If you’re looking for the top ETFs this year, the iShares S&P/ASX Dividend Opportunities ETF (ASX: IHD) and the Betashares Australian Ex-20 Portfolio Diversifier ETF (ASX: EX20) could be worthy of your watchlist.
Why investors study the S&P/ASX Dividend Opportunities ETF and Australian Ex-20 Portfolio Diversifier ETF
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.
Want to know (lots) more? Read through our full EX20 ETF review: see our EX20 ETF review now.
Obviously, an easy way to analyse any ETF or fund like EX20 or IHD 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 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%.
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 IHD 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. EX20’s provider is Betashares. Betashares ranks highly for our scores of ETF providers and issuers in Australia. We believe BetaShares is one of the leading providers of index and non-index style products to retail investors in Australia.
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…