Is 2020 going to be the year to invest in ASX ETFs like the InvestSMART Intelligent Investor Australian Equity Income Fund (Managed Fund) ETF (ASX: INIF) and SPDR S&P/ASX 200 ETF (ASX: STW)?
How an Aussie (or Kiwi!) investor can use the INIF ETF
The Intelligent Investor INIF Fund is an actively managed ETF, with a focus on a research-led, value investing approach. This fund also focuses on providing investors with exposure to companies with a sustainable income yield.
According to our most recent data, the INIF ETF had $33.36 million of money invested. Given its funds under management (also known as FUM or ‘market cap’) is less than $100 million, you should consider if this ETF is still too small and if it is sustainable for the ETF issuer. 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 general rule, especially if the ETF issuer/provider is reputable and committed to growing the ETF’s FUM through effective marketing strategies and distribution to financial advisers.
Fees to consider
According to our numbers, the annual management fee on the INIF ETF is 0.97%. The issuer, InvestSMART, collects this fee automatically.
Meaning, if you invested $2,000 in the INIF ETF for a full year you could expect to pay management fees of around $19.40. This fee is different from the fee you pay to your brokerage provider (e.g. CommSec, NabTrade, SelfWealth, etc.), which is the fee to buy or sell the ETF. In addition to a management fee charged by the issuer, be mindful to check the ‘spread‘ for the ETF.
A fee comparison
Fees aren’t the only key consideration for ETF investors, but it’s an easy thing to do. To understand if the ETF you’re looking at is too costly, compare it with other ETFs from the same sector, and against the industry average. For example, the average management fee (MER) across all of the ETFs covered by the Best ETFs Australia team was 0.5%, which is $10.00 per $2,000 invested. Keep in mind that small changes in the fees paid can make a big difference after 10 or 20 years. You should read the INIF Product Disclosure Statement (PDS), available on the ETF issuer’s website, because it will detail the fees, tax implications and the latest information.
You can get a copy of our free investment review when click here to see the INIF ETF report.
Key facts about the STW ETF
The SPDR STW ETF is Australia’s first ETF and has been operating for over 15 years. STW provides exposure to the largest 200 Australian shares, based on market capitalisation. This is a low-cost way to access top Australian companies through a single fund.
With our numbers for Oct 2020, STW’s FUM stood at $3595.35 million. Since the STW’s FUM is over $100 million, our investing team would say the ETF has met our minimum criteria for the total amount invested, otherwise known as FUM. A very sustainable ETF in the Index sector should be able to scale well and become profitable for the ETF issuer.
Are the fees for the STW ETF bad?
SPDR, the ETF issuer, charges a yearly management fee of 0.13% for the STW ETF. Meaning, if you invested $2,000 for a full 12-month period you could expect to pay a base management fee of around $2.60.
This management fee is below the average for all ETFs on our Best ETFs Australia list of ETFs. However, you might still be able to find a cheaper ETF for less.
Get the full STW review available on our website by clicking this link to access our report.
[ls_content_block id=”4954″ para=”paragraphs”]
