Now could be the right time to run the rule over the BetaShares FTSE RAFI Australia 200 ETF (ASX: QOZ) and Vanguard Australian Property Securities Index ETF (ASX: VAP). Using our internal quantitative analysis, these ETFs appear to offer attractive exposure to the Australian shares sector.
What do they do?
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.
The Vanguard VAP ETF provides investors with low-cost exposure to listed Australian property companies and real estate investment trusts (REITs).
To learn more about the QOZ ETF, read our free ETF investment report once you’re done with this article.
To make this article easier to digest, we’ll just study the fees or ‘management expense ratio’ (MER). Using data for December 2021, the QOZ ETF has an MER of 0.40% while the VAP ETF had a yearly fee of 0.23%. So, VAP wins on this metric. 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 classify 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.
How we study past performance
Time to look at past returns. 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 attractive return one year just to generate unsatisfactory 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 December 2021, the QOZ ETF had an average annual return of 13.13%. During the same time, the VAP ETF returned 13.02%.
Lastly, we need to consider the issuer or provider of the ETF. There are too many factors that go into our internal scoring of fund providers to detail here (you’d get bored pretty quickly). So here’s the quick version. As you guessed, the issuer of the VAP ETF 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.
In summary, the VAP ETF ranks higher against our internal scoring methodology but not by much compared to QOZ.
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 2022, keep reading…