What do the VHY and GEAR ETFs do?
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%.
BetaShares GEAR Fund is an internally geared fund, investing in the largest 200 companies on the ASX, by market capitalisation.
If you like the look of the VHY ETF, check out our free VHY ETF report.
One of the easy ways we compare ETFs such as GEAR and VHY at Best ETFs and Rask Australia is by analysing the fees and costs of an ETF. Internally, we score ETFs based on management fees, plus indirect costs and we take into account the buy-sell spread. We like to look at the ‘all-in’ costs of buying and owning an ETF.
We’ll keep it basic and just study the fees. Based on our data for December 2021, the VHY ETF has a management expense ratio (MER) of 0.25% while the GEAR ETF’s yearly fee was 0.80%.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.
Show me the money
Typically, we want to a see ETFs with a three-year track record of compelling performance. Put another way, when an ETF achieves a three year track record, we score it greater than might otherwise be the case. That said, there are exceptions to this rule of thumb. Also, remember that it’s hard to compare an ETF with a hedge fund strategy against other ETFs. Why? Hedge fund ETFs often use inverse or ‘opposite’ strategies which means that they’re designed to move in an opposite direction to the market. Nevertheless, we can see that both ETFs met their three-year performance milestone.
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 VHY 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.
Best ETFs Takeaway
For us, the VHY ETF ranks greater 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 2022 in a free report. Keep reading to find out how to get our analyst’s report emailed to you right now…