Why investors study the S&P/ASX 200 ETF and Australian Equal Weight ETF
The SPDR STW ETF is Australia’s first ETF and has been operating for over 15 years. STW 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.
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.
Want to know (lots) more? Read through our full MVW ETF review: see our MVW ETF review now.
Obviously, an easy way to analyse any ETF or fund like MVW or STW is with quantitative methods, such as studying the fees and past performance (keeping in mind past performance is no guarantee of future performance).
We’ll keep it basic and just study the fees. Based on our data for December 2020, the STW ETF has a management expense ratio (MER) of 0.13% while the MVW ETF’s yearly fee was 0.35%.So STW 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.
As Jerry Maguire said, ‘show me the money’. 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 positive return one year just to generate inferior 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 STW ETF had an average annual return of 8.00%. During the same time, the MVW ETF returned 7.21%.
Finally, at Best ETFs Australia, we apply a rating to the ETF issuer or provider. That is, the company that starts and is responsible for operating the ETF on the ASX. There are too many considerations that go into our scoring to detail here. The issuer of STW is SPDR. SPDR ranks highly for our scores of ETF providers and issuers in Australia. We think SPDR is one of Australia’s top 10 ETF providers for advisers and institutions, and its ETFs on the ASX provide good exposure to particular financial markets for retail investors. MVW’s provider is Vaneck. VanEck ranks highly for our scores of ETF providers and issuers in Australia. Our team considers VanEck to be one of Australia’s leading providers of specialised ETFs and funds for retail investors and advisers.
In summary, the MVW ETF ranks more positively against our internal scoring methodology but not by much compared to STW.
Please, keep in mind, there is much more to zeroing in on 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…