What are top Australian shares ETFs for 2021? We think the Vanguard Australian Shares Index ETF (ASX: VAS) and SPDR S&P/ASX 200 Listed Property Fund ETF (ASX: SLF) ASX ETFs could be worthy of closer inspection. Here’s why…
Popping the hood on these 2 ETFs
The Vanguard VAS ETF provides exposure to the largest 300 Australian shares, based on market capitalisation. This is a low-cost way to access top Australian companies through a single fund.
The SLF ETF by SPDR invests in shares/securities of listed real estate investment trusts (REITs). Investors can use these property-focused ETFs to get exposure to a broad basket of trusts and companies exposed to property, including office spaces, commercial rental spaces and construction projects.
Keep learning about the SLF ETF on our free report page. See the ASX SLF 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 VAS ETF has a management expense ratio (MER) of 0.10% while the SLF ETF’s yearly fee was 0.40%.So VAS comes out on top. 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 VAS ETF had an average annual return of 8.24%. During the same time, the SLF ETF returned 5.49%.
Too long, didn’t read (TL;DR)
In summary, the VAS ETF rates more promisingly for our internal scoring methodology but not by much compared to SLF.
Please, keep in mind, there is much more to picking 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…