Now could be an opportune time to run the rule over the Vaneck Australian Resources ETF (ASX: MVR) and Vanguard Australian Shares High Yield ETF (ASX: VHY). Using our internal quantitative analysis, these ETFs appear to offer strong exposure to the Australian shares sector.
Getting to know the VHY and MVR ETFs
The VanEck MVR ETF provides focused exposure to the Australian resources sector, which is a significant part of the Australian economy. This is a low-cost way to invest in the Australian resources industry through a single fund.
The Vanguard VHY ETF provides exposure to the largest dividend-paying Australian shares, based on market capitalisation and forecast dividend yield. It tracks the FTSE Australian High Dividend Yield Index. The index excludes real estate investment trusts (REITs) and caps the total exposure to any sector/industry at 40%.
Note: you can continue learning about the VHY ETF on our report page. ASX VHY report.
To make this article easier to digest, we’ll just study the fees or ‘management expense ratio’ (MER). Using data for December 2020, the MVR ETF has an MER of 0.35% while the VHY ETF had a yearly fee of 0.25%. So, VHY wins on this metric. Keep in mind, a more insightful metric to know is the fee quartiles that these ETFs find themselves in (note: quartile 1 is best). Meaning, we take all the Australian shares ETFs in our database and put them into 4 quartiles, based on their fees. For example, any ETF which has a fee below 0.3% would be considered in our first (best) quartile.
Let’s look at the past results. 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 strong return one year just to generate weak 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 MVR ETF had an average annual return of 11.09%. During the same time, the VHY ETF returned 6.22%.
Best ETFs Takeaway
In summary, the VHY ETF ranks better against our internal scoring methodology but not by much compared to MVR.
Please, keep in mind, there is much more to choosing 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…