Now could be the right time to run the rule over the Vaneck Australian Equal Weight ETF (ASX: MVW) and iShares Core S&P/ASX 200 ETF (ASX: IOZ). Using our internal quantitative analysis, these ETFs appear to offer good exposure to the Australian shares sector.
What do they do?
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.
The iShares IOZ ETF 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.
To learn more about the MVW ETF, read our free ETF investment report once you’re done with this article.
To make this article easier to digest, we’ll just study the fees or ‘management expense ratio’ (MER). Using data for December 2020, the MVW ETF has an MER of 0.35% while the IOZ ETF had a yearly fee of 0.09%. So, IOZ wins on this metric. 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 divide 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.
Performance is important. 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 good return one year just to generate poor 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 MVW ETF had an average annual return of 7.21%. During the same time, the IOZ ETF returned 7.77%.
Lastly, we need to consider the issuer or provider of the ETF. There are too many factors that go into our internal scoring of fund providers to detail here (you’d get bored pretty quickly). So here’s the quick version. As you guessed, the issuer of the IOZ ETF is iShares. iShares ranks highly for our scores of ETF providers and issuers in Australia. We consider iShares to be among the best ETF providers in Australia and globally.
For us, the MVW ETF ranks more compelling 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…