fee’, which does not include commissions if you are currently not enrolled in a free trade program, is about 0.04/51 = 0.08%. This is far lower than the 0.25% purchase fee if you are buying the mutual fund version (ticker VFWIX) directly from Vanguard. As a side note, the ETF version also has a lower expense ratio of 0.25% compared to 0.40% for the mutual fund version.

The intraday chart of the VEU versus iShares EAFE ETF (ticker EFA) is shown below.

For those who are interested , the following link contains the first day’s trading action: 2007-03-08-veu-trades.png. You can look at the ask-bid spreads over the first trading day. All the times at in Pacific Standard Time.

I think this ETF will become a keeper for investors, especially in the taxable account, for the following two reasons:

• ability to claim back foreign tax credit, and
• ability to tax harvest as and when needed, without the trading limitations and purchase / redemption fees associated with mutual funds.

What do you think?

This entry was posted on Thursday, March 8th, 2007 at 2:46 pm and is filed under ETF, Investing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.