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Firstly, sorry if the terminology of my question is not correct, I'm quite new to investing.

I am having trouble understanding the differences between two ETF's that follow the same index (a specific example would be Vanguards S&P 500(code VOO) and Vanguards S&P 500 UCITS GBP (VUSA))

..I understand that they are on differing markets and one is compliant with EU'S UCITS regulations and are both hosted in different countries. But what is the reason for the price difference and why is it this way.

Again, sorry about the shoddy terminology/lack of articulation; this is a rather new topic for me and is a massive learning curve.

Thanks.

  • 3
    Hint: What does "GBP" mean? – Grade 'Eh' Bacon May 25 '18 at 19:28
  • GBP is the abbreviation for the British pound sterling – Bob Baerker May 25 '18 at 21:51
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Some minor reasons for price variation might be:

  1. Different expense ratios

  2. Failure to own exactly the same number of stocks that are in the S&P 500 and in the identical proportion to the index

A major reason for price difference is that the price of an ETF does not directly reflect the price of the underlying index. Assuming that we're talking about two ETFs in the same currency, two ETFs with an identical amount of AUM will have a different number of shares. If two funds have $100 billion in AUM then if fund A issued 400 million shares then it's NAV will be $250 and if Fund B issued 500 million shares then its NAV will be $200. In either case, if the funds are managed identically and the expense ratios are the same, your performance will be the same (ROI).

Your concern shouldn't be with the nominal price of an ETF. Your primary concern should be selecting the sector/index that you want to invest in and a secondary concern should be the efficiency of the ETF.

  • +1. I'll add that for international investors, there are variations on typical ETFs that track foreign indexes like the S&P 500 but in a "currency neutral" manner, by hedging the change in local currency vs. the currency of the companies in the index. It's common in Canada to see these variants for popular U.S. index ETFs, and I imagine currency neutral ETFs exist elsewhere too. The CN variant may under- or over-perform the plain index depending on the change in exchange rates. – Chris W. Rea May 25 '18 at 22:07

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