A new ETF to rule them all?

In ETF Blog, Latest by Simon Brown

Back in the day, Kristia and I recorded a podcast titled ‘Can one ETF rule them all?’ The idea was simple: Picking exchange-traded funds (ETF) is an active decision and we wanted it to be as passive as possible.

The idea was then to select a single global ETF with some direct emerging market exposure and a low total expense ratio (TER). We settled on the Ashburton 1200 and it has served us excellently, including a reduction in the TER recently.

Over the years a number of new global ETFs have cropped up, and we always get asked if this new player could replace our one ETF to rule them all. While the newcomers have all been perfectly fine, they did not have anything that made them markedly better.

Until now.

CoreShares issued their Total World ETF (JSE code: GLOBAL) last month which not only holds some 9,000 stocks but also has increased direct emerging market exposure (11% vs. 7%) and a TER that is some 0.2% cheaper. In short, it ticks all the boxes, and it will be my new one ETF to rule them all.

The next question everybody will be asking is: Will I be selling my existing Ashburton 1200 ETFs and switch over to the new GLOBAL ETF from CoreShares?

The answer is no. The transaction costs (buying and selling) and then the spread I will have to cross again when I buy and sell would add up to over 2%. Considering that I’m only saving 0.2% a year, it will take over a decade to recover my costs and by then who knows what the (Ashburton) Global 1200 TER will be.

So, I will continue to hold my existing Ashburton 1200. However, every month my debit order will go into the new CoreShares Total World ETF.



ETF blog

 

At Just One Lap, we are big fans of passive investment using ETFs. In this weekly blog, we discuss ETFs on the local market and the factors you need to consider when choosing an ETF. If you have wondered how one ETF differs from another, this is where you can find out. We explain which index each ETF tracks, what type of portfolio could benefit from holding each ETF, and how the costs will affect your bottom line.



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