Jump to content

How to calculate total TER of ETF portfolio


theshidoshi

Recommended Posts

How to calculate total TER for an ETF portfolio

renderTimingPixel.png

Hi guys

I am a new investor and as I have been learning about ETF portfolio structuring and key things such as keeping a low TER.

I am shifting my portfolio to ETF portfolio and I am not sure how to calculate an aggregate TER for the portfolio. I am not sure I am doing the total TER calculation for all 7 ETFs correctly.

Example of my ETF structure:

Percentage of holding - ETF - TER

  1. 40% in CSP1 TER 0.07%
  2. 20% in CUKX TER 0.07%
  3. 10% in IUKP TER 0.40%
  4. 10% in GBDV TER 0.45%
  5. 10% in SWDA TER 0.20%
  6. 5% in EMIM TER 0.18%
  7. 5% in SGLN TER 0.25%

 

Do I calculate it in the following way:

A) Sum of all 7 ETF TERs = 1.62%

B) Average of all 7 ETF TERs = 0.23%

C) Or more complex calculation considering the TER of each ETF in relation to its position size (e.g 40% in CSP1 with TER of 0.07% vs. 5% in EMIM with TER of 0.18% means its a lot cheaper than the simple addition of both TERs)

 

Any explanation with an example would be most helpful.

Thank you

Link to comment

Hi @theshidoshi

The answer is C. You need to weight the TER of each ETF by its weight in your portfolio.

In Excel, if you had the weights in column A and TER’s in column B, you could use the SUMPRODUCT function to find the TER for your portfolio.

I’ve calculated this for you and I got a TER of 0.1685%. Let me know if you've got any other questions!

Kind regards,

Sam

Link to comment
2 hours ago, samd_IG said:

Hi @theshidoshi

The answer is C. You need to weight the TER of each ETF by its weight in your portfolio.

In Excel, if you had the weights in column A and TER’s in column B, you could use the SUMPRODUCT function to find the TER for your portfolio.

I’ve calculated this for you and I got a TER of 0.1685%. Let me know if you've got any other questions!

Kind regards,

Sam

Thank you so much. I learnt a lot. I do have one question. My example above is the future weighting.

 

I tried it with my current portfolio I am trying to restructure and got a TER that is much much lower than I expected. I tested with our example above and ot worked but when applied to my current holdings it comes up with 0.05% which I find strange

 

Below is the ETF table (currently only 25% of my ISA portfolio)

Symbol - TER - Weighting

CSP1 0.07% 8.62%
CUKX 0.07% 3.99%
IUKP 0.40% 2.47%
EMIM 0.18% 1.02%
GBDV 0.45% 3.59%
SWDA 0.20% 3.18%
SGLN 0.25% 1.65%

 

I used the formula:

=SUMPRODUCT(A1:A7,B1:B7)

Answer 0.05%

 

How is that possible with such low TER?

Link to comment
1 hour ago, theshidoshi said:

Below is the ETF table (currently only 25% of my ISA portfolio)

If you are just finding the TER for the portion of your portfolio that is invested in assets that have an annual expense then I would recommend either using weights for this part that sum to 100%, or to gross up the weights as shown in the screenshot below.

Both methods should get to the same answer, which I've calculated as 0.19% (2 d.p)

TER.PNG.0e438cb85d2164dfb59a2bd534fbafda.PNG

TER2.PNG.ff87db95403900d90e7cf13f70c0aaad.PNG

 

That should do the trick. Let me know if you've any other questions!

  • Like 1
Link to comment
  • 1 month later...

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • Posts

    • Sainsburys full year earnings and Unilever’s first quarter trading update both say the same thing, UK consumers are in for higher prices. The war in Ukraine, supply chain issues and the effects of ongoing Covid all to blame.      
    • US Dollar (DXY) Daily Price and Analysis US Q1 GDP may stall the greenback’s advance. A 20-year high nears for the US dollar. The multi-month US dollar rally continues with the greenback printing a fresh high today ahead of the first look at US Q1 GDP at 12.30 GMT. The US dollar basket (DXY) has been boosted by renewed weakness in the Euro and the Japanese Yen, as investors move from lower-yielding to higher-yielding currencies, while safe-haven flows continue to benefit the greenback. The US growth release later in the session is expected to show a sharp slowdown from the robust Q4 figure of 6.9%. The markets are currently pricing in growth of just 1% for the first three months of this year, with the slowdown mainly due to a reduction in inventory accrual over the quarter. This release is unlikely to move the greenback, unless there is a large miss or beat, as the Fed believe that 2022 US growth will be robust enough to let them tighten monetary policy sharply without damaging the economy. The latest US Core PCE data – the Fed’s preferred inflation reading – is released on Friday and this may have more effect on the US dollar than today’s GDP data. For all market moving economic data and events, see the DailyFX Calendar. The ongoing US dollar rally has been aided by weakness across a range of G7 currencies including the Euro, the Japanese Yen, and the British Pound. The Euro continues to battle with lowly growth expectations, exacerbated by energy concerns, the British Pound is mired by weak economic data, while the Japanese Yen is in freefall as the BoJ continues with its ultra-loose monetary policy.   The US dollar continues to press higher and looks set to break above 103.96, the March 2020 high. Above here the US dollar would be back at levels last seen nearly two decades ago. The March resistance will likely hold in the short-term, especially with month-end portfolio rebalancing at the end of the week, but US dollar strength is set to continue in the months ahead. USDOLLAR (DXY) WEEKLY PRICE CHART – APRIL 28, 2022 {{THE_FUNDAMENTALS_OF_BREAKOUT_TRADING}} What is your view on the US Dollar – bullish or bearish?   Apr 28, 2022 | DailyFX Nick Cawley, Strategist
    • While Tesla has nothing directly to do with Elon Musk buying Twitter - TSLA stock closed down 12% on news that Musk may have to sell stock and use other holdings to stand against the loan to finalise the purchase of the social media giant.        
×
×
  • Create New...