If you’re looking for an ASX ETF in the Australian shares sector, chances are, the Vaneck Small Companies Masters ETF (ASX: MVS) is an ETF you’re considering.
How Australian investors can use the MVS ETF
The VanEck MVS ETF provides exposure to a diversified portfolio of Australian small caps, with a focus on highly liquid, dividend-paying companies. This ETF tracks the MVIS Australia Small-Cap Dividend Payers Index.
The MVS ETF is yet to reach scale
The MVS ETF had $54.75 million of money invested when we last pulled the monthly numbers. With a 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. We say an ETF with more than $100 million invested is typically more sustainable than one with less than $100 million (at least) because if an ETF is too small it may not be sustainable for an ETF issuer, such as Vaneck. 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.
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Don’t forget MVS fees
With a yearly management fee of 0.49% charged by Vaneck, if you invested $2,000 in the MVS ETF for a full year you could expect to pay management fees of around $9.80. For context, the average management fee (MER) of all ETFs covered by Best ETFs Australia on our complete list of ASX ETFs is 0.5% or around $10.00 per $2,000 invested. Keep in mind, small changes in fees can make a big difference after 10 or 20 years.
In addition to a yearly management fee, there are other costs investors must consider, including brokerage and taxes. A specific cost for ETF and mFund investors to consider is the buy-sell spread, which is the slippage or ‘invisible’ cost paid by an investor when he or she buys or sells the ETF. For the MVS ETF, the most recent average monthly buy-sell spread we gathered (May 2020) was 0.78%. Remember, the lower (or ‘tighter’) the buy-sell spread, the better. This buy-sell spread was above the average ETF spread of 0.45%, which means the MVS ETF has more slippage than the average ETF (that’s a bad thing).
If you’re weighing up the MVS ETF, keep in mind that this is just a brief introduction to the ETF. Indeed, before doing anything, take a look at our free Vaneck MVS report. And while you’re at it, consider searching our complete list of ASX ETFs for similar ETFs in the Australian shares sector, to do a good comparison.