The iShares Core S&P/ASX 200 ETF (ASX: IOZ) and SPDR S&P/ASX 50 ETF (ASX: SFY) are exchange-traded funds (ETFs) operating in the Australian shares sector, and aiming to make investing as simple as possible.
How the IOZ and SFY ETFs fit in a portfolio
The iShares IOZ ETF provides exposure to the largest 200 Australian shares, based on market capitalisation. This is a low-cost way to access top Australian companies through a single fund.
The SPDR SFY ETF is the only Australian ETF providing exposure to Australia’s top 50 listed companies, by market capitalisation. SFY provides a low-cost way to invest in the ASX’s top 50 companies through a single fund.
See our ASX SFY 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 SFY and IOZ is to study the fee load. No one likes paying high fees if they don’t need to. Here at Best ETFs and Rask Australia, 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 December 2021, the IOZ ETF has an MER of 0.09% while the SFY ETF had a yearly fee of 0.29%. As a result, IOZ 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 December 2021, the IOZ ETF had an average annual return of 14.66%. During the same time, the SFY ETF returned 13.93%.
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. As you guessed, the provider backing the IOZ ETF is iShares. And iShares ranks highly for our scores of ETF providers and issuers in Australia. We consider iShares to be among the best ETF providers in Australia and globally. SFY’s ETF provider on the ASX is SPDR. SPDR ranks highly for our scores of ETF providers and issuers in Australia. We think SPDR is one of Australia’s top 10 ETF providers for advisers and institutions, and its ETFs on the ASX provide good exposure to particular financial markets for retail investors.
What it all means
In summary, the IOZ ETF rates better for our internal scoring methodology but not by much compared to SFY.
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 2022, keep reading…