What are top Australian shares ETFs for 2021? We think the VanEck Vectors Australian Property ETF (ASX: MVA) and Vanguard MSCI Australian Large Companies Index ETF (ASX: VLC) ASX ETFs could be worthy of closer inspection. Here’s why…
Popping the hood on these 2 ETFs
The VanEck MVA ETF provides investors with exposure to the Australian property market by investing in a portfolio of ASX-listed property companies and real estate investment trusts (REITs).
The Vanguard VLC ETF provides exposure to the MSCI Australian Shares Large Cap Index. This index is a ‘free float-adjusted market capitalization index’ which provides investors with exposure to the largest companies on the ASX.
Keep learning about the VLC ETF on our free report page. See the ASX VLC review.
In addition to using our years of experience analysing ETFs, there are simple tricks any investor can use to compare similar ETFs.
The first is fees. Our team uses quant methods to score ETFs based on its fees and costs, then we slice and dice across sectors, strategy types and providers.
We’ll keep it basic and just study the fees. Based on our data for December 2020, the MVA ETF has a management expense ratio (MER) of 0.35% while the VLC ETF’s yearly fee was 0.20%. Therefore, VLC wins on this one. That said, a more useful metric to know is the fee quartiles that these ETFs find themselves in (note: quartile 1 is best). For example, any ETF which has a fee below 0.3% would be considered in our first (best) quartile.
Show me the money
It’s time to study the track record. 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 funds can put in a compelling return one year just to generate subpar 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 MVA ETF had an average annual return of 7.32%. During the same time, the VLC ETF returned 8.83%.
Too long, didn’t read (TL;DR)
For us, the MVA ETF ranks greater for our internal scoring methodology but not by much.
We hope this article helped you analyse ETFs. Don’t forget, there’s a lot more to investing well than what we just outlined (risks, diversification, other potentially better ETFs, etc.). Our analyst team at Rask Australia spends months looking at new ASX investments (it’s our day job!). To make your life easier, you can get the name of our team’s top ETF pick for 2021 in a free report. Keep reading to find out how to get our analyst’s report emailed to you right now…