What are top Australian shares ETFs for 2022? We think the Vanguard Australian Shares High Yield ETF (ASX: VHY) and BetaShares Geared Australian Equity Fund (Hedge Fund) ETF (ASX: GEAR) 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%.
BetaShares GEAR Fund is an internally geared fund, investing in the largest 200 companies on the ASX, by market capitalisation.
Keep learning about the GEAR ETF on our free report page. See the ASX GEAR 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 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.
Too long, didn’t read (TL;DR)
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…