Why investors study the Core S&P/ASX 200 ETF and FTSE RAFI Australia 200 ETF
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 BetaShares QOZ ETF provides exposure to a ‘fundamentally weighted’ index of 200 large Australian shares. This ETF focuses on weighting the portfolio with a focus on ‘economic importance’ rather than market capitalisation, while also aiming to outperform traditional market-cap weighted indices.
Want to know (lots) more? Read through our full QOZ ETF review: see our QOZ ETF review now.
Obviously, an easy way to analyse any ETF or fund like QOZ or IOZ 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 simple and just study the fees. Based on our data for July 2022, the IOZ ETF has a management expense ratio (MER) of 0.09% while the QOZ ETF’s yearly fee was 0.40%.So IOZ 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 we study past performance
Time to look at past returns. 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 attractive return one year just to generate unsatisfactory 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 July 2022, the IOZ ETF had an average annual return of 6.22%. During the same time, the QOZ ETF returned 7.23%.
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 IOZ 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. QOZ’s provider is BetaShares. Betashares ranks highly for our scores of ETF providers and issuers in Australia. We believe BetaShares is one of the leading providers of index and non-index style products to retail investors in Australia.
In summary, the QOZ ETF ranks higher against our internal scoring methodology but not by much compared to IOZ.
Please, keep in mind, there is much more to choosing 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 2024, keep reading…