1. The SPDR SPY ETF (ASX:SPY) ETF
The SPDR SPY ETF is the oldest ETF in the world and provides exposure to the 500 largest US-listed shares. These 500 shares represent approximately 80% of the total market capitalisation of the US stock market.
According to our most recent data, the SPY ETF had $54.94 million of money invested. Given its funds under management (also known as FUM or ‘market cap’) is less than $100 million, you should consider if this ETF is still too small and if it is sustainable for the ETF issuer. At Best ETFs we say an ETF with more than $100 million invested is typically more sustainable than one with less than $100 million (at least). However, there are exceptions to this general rule, especially if the ETF issuer/provider is reputable and committed to growing the ETF’s FUM through effective marketing strategies and distribution to financial advisers.
Fees to consider
According to our numbers, the annual management fee on the SPY ETF is 0.09%. The issuer, SPDR, collects this fee automatically.
Meaning, if you invested $2,000 in the SPY ETF for a full year you could expect to pay management fees of around $1.80. This fee is different from the fee you pay to your brokerage provider (e.g. CommSec, NabTrade, SelfWealth, etc.), which is the fee to buy or sell the ETF. In addition to a management fee charged by the issuer, be mindful to check the ‘spread‘ for the ETF.
A fee comparison
Fees aren’t the only key consideration for ETF investors, but it’s an easy thing to do. To understand if the ETF you’re looking at is too costly, compare it with other ETFs from the same sector, and against the industry average. For example, the average management fee (MER) across all of the ETFs covered by the Best ETFs Australia team was 0.5%, which is $10.00 per $2,000 invested. Keep in mind that small changes in the fees paid can make a big difference after 10 or 20 years. You should read the SPY Product Disclosure Statement (PDS), available on the ETF issuer’s website, because it will detail the fees, tax implications and the latest information.
Want to hear more about the SPY ETF? View our free investment review.
2. The BetaShares AAA ETF (ASX:AAA) ETF
The BetaShares AAA ETF provides investors with exposure to Australian cash, without the need to open a bank account or have capital locked up in a term deposit.
With our numbers for December 2020, AAA’s FUM stood at $2205.98 million. Since the AAA’s FUM is over $100 million, our investing team would say the ETF has met our minimum criteria for the total amount invested, otherwise known as FUM. A very sustainable ETF in the Index sector should be able to scale well and become profitable for the ETF issuer.
Are the fees for the AAA ETF bad?
BetaShares, the ETF issuer, charges a yearly management fee of 0.18% for the AAA ETF. Meaning, if you invested $2,000 for a full 12-month period you could expect to pay a base management fee of around $3.60.
The management fee is above the average for all ETFs on our list of ASX ETFs, but keep in mind the ETF may be able to justify the higher price tag with superior performance over time.
Want to know more? Get our team’s free AAA ETF review. Simply click here now.