Investing your money to get exposure to the Australian shares sector has never been easier thanks to ASX ETFs like the iShares Edge MSCI Australia Multifactor ETF (ASX: AUMF). Before you make an investment, we think it’s important to do your own ETF review. So, here are three tips to get the ball rolling.
1. Find out what the AUMF ETF invests in
The iShares AUMF ETF provides investors with the performance of MSCI Australia IMI Diversified Multiple Factor (AUD) Index, before fees and expenses. This index is composed of Australian equities that have favourable exposure to four target style factors (quality, value, size and momentum).
2. Has the ETF reached scale?
The iShares AUMF ETF had $15.07 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). This is because if an ETF is too small, it may not be sustainable for an ETF issuer/provider, such as iShares, to continue to operate it.
That said, there are exceptions to this rule of thumb, especially if the ETF issuer is committed to growing the ETF’s FUM to the point where it becomes profitable.
3. Watch the fees (and other costs)
iShares charges investors a yearly management fee of 0.3% for the AUMF ETF. This means that if you invested $2,000 in AUMF for a full year, you could expect to pay management fees of around $6.00.
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.
Where to from here in 2020?
So there you have it, three tips to weigh up the AUMF ETF. Before you go any further, take a look at our iShares AUMF report – it’s free. Then, to make sure you’ve covered all bases, don’t forget to search our complete list of ASX ETFs to compare your options. You can filter the search results according to sector, issuer, size and more.
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