If you’re looking for the top ETFs this year, the Vanguard Australian Property Securities Index ETF (ASX: VAP) and the Betashares Australian Sustainability Leaders ETF (ASX: FAIR) could be worthy of your watchlist.
Why investors study the Australian Property Securities Index ETF and Australian Sustainability Leaders ETF
The Vanguard VAP ETF provides investors with low-cost exposure to listed Australian property companies and real estate investment trusts (REITs).
The BetaShares FAIR ETF provides exposure to the largest Australian shares and focuses on companies which operate ethically. FAIR has been certified by the Responsible Investment Association Australasia (RIAA), as part of the Responsible Investment Certification Program.
Want to know (lots) more? Read through our full FAIR ETF review: see our FAIR ETF review now.
Obviously, an easy way to analyse any ETF or fund like FAIR or VAP 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 VAP ETF has a management expense ratio (MER) of 0.23% while the FAIR ETF’s yearly fee was 0.49%.So VAP comes out on top. 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 VAP ETF had an average annual return of 6.07%. During the same time, the FAIR ETF returned 9.75%.
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 VAP 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. FAIR’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.
For us, the FAIR ETF rates positively against our internal scoring methodology, but only just.
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…