2022’s premium ETFs: VLC or IHD?

Now could be the right time to take a look at the Vanguard MSCI Australian Large Companies Index ETF (ASX: VLC) and iShares S&P/ASX Dividend Opportunities ETF (ASX: IHD). Using our internal quantitative analysis, these ETFs seem to offer strong exposure to the Australian shares sector.

Here’s how we think about the VLC and IHD ETFs

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.

Get our team’s VLC ETF review, available free when you click this link: access the free investment report.

a gif of 4 etf reports

ASX: VLC or ASX: IHD 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 VLC ETF has an MER of 0.20% while the IHD ETF had a yearly fee of 0.30%. As a result, VLC comes out on top. Keep in mind, a more insightful 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 put 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.

Track record

Let’s look at the past results. 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 strong return one year just to generate weak 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%.

In summary

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

For us, the IHD ETF rates more effectively 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…

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