You might be sitting back and considering the ETF Securities EURO STOXX 50 ETF (ASX: ESTX) and thinking that May could be as good of a time as any to take closer look.
What does the ESTX do for a diversified portfolio?
The ETFS ESTX ETF provides investors with exposure to 50 blue-chip companies from 12 eurozone countries; namely Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.
Pay attention to FUM
As at the end of last month, the ESTX ETF had $45.73 million of money invested. With a funds under management (FUM) or ‘market cap’ figure of less than $100 million, it’s important to consider if this ETF is still too small. We say an ETF with more than $100 million invested is typically more sustainable than one with less than $100 million (at least) because if an ETF is too small it may not be sustainable for an ETF issuer, such as ETF Securities. However, there are exceptions to this rule of thumb, especially if the ETF issuer/provider is committed to growing the ETF’s FUM to the point where it becomes profitable.
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Consider the ETF’s fees & costs
With a yearly management fee of 0.35% charged by ETF Securities, if you invested $2,000 in the ESTX ETF for a full year you could expect to pay management fees of around $7.00. This does not include any performance fees earned by the ETF’s manager for doing a good job. For context, the average management fee (MER) of all ETFs covered by Best ETFs Australia on our complete list of ASX ETFs is 0.54% or around $10.80 per $2,000 invested. Keep in mind, small changes in fees can make a big difference after 10 or 20 years.
In addition to a yearly management fee, there are other costs investors must consider, including brokerage and taxes. A specific cost for ETF and mFund investors to consider is the buy-sell spread, which is the slippage or ‘invisible’ cost paid by an investor when he or she buys or sells the ETF. For the ESTX ETF, the most recent average monthly buy-sell spread we gathered (April 2020) was 0.35%. Remember, the lower (or ‘tighter’) the buy-sell spread, the better. This buy-sell spread was below the average ETF spread of 0.51%, so that’s a good thing.
Takeaway
These are just some of the considerations or factors you would need to look at when weighing up the ESTX ETF. Before doing anything, take a look at our ETF Securities ESTX report – it’s free. While you’re at it, don’t forget to search our complete list of ASX ETFs.
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