Got your analyst shoes on today? The BetaShares Diversified Conservative Income ETF (ASX: DZZF) and iShares S&P/ASX Small Ordinaries ETF (ASX: ISO) are two ASX ETFs operating in the Diversified ETF and Australian shares sectors, respectively.
What does the DZZF do in a portfolio?
The BetaShares DZZF ETF provides investors with a diversified portfolio of assets, including shares, property securities, bonds and cash, across Australian and global markets.
As at the end of last month, the DZZF ETF had $3.49 million of money invested. Since its funds under management (FUM) or ‘market cap’ figure of less than $100 million, it’s important to consider if this ETF is still too small. At Best ETFs we say an ETF with more than $100 million invested is typically more sustainable than one with less than $100 million (at least). However, there are exceptions to this rule of thumb, especially if the ETF issuer/provider is committed to growing the ETF’s FUM to the point where it becomes profitable.
Fees & costs
The yearly management fee on the DZZF ETF is 0.26%. The issuer, BetaShares, takes this out automatically.
What this fee means is, if you invested, say, $2,000 in the DZZF ETF for a full year you could expect to pay management fees of around $5.20. This fee is different from the fee you pay to your brokerage provider (e.g. CommSec, NabTrade, SelfWealth, etc.) to buy or sell the ETF. Importantly, you should also be mindful of the ‘spread‘ for the ETF.
Is the ETF too expensive?
The easiest way to know if the ETF is too costly is to compare it with other ETFs in the same sector, and against the industry average. The average management fee (MER) across all of the ETFs covered by Best ETFs Australia is 0.54%, which is around $10.80 per $2,000 invested. Small changes in fees can make a big difference after 10 or 20 years. To understand all of the fees, you should read the DZZF Product Disclosure Statement (PDS), available on the ETF issuer’s website, because it has the complete and up-to-date information.
The DZZF ETF might be one for the watchlist, but if you want to access our full ETF review, simply click here to get our full report – it’s free.
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The ins-and-outs of the ISO ETF
The iShares ISO ETF provides exposure to 200 small cap Australian shares. This is a low-cost way to access small Australian companies through a single fund.
At the end of April 2020, ISO’s FUM stood at $86.52 million. With less than $100 million invested, it’s important to consider if this ETF is still too small and you should wait to buy in. If you’re worried about the size of the ETF, consider comparing it alongside some of the other Index sector ETFs, using our full list.
Are ISO’s fees too high?
iShares charge a yearly management fee of 0.55% for the ISO ETF. Meaning, with $2,000 invested for 12 months you can expect to pay a base management fee of around $11.00.
The management fee is above the average for all ETFs on our radar, but keep in mind the ETF may be able to justify it.
Choosing between ETFs might seem easy, but it’s important to try and get it right the first time so you don’t end up having to chop-and-change positions (and potentially pay tax). To make your life a little easier, if you’re looking at the DZZF ETF, consider clicking here to access our comprehensive investment report. It’s free.