2 top Aussie shares ETFs for 2021 and beyond

We recently crunched some numbers in our database and found that Vanguard MSCI Australian Large Companies Index ETF (ASX: VLC) and iShares S&P/ASX 20 ETF (ASX: ILC) ranked higher than most ETFs in the Australian shares sector.

So what do they 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 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.

If you want to go beyond the basics with the VLC ETF you can learn more about it by reading our free review.

Obviously, an easy way to analyse ETFs like ILC and VLC is by using quantitative methods and judging the fees and past performance (note: past performance is no guarantee of future performance).

At Rask Australia and Best ETFs, our team scores ETFs and funds based on the management fees and we take into account the buy-sell spread and other costs. We’ll then compare these ‘all in’ fees and costs across sectors, strategy types and providers to get a sense of fees across the entire market.

To make this article easier to digest, we’ll just study the fees or ‘management expense ratio’ (MER). Using data for December 2020, the VLC ETF has an MER of 0.20% while the ILC ETF had a yearly fee of 0.24%. As a result, VLC comes out on top. Keep in mind, a more useful 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 classify 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.

How we study past performance

Time to look at past returns. 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 attractive return one year just to generate unsatisfactory 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 ILC ETF returned 8.64%.

Now we need to scrutinise the issuer or provider of the ETF. There are too many factors that go into our internal scoring of fund providers to detail here — here’s the quick version: As you guessed, the issuer of the VLC ETF 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. ILC’s provider 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.

Next steps

If you’d like to learn more about these two ETFs, be sure to visit our free VLC ETF report or ILC ETF review.

In summary, the ILC ETF ranks higher against our internal scoring methodology but not by much compared to VLC.

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…

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here or enter your email address below to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just enter your email address below and we'll send you the report right away.

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just click the link below and enter your email address. We'll send you the report right away.

CLICK HERE TO GET THE REPORT

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