Now could be an opportune time to run the rule over the Betashares Australia 200 ETF (ASX: A200) and Vaneck Australian Equal Weight ETF (ASX: MVW). Using our internal quantitative analysis, these ETFs appear to offer attractive exposure to the Australian shares sector.
Getting to know the MVW and A200 ETFs
The Betashares A200 ETF provides exposure to the largest 200 Australian companies, based on market capitalisation. Unlike many other Australian shares ETFs, A200 uses the Solactive Australia 200 Index. This is virtually the same thing as the indices provided by S&P/ASX, as it also uses a market capitalisation weighting.
The VanEck MVW ETF provides exposure to over 60 of the largest and most liquid Australian shares, equally weighted. By equally weighting shares, this ETF aims to reduce concentration risk in specific Australian stocks and sectors.
Note: you can continue learning about the MVW ETF on our report page. ASX MVW 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 A200 ETF has an MER of 0.07% while the MVW ETF had a yearly fee of 0.35%. As a result, A200 comes out on top. Keep in mind, a more useful 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 ETFs in our database and classify 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.
How we study past performance
Time to look at past returns. 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 attractive return one year just to generate unsatisfactory 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. MVW achieved a three-year average annual total return of 7.21% as of December 2020 but the A200 ETF had not yet got to the three-year milestone. Again, keep in mind we will still consider shorter-term returns if we believe it is a high quality ETF. And as always, past performance is not indicative of future performance.
Best ETFs Takeaway
In summary, the MVW ETF ranks higher against our internal scoring methodology but not by much compared to A200.
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…