Now could be the right time to take a look at the iShares S&P/ASX Dividend Opportunities ETF (ASX: IHD) and Vanguard Australian Property Securities Index ETF (ASX: VAP). Using our internal quantitative analysis, these ETFs seem to offer strong exposure to the Australian shares sector.
Here’s how we think about the IHD and VAP ETFs
Investors looking for exposure to 50 high yielding Australian companies, may find the iShares IHD ETF of interest. This is a low-cost way to access high-yielding Australian companies through a single fund.
The Vanguard VAP ETF provides investors with low-cost exposure to listed Australian property companies and real estate investment trusts (REITs).
Get our team’s IHD ETF review, available free when you click this link: access the free investment report.
To make this article easier to digest, we’ll just study the fees or ‘management expense ratio’ (MER). Using data for December 2020, the IHD ETF has an MER of 0.30% while the VAP ETF had a yearly fee of 0.23%. So, VAP wins on this metric. Keep in mind, a more insightful metric to know is the fee quartiles that these ETFs find themselves in (note: quartile 1 is best). Meaning, we take all the Australian shares shares ETFs in our database and put them into 4 quartiles, based on their fees. For example, any ETF which has a fee below 0.3% would be considered in our first (best) quartile.
Let’s look at the past results. Keep in mind, performance isn’t everything — and past performance is not indicative of future performance. It’s just one part of a much bigger picture. The reason we say performance is not everything is because of volatility of financial markets and the economy from one year to the next. Some ETFs and fund can put in a strong return one year just to generate weak returns the next time around. That’s why we prefer three-year or seven-year track records over one-year track records. It can smooth out the temporary performances caused by external factors. Both ETFs have achieved our three-year performance hurdle. As of December 2020, the IHD ETF had an average annual return of 5.52%. During the same time, the VAP ETF returned 6.07%.
In summary, the VAP ETF ranks better against our internal scoring methodology but not by much compared to IHD.
Please, keep in mind, there is much more to choosing a good ETF. That’s why you should now use these skills to find the best ETF you can. If you want the name of our team’s top ETF pick for 2021, keep reading…