What are top Australian shares ETFs for 2021? We think the Vanguard Australian Shares High Yield ETF (ASX: VHY) and VanEck Vectors Australian Property ETF (ASX: MVA) ASX ETFs could be worthy of closer inspection. Here’s why…
Popping the hood on these 2 ETFs
The Vanguard VHY ETF provides exposure to the largest dividend-paying Australian shares, based on market capitalisation and forecast dividend yield. It tracks the FTSE Australian High Dividend Yield Index. The index excludes real estate investment trusts (REITs) and caps the total exposure to any sector/industry at 40%.
The VanEck MVA ETF provides investors with exposure to the Australian property market by investing in a portfolio of ASX-listed property companies and real estate investment trusts (REITs).
Keep learning about the MVA ETF on our free report page. See the ASX MVA review.
In addition to using our years of experience analysing ETFs, there are simple tricks any investor can use to compare similar ETFs.
The first is fees. Our team uses quant methods to score ETFs based on its fees and costs, then we slice and dice across sectors, strategy types and providers.
We’ll keep it basic and just study the fees. Based on our data for July 2021, the VHY ETF has a management expense ratio (MER) of 0.25% while the MVA ETF’s yearly fee was 0.35%.So VHY 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.
As Jerry Maguire said, ‘show me the money’. 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 positive return one year just to generate inferior 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 VHY ETF had an average annual return of 12.14%. During the same time, the MVA ETF returned 8.35%.
Too long, didn’t read (TL;DR)
For us, the VHY ETF ranks fairly better for our internal scoring methodology but not by much.
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…