Is 2021 going to be the year to invest in ASX ETFs like the Betashares Australia 200 ETF (ASX: A200) and iShares MSCI Emerging Markets ETF (ASX: IEM)?
How an Aussie (or Kiwi!) investor can use the A200 ETF
The Betashares A200 ETF provides exposure to the largest 200 Australian companies, based on market capitalisation. Unlike many other Australian shares ETFs, A200 uses the Solactive Australia 200 Index. This is virtually the same thing as the indices provided by S&P/ASX, as it also uses a market capitalisation weighting.
According to our most recent data, the A200 ETF had $844.98 million of money invested. With A200’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 Australian 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 A200 ETF is 0.07%. The issuer, Betashares, collects this fee automatically.
Meaning, if you invested $2,000 in the A200 ETF for a full year you could expect to pay management fees of around $1.40. 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 0.5%, which is $10.00 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 A200 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 A200 ETF report.
Key facts about the IEM ETF
The iShares IEM ETF provides investors with exposure to a portfolio of over 800 companies from emerging markets, like China, India and Brazil.
With our numbers for Oct 2020, IEM’s FUM stood at $767.33 million. Since the IEM’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 IEM ETF bad?
iShares, the ETF issuer, charges a yearly management fee of 0.67% for the IEM ETF. Meaning, if you invested $2,000 for a full 12-month period you could expect to pay a base management fee of around $13.40.
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 IEM review available on our website by clicking this link to access our report.
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