What are the Vanguard VLC and Vanguard VAP ETFs designed to do?
The Vanguard VLC ETF provides exposure to the MSCI Australian Shares Large Cap Index. This index is a ‘free float-adjusted market capitalization index’ which provides investors with exposure to the largest companies on the ASX.
The Vanguard VAP ETF provides investors with low-cost exposure to listed Australian property companies and real estate investment trusts (REITs).
For more information on the VLC ETF, see our ASX VLC review.
We’ll keep it easy and just study the fees. Based on our data for December 2020, the VLC ETF has a management expense ratio (MER) of 0.20% while the VAP ETF’s yearly fee was 0.23%.So VLC 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.
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 VLC ETF had an average annual return of 8.83%. During the same time, the VAP ETF returned 6.07%.
Okay, one final thing. Let’s talk about the company responsible for the ETF. There are too many factors that go into our internal scoring of fund providers to step through in this article. The provider for these ETFs is Vanguard. Vanguard ranks highly for our scores of ETF providers and issuers in Australia. We consider Vanguard to be in Australia’s top three ETF providers for retail investors, advisers and institutions.
In summary, the VAP ETF ranks higher against our internal scoring methodology but not by much compared to VLC.
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…