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Why I like the VanEck Vectors Australian Equal Weight ETF (ASX:MVW)

VanEck Vectors Australian Equal Weight ETF (ASX: MVW) is an exchange-traded fund (ETF) that provides exposure to the largest shares listed on the Australian stock exchange.

Equal weight means all companies have the same weighting, regardless of size or market capitalisation. Holdings are rebalanced every three months to ensure no positions become too big or small.

Since launching in 2014, MVW has outperformed the S&P/ASX 200 benchmark by 1.76% per annum while also taking on less risk.

Diversification is key

As a result of the equal weightings, MVW is more diversified than most ASX index funds. Why is this important? Diversification helps reduce the risk of any one holding or sector. Illustrated below is the sector weighting of MVW compared to the ASX 200 Index.

Source: MVW April Fund Flyer

Where Financials and Materials make up 50% of the ASX Index, for MVW it is only 36%. This reduces exposure to the Big 4 banks – Commonwealth Bank (ASX: CBA), ANZ Bank (ASX: ANZ), National Australia Bank (ASX: NAB) and Westpac Banking Corp (ASX: WBC) and the major miners – BHP Group (ASX: BHP) and Rio Tinto (ASX: RIO).

Moreover, it offers better exposure to the Technology, Industrial and Consumer Staples sectors.

Past performance

The ETF has a three-year return of 8.40% per annum and a seven-year return of 9.37% per annum.

As mentioned above, it has outperformed the benchmark S&P/ASX 200 index by 1.76% annum.

If you invested $10,000 in MVW and a friend invested $10,000 in the benchmark index in 2014, you would be $1,976 richer today than your mate.

Dividends are paid twice a year. The ETF has a current dividend yield of 2.35%.

Fees and risks

MVW has an annual management fee of 0.35%.

Relative to Australian Index trackers Vanguard Australian Shares Index ETF (ASX: VAS) and iShares Core S&P/ASX 200 ETF (ASX: IOZ), which have management fees of 0.10% and 0.09% respectively, MVW is expensive.

The ETF only consists of Australian companies therefore investors are not diversified across geographies. Australia consists of roughly 2% of the worlds share market, so there is a lot of other regions to consider.

My take

MVW would form the core of your investment portfolio. For more information on core and satellite investing click here.

Personally, if I wanted a broad-based Australian Index ETF, I would choose MVW. I like its diversification away from the big banks and miners and believe it will continue to outperform the benchmark index.

For further reading, be sure to check out the full ETF report for MVW here.

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

Low fees? Check.

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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.

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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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At the time of publishing, Lachlan does not have a financial or commercial interest in any of the ETFs mentioned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

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General Financial Advice warning
The information on this website is general financial advice only. That means, the advice does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. Please read our Terms & Conditions and Financial Services Guide before using this website.

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