What are top Australian shares ETFs for 2021? We think the iShares S&P/ASX Dividend Opportunities ETF (ASX: IHD) and Betashares Australian Ex-20 Portfolio Diversifier ETF (ASX: EX20) ASX ETFs could be worthy of closer inspection. Here’s why…
Popping the hood on these 2 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 BetaShares EX20 ETF provides exposure to the largest 180 Australian shares, based on market capitalisation, excluding the top 20.
Keep learning about the EX20 ETF on our free report page. See the ASX EX20 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 easy and just study the fees. Based on our data for December 2020, the IHD ETF has a management expense ratio (MER) of 0.30% while the EX20 ETF’s yearly fee was 0.25%. Therefore, EX20 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.
How do they perform?
Performance matters. 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 solid return one year just to generate lacking 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 EX20 ETF returned 7.30%.
Too long, didn’t read (TL;DR)
In summary, the EX20 ETF ranks higher against our internal scoring methodology but not by much compared to IHD.
Please, keep in mind, there is much more to selecting 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…