Why investors study the MSCI Australian Large Companies Index ETF and S&P/ASX Dividend Opportunities ETF
The Vanguard VLC ETF provides exposure to the MSCI Australian Shares Large Cap Index. This index is a ‘free float-adjusted market capitalization index’ which provides investors with exposure to the largest companies on the ASX.
Investors looking for exposure to 50 high yielding Australian companies may find the iShares IHD ETF of interest. This is a low-cost way to access high-yielding Australian companies through a single fund.
Want to know (lots) more? Read through our full IHD ETF review: see our IHD ETF review now.
Obviously, an easy way to analyse any ETF or fund like IHD or VLC is with quantitative methods, such as studying the fees and past performance (keeping in mind past performance is no guarantee of future performance).
We’ll keep it easy and just study the fees. Based on our data for December 2021, the VLC ETF has a management expense ratio (MER) of 0.20% while the IHD ETF’s yearly fee was 0.30%.So VLC 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.
How do they perform?
Performance matters. 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 solid return one year just to generate lacking 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 VLC ETF had an average annual return of 14.93%. During the same time, the IHD ETF returned 13.08%.
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 VLC 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. IHD’s provider is iShares. 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.
Conclusion
Did you know we have free reports? View our ASX VLC review and ASX IHD review today.
For us, the IHD ETF rates positively against our internal scoring methodology, but only just.
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…
