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Discussion Starter #1
I am thinking to sell $92K worth of VUN and buy XUU in the next couple of months in my RRSP due to VUN's higher MER (0.16 compare to 0.07). I bought VUN in 2014-2016 and stopped buying it other than buying it through DRIP. My book value is $38.5/per share and now the market value is $61.75/per share. I am thinking to sell it once it reaches to $62. Although VUN has a higher MER, XUU under performed VUN mostly in 2020.I couldn't figure it out why it has under performed this year.

What is your thought about this switching? Am I missing something?

20471
 

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It won't hurt, but it probably won't help a lot either. I don't see a major difference either way.

XUU seems to be a fund-of-funds (holding underlying iShares ETFs), but VUN seems to hold securities directly. There may be a difference in terms of withholding taxes at the fund level, but I am not exactly sure if or how it will apply to Canadian ETFs holding US ETFs with US underlyings.

If you would like to eliminate withholding taxes on US dividends in an RRSP, you could switch to VTI or iTOT which are US-based ETFs (denominated in USD). To do that you would need to exchange CAD to USD, which would incur a one time cost. It may be worth it if you plan to hold it (or other US ETFs) for a long time.
 

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VUN tracks: CRSP US Total Market Index
XUU tracks: S&P Total Market Index

They follow different indexes and won't perform the same. It does not mean anything that one underperforms the other by a little bit. Over the years, I'm sure they will take turns beating the other.

Really you are choosing between two different portfolio managers. Indexes are not completely dumb, passive things: they are really "light-weight" portfolio management. And there is some human skill involved because decisions have human discretion.

With VUN, you are paying 0.16% MER for the CRSP managers and their decisions. This is an index that comes from the university system and is most often used in academic research.

With XUU, you are paying 0.07% MER for the S&P managers and their decisions. The S&P people have a pretty strong track record managing indexes, and they have more commercial (and performance) pressures. There might be stronger institutional knowledge of methodology at S&P as well.

Personally, between those two, I would slightly prefer XUU. It's a lower management fee and I think more highly of the S&P indexes. But it's a very small difference.
 

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I hold VTI. Lower MER and nearly double dividends without withholding tax

Withholding taxes 30% of 1.8% dividend vs 3% dividend of VTI
MER 0.16 vs 0.03 of VTI

Use norbits gambit to exchange to USD
 

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I hold VTI. Lower MER and nearly double dividends without withholding tax
Do you hold this in an RRSP? I'm curious, does DRIP work for these US-listed funds? Do you automatically gain more shares when distributions happen, or are you ending up with USD cash?
 

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USD cash dividends in USD RRSP (no forced exchange to CAD) I just pool it with the annual contribution/purchase
 

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Discussion Starter #7
XUU seems to be a fund-of-funds (holding underlying iShares ETFs), but VUN seems to hold securities directly. There may be a difference in terms of withholding taxes at the fund level, but I am not exactly sure if or how it will apply to Canadian ETFs holding US ETFs with US underlyings.
XUU holds four US listed ETFs whereas VUN hold only one ETF. Both of them don't hold any securities directly. I am not comfortable of doing Norbert Gambit and prefer that the fund manager does the conversion with better exchange rate.
 

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XUU holds four US listed ETFs whereas VUN hold only one ETF. Both of them don't hold any securities directly. I am not comfortable of doing Norbert Gambit and prefer that the fund manager does the conversion with better exchange rate.
In that case the main difference would be the 9 bps reduction in expense ratio, since it would be difficult to know beforehand which index will outperform and any delta would likely be minimal anyway.
 

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yes, in rrsp we hold VTI for broad based. Have held XBB at times when we think small caps might lead the broader market. Plus small cap us is big Canadian company size.

For global I often use I-XUS.
I just recently moved these into the USD side of my rrsp.

Have in past used VUN in a tfsa to save dividend us tax that vti would take there.
 

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yes, in rrsp we hold VTI for broad based. Have held XBB at times when we think small caps might lead the broader market. Plus small cap us is big Canadian company size.

For global I often use I-XUS.
I just recently moved these into the USD side of my rrsp.

Have in past used VUN in a tfsa to save dividend us tax that vti would take there.
sorry, meant VBR, not xbb
 
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