Could 2020 be the year to invest in ETFs such as the Fidelity Global Emerging Markets Fund (Managed Fund) ETF (ASX: FEMX) and iShares Edge MSCI Australia Minimum Volatility ETF (ASX: MVOL)?
How and why Aussie investors use the FEMX ETF
The Fidelity FEMX Fund provides investors with exposure to the performance of emerging market companies. The Fidelity Global Emerging Markets Fund is a managed fund that has been operating since 2013. It listed on the ASX in October 2018, making it easier for investors to enter and exit the fund.
As at the end of last month, the FEMX ETF had $76.69 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 FEMX ETF is 0.99%. The issuer, Fidelity, takes this out automatically.
What this fee means is, if you invested, say, $2,000 in the FEMX ETF for a full year you could expect to pay management fees of around $19.80. 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 0.5%, which is around $10.00 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 FEMX Product Disclosure Statement (PDS), available on the ETF issuer’s website, because it has the complete and up-to-date information.
Did you know you access our free investment report? View the free FEMX ETF report.
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Getting to know the MVOL ETF
The iShares MVOL ETF invests in Australian companies, with a focus on minimising volatility and risk within the portfolio. This is a low-cost way to access top Australian companies through a single fund.
At the end of May 2020, MVOL’s FUM stood at $42.8 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 MVOL’s fees too high?
iShares charge a yearly management fee of 0.3% for the MVOL ETF. Meaning, with $2,000 invested for 12 months you can expect to pay a base management fee of around $6.00.
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 FEMX ETF review available on our website right now. Click here to access our comprehensive investment report.
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