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Commonwealth Diversified Share Fund

January 31st, 2007 at 03:39 am

I received a couple of dividend statements today for my investments in the Commonwealth Diversified Share Fund [ASX code: CDF] - a sort of ETF that aims to replicate the S&P/ASX200 Accumulation Index. I was interested to see how the Annualised Net Return (change in net asset value per unit after fees, taxes and expenses, assuming all distributions are reinvested) compared to the ASX200 Accumulation Index:

1 Year 3 Year 5 Year
Net Return 23.27% 24.31% 14.78%
S&P/ASX200 24.22% 25.00% 15.35%
Difference 0.95% 0.69% 0.57%

This shows that the effective "fee" for using this "Index" fund is around 0.57% - 0.95% (it varies as in some years they outperform or underperform the index by a slight amount - aka. "tracking error").

This compares favourably to investing in, say, Vanguard Australia's "High Yield Australian Shares" Index Fund, which invests in the S&P/ASX200 stocks (excluding LPTs) which has a management fee of 0.90% for the first $50,000 invested (0.60% for the next $50,000 and then 0.45% for the balance of your investment in this fund over $100,000).

The buy-sell spread of 0.30% for the Vanguard Fund is slightly higher than you'd pay in brokerage costs for buying a parcel of over $10,000 of CDF stock.

The only substantial difference between these two methods of investing in the ASX200 index that I can spot is that the CDF shares occasionally trade at a small discount to the ASX200 index (XJO), so you could save yourself the buy-sell spread and a couple of year's worth of management fees by timing your purchase carefully:

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