3

For example looking at IE00B5BMR087 and IE0031442068 (both links in German), they seem to be very similar. Both try to track the S&P 500 in the same ways, the main difference seems to be that one is distributing while the other is accumulating.

However, there is a considerable difference in the price per share (~24 vs ~240). Why is that? And does the difference matter?

It seems to me that it wouldn't matter, because if the underlying market goes up x%, 10 shares of the 24 ETF would go up the same value as 1 share of the 240 ETF. So the only difference (apart from distributing vs accumulating) would be the restriction to only be able to purchase shares in steps of 240 at a time for the more expensive ETF. But it seems odd to me that there would be such a price discrepancy (is the distribution responsible for all of that?), so I'm wondering if I'm missing something.

4

You are correct that it doesn't matter. The current value of one "share" of the S&P 500 is around USD2800 or EUR2400. An ETF typically chooses a ratio that it seeks to maintain with the index. One of your ETFs has chosen 0.01x and the other has chosen 0.1x. Sometimes an ETF can even split like a common stock, changing its ratio (and changing the number of ETF shares to compensate).

1

Simplistic example: Two sponsors raise $100 million for the purpose of creating an S&P 500 tracking ETF.

Fund A issues 1.0 million shares so its initial price is $100.

Fund B issues 2.5 million shares so its initial price is $40.

An equal dollar investment in either fund earns the same amount, assuming that both funds track the underlying index identically. Share price makes no difference in this context.

-1

If all else is equal, one potential advantage of a low-price ETF is that for small investors you may be able to take advantage of a Dividend Reinvestment Plan, whereas for high-price ETFs you may not.

If you have $10000 to invest, and your options are a $25/share ETF or a $500/share ETF, then you can buy 400 shares of the first and 20 of the second. Suppose the first offers a dividend of $0.20/share, and the second a dividend of $4/share (the same value). With a DRP you will be able to get 3 shares of the first, 12 per year. For the second ETF it will take 7 dividends to receive even 1 share through the DRP. While you wait for your DRP balance to add up to $500 you neither have direct access to the cash nor a share to trade.

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  • Fractional share ownership has been common for 20ish years. Thus, it does not matter for dividend reinvestment whether you have two $500 shares or forty $25 shares.
    – RonJohn
    Jan 1 at 3:37
  • @RonJohn Not all exchanges allow fractional trades. And if you buy fractional shares through your broker, wouldn't that necessitate that your shares are actually indirectly owned by you, ie a custodian model, rather than directly owned? So maybe the DRP can work for you, but it will limit your broker choices and may have a different risk. Jan 1 at 3:46
  • ETF shares are already indirectly owned via a custodian. nerdwallet.com/article/investing/what-is-an-etf "The fund provider owns the underlying assets, designs a fund to track their performance and then sells shares in that fund to investors. Shareholders own a portion of an ETF, but they don’t own the underlying assets in the fund."
    – RonJohn
    Jan 1 at 4:23
  • @RonJohn Yes, that's not what I meant though. Anyway, anyone in a country like Australia could still find what I wrote helpful as there are very few brokers which allow fractional trading here. Jan 1 at 4:49

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