Now could be the right time to take a look at the iShares S&P/ASX 20 ETF (ASX: ILC) and SPDR S&P/ASX 200 Listed Property Fund ETF (ASX: SLF). Using our internal quantitative analysis, these ETFs seem to offer strong exposure to the Australian shares sector.
Here’s how we think about the ILC and SLF ETFs
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.
The SLF ETF by SPDR invests in shares/securities of listed real estate investment trusts (REITs). Investors can use these property-focused ETFs to get exposure to a broad basket of trusts and companies exposed to property, including office spaces, commercial rental spaces and construction projects.
Get our team’s ILC ETF review, available free when you click this link: access the free investment report.
To make this article easier to digest, we’ll just study the fees or ‘management expense ratio’ (MER). Using data for July 2021, the ILC ETF has an MER of 0.24% while the SLF ETF had a yearly fee of 0.40%. As a result, ILC comes out on top. 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 July 2021, the ILC ETF had an average annual return of 11.98%. During the same time, the SLF ETF returned 7.22%.
In summary, the ILC ETF rates better for our internal scoring methodology but not by much compared to SLF.
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…