Are VSO & ILC worth a closer look in 2022?

Now could be an opportune time to run the rule over the Vanguard MSCI Australian Small Companies Index ETF (ASX: VSO) and iShares S&P/ASX 20 ETF (ASX: ILC). Using our internal quantitative analysis, these ETFs appear to offer good exposure to the Australian shares sector.

Getting to know the ILC and VSO ETFs

The Vanguard VSO ETF provides exposure to a diversified portfolio of Australian small caps and tracks the MSCI Australian Shares Small Cap Index. This is a low-cost way to access the performance of Australian small-cap shares through a single fund.

The iShares ILC ETF provides exposure to the largest 20 Australian stocks, giving you targeted exposure to Australian blue-chip companies. This is a low-cost way to access top Australian companies through a single fund.

Note: you can continue learning about the ILC ETF on our report page. ASX ILC report.

a gif of 4 etf reports

ASX: VSO or ASX: ILC price performance

To make this article easier to digest, we’ll just study the fees or ‘management expense ratio’ (MER). Using data for December 2021, the VSO ETF has an MER of 0.30% while the ILC ETF had a yearly fee of 0.24%. So, ILC 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 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 analysis

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 VSO ETF had an average annual return of 20.08%. During the same time, the ILC ETF returned 14.08%.

Best ETFs Takeaway

To keep reading about these two ETFs, be sure to visit our free VSO ETF report or ILC ETF review.

In summary, the VSO ETF rates better for our internal scoring methodology but not by much compared to ILC.

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…

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