Could 2020 be the year to invest in ETFs such as the Betashares S&P/ASX Australian Technology ETF (ASX: ATEC) and iShares Treasury ETF (ASX: IGB)?
How and why Aussie investors use the ATEC ETF
The BetaShares ATEC ETF provides exposure to the top Australian technology companies that are listed on the ASX. This is a low-cost way to access the Australian technology sector through a single fund.
As at the end of last month, the ATEC ETF had $9.65 million of money invested. Since its 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. At Best ETFs we say an ETF with more than $100 million invested is typically more sustainable than one with less than $100 million (at least). 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.
Fees & costs
The yearly management fee on the ATEC ETF is 0.48%. The issuer, Betashares, takes this out automatically.
What this fee means is, if you invested, say, $2,000 in the ATEC ETF for a full year you could expect to pay management fees of around $9.60. These fees would be automatically deducted from your investment. This does not include any performance fees, and it’s different from the fee you pay to your brokerage provider (e.g. CommSec, NabTrade, SelfWealth, etc.) to buy or sell the ETF. Importantly, you should also be mindful of the ‘spread‘ for the ETF.
Is the ETF too expensive?
The easiest way to know if the ETF is too costly is to compare it with other ETFs in the same sector, and against the industry average. The average management fee (MER) across all of the ETFs covered by Best ETFs Australia is 0.54%, which is around $10.80 per $2,000 invested. Keep in mind, small changes in fees can make a big difference after 10 or 20 years. What’s more, you should read the ATEC Product Disclosure Statement (PDS) because it has the complete and updated information on all fees.
Did you know you access our free investment report? View the free ATEC ETF report.
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Getting to know the IGB ETF
The iShares IGB ETF provides investors with diversified access to Australian government bonds with a broad range of maturities. This is a relatively low-cost way to get exposure to Australian Treasury bonds in a single fund.
At the end of April 2020, IGB’s FUM stood at $64.66 million. With less than $100 million invested, it’s important to consider if this ETF is still too small and you should wait to buy in. If you’re worried about the size of the ETF, consider comparing it alongside some of the other Index sector ETFs, using our full list.
Are IGB’s fees too high?
iShares charge a yearly management fee of 0.18% for the IGB ETF. Meaning, with $2,000 invested for 12 months you can expect to pay a base management fee of around $3.60.
The management fee is above the average for all ETFs on our radar, but keep in mind the ETF may be able to justify it.
We’ve got a full ATEC ETF review available on our website right now. Click here to access our comprehensive investment report.
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