What are the iShares ILC and SPDR STW ETFs designed to do?
The iShares ILC ETF provides exposure to the largest 20 Australian stocks, giving you targeted exposure to Australian blue-chip companies. This is a low-cost way to access top Australian companies through a single fund.
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.
For more information on the ILC ETF, see our ASX ILC review.
We’ll keep it basic and just study the fees. Based on our data for December 2020, the ILC ETF has a management expense ratio (MER) of 0.24% while the STW ETF’s yearly fee was 0.13%. Therefore, STW 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.
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 ILC ETF had an average annual return of 8.64%. During the same time, the STW ETF returned 8.00%.
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 behind the ILC 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. . Meannwhile, STW’s provider 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.
For us, the ILC ETF ranks greater 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…