Is 2020 going to be the year to invest in ASX ETFs like the Vanguard MSCI Index International Shares ETF (ASX: VGS) and BetaShares Global Sustainability Leaders ETF (ASX: ETHI)?
How an Aussie (or Kiwi!) investor can use the VGS ETF
The Vanguard VGS ETF provides exposure to listed companies from developed markets around the world, excluding Australia. This ETF is not hedged so it is exposed to currency fluctuations.
According to our most recent data, the VGS ETF had $2111.82 million of money invested. With VGS’s total funds under management (FUM) figure over $100 million, the ETF meets our team’s minimum investment criteria for FUM levels. As a general rule, our team draws the line at $100 million for ETFs in the International shares sector because we believe that, relative to smaller ETFs, achieving this amount of FUM lowers the chance that the ETF issuer will close the ETF.
Fees to consider
According to our numbers, the annual management fee on the VGS ETF is 0.18%. The issuer, Vanguard, collects this fee automatically.
Meaning, if you invested $2,000 in the VGS ETF for a full year you could expect to pay management fees of around $3.60. This fee is different from the fee you pay to your brokerage provider (e.g. CommSec, NabTrade, SelfWealth, etc.), which is the fee to buy or sell the ETF. In addition to a management fee charged by the issuer, be mindful to check the ‘spread‘ for the ETF.
A fee comparison
Fees aren’t the only key consideration for ETF investors, but it’s an easy thing to do. To understand if the ETF you’re looking at is too costly, compare it with other ETFs from the same sector, and against the industry average. For example, the average management fee (MER) across all of the ETFs covered by the Best ETFs Australia team was 0.51%, which is $10.20 per $2,000 invested. Keep in mind that small changes in the fees paid can make a big difference after 10 or 20 years. You should read the VGS Product Disclosure Statement (PDS), available on the ETF issuer’s website, because it will detail the fees, tax implications and the latest information.
You can get a copy of our free investment review when click here to see the VGS ETF report.
Key facts about the ETHI ETF
The BetaShares ETHI ETF provides investors with exposure to a diversified portfolio of global companies that fit within the environmental, social and governance (ESG) framework set, along with screening out companies with significant exposure to fossil fuels. ETHI has been certified by the Responsible Investment Association Australasia (RIAA), as part of the Responsible Investment Certification Program.
With our numbers for July 2020, ETHI’s FUM stood at $727.38 million. Since the ETHI’s FUM is over $100 million, our investing team would say the ETF has met our minimum criteria for the total amount invested, otherwise known as FUM. A very sustainable ETF in the Index sector should be able to scale well and become profitable for the ETF issuer.
Are the fees for the ETHI ETF bad?
BetaShares, the ETF issuer, charges a yearly management fee of 0.59% for the ETHI ETF. Meaning, if you invested $2,000 for a full 12-month period you could expect to pay a base management fee of around $11.80.
The management fee is above the average for all ETFs on our list of ASX ETFs, but keep in mind the ETF may be able to justify the higher price tag with superior performance over time.
Get the full ETHI review available on our website by clicking this link to access our report.
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