The Betashares Australia 200 ETF (ASX: A200) and Betashares FTSE RAFI Australia 200 ETF (ASX: QOZ) are exchange-traded funds (ETFs) operating in the Australian shares sector, and aiming to make investing as simple as possible.
How the A200 and QOZ ETFs fit in a portfolio
The Betashares A200 ETF provides exposure to the largest 200 Australian companies, based on market capitalisation. Unlike many other Australian shares ETFs, A200 uses the Solactive Australia 200 Index. This is virtually the same thing as the indices provided by S&P/ASX, as it also uses a market capitalisation weighting.
The BetaShares QOZ ETF provides exposure to a ‘fundamentally weighted’ index of 200 large Australian shares. This ETF focuses on weighting the portfolio with a focus on ‘economic importance’ rather than market capitalisation, while also aiming to outperform traditional market-cap weighted indices.
See our ASX QOZ report – it’s totally free.
Okay, so we know what they’re designed to do, the sectors and strategies. Now what? One of the quick ways to compare ETFs like QOZ and A200 is to study the fee load. No one likes paying high fees if they don’t need to. Here at Best ETFs and Rask Austalia, we begin by analysing the fees and ‘all in’ costs of an ETF or fund. Our team will score ETFs based on management fees, plus any other costs, then put them into quartiles by sector, strategy and across the entire ETF market.
To make this article easier to digest, we’ll just study the fees or ‘management expense ratio’ (MER). Using data for July 2021, the A200 ETF has an MER of 0.07% while the QOZ ETF had a yearly fee of 0.40%. As a result, A200 comes out on top. Keep in mind, a more useful 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 divide 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.
Performance is important. 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 good return one year just to generate poor 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 A200 ETF had an average annual return of 10.75%. During the same time, the QOZ ETF returned 9.12%.
One final point: the ETF provider is important. In Australia, we believe there are a handful of stand-out ETF providers and many that are mid-pack or very fresh. The issuer of the A200 and QOZ ETFs 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.
What it all means
In summary, the A200 ETF rates better for our internal scoring methodology but not by much compared to QOZ.
Please, keep in mind, there is much more to picking 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…