Is it time to invest in ETFs such as the BetaShares Diversified High Growth ETF (ASX: DHHF) and InvestSMART Intelligent Investor Australian Equity Income Fund (Managed Fund) ETF (ASX: INIF)? These two ASX ETFs operate in the Diversified ETF and Australian shares sectors, respectively.
1. The BetaShares DHHF ETF (ASX:DHHF)
The BetaShares DHHF ETF provides investors with a diversified portfolio of assets, including shares, property securities, bonds and cash, across Australian and global markets.
As at the end of last month, the DHHF ETF had $3.33 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 DHHF ETF is 0.26%. The issuer, BetaShares, takes this out automatically.
What this fee means is, if you invested, say, $2,000 in the DHHF ETF for a full year you could expect to pay management fees of around $5.20. This fee is 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. Small changes in fees can make a big difference after 10 or 20 years. To understand all of the fees, you should read the DHHF Product Disclosure Statement (PDS), available on the ETF issuer’s website, because it has the complete and up-to-date information.
These are just the basics of the DHHF ETF. To learn more, access our free investment report.
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2. The InvestSMART INIF ETF (ASX:INIF)
The Intelligent Investor INIF Fund is an actively managed ETF, with a focus on a research-led, value investing approach. This fund also focuses on providing investors with exposure to companies with a sustainable income yield.
At the end of April 2020, INIF’s FUM stood at $24.72 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 Active ETF (e.g. ETMF) sector ETFs, using our full list.
Are INIF’s fees too high?
InvestSMART charge a yearly management fee of 0.97% for the INIF ETF. Meaning, with $2,000 invested for 12 months you can expect to pay a base management fee of around $19.40.
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.
Before you read the Product Disclosure Statement (PDS) or speaking to your financial adviser about the DHHF ETF report. Take a look at our free investment report.
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