Now could be an opportune time to run the rule over the Vaneck Australian Resources ETF (ASX: MVR) and Vanguard MSCI Australian Small Companies Index ETF (ASX: VSO). Using our internal quantitative analysis, these ETFs appear to offer good exposure to the Australian shares sector.
Getting to know the VSO and MVR ETFs
The VanEck MVR ETF provides focused exposure to the Australian resources sector, which is a significant part of the Australian economy. This is a low-cost way to invest in the Australian resources industry through a single fund.
The Vanguard VSO ETF provides exposure to a diversified portfolio of Australian small caps and tracks the MSCI Australian Shares Small Cap Index. This is a low-cost way to access the performance of Australian small-cap shares through a single fund.
Note: you can continue learning about the VSO ETF on our report page. ASX VSO report.
To make this article easier to digest, we’ll just study the fees or ‘management expense ratio’ (MER). Using data for December 2020, the MVR ETF has an MER of 0.35% while the VSO ETF had a yearly fee of 0.30%. So, VSO wins on this metric. Keep in mind, a more useful metric to know is the fee quartiles that these ETFs find themselves in (note: quartile 1 is best). Meaning, we take all the Australian shares shares ETFs in our database and divide them into 4 quartiles, based on their fees. For example, any ETF which has a fee below 0.3% would be considered in our first (best) quartile.
Performance analysis
Performance is important. Keep in mind, performance isn’t everything — and past performance is not indicative of future performance. It’s just one part of a much bigger picture. The reason we say performance is not everything is because of volatility of financial markets and the economy from one year to the next. Some ETFs and funds can put in a good return one year just to generate poor returns the next time around. That’s why we prefer three-year or seven-year track records over one-year track records. It can smooth out the temporary performances caused by external factors. Both ETFs have achieved our three-year performance hurdle. As of December 2020, the MVR ETF had an average annual return of 11.09%. During the same time, the VSO ETF returned 9.50%.
Best ETFs Takeaway
To keep reading about these two ETFs, be sure to visit our free MVR ETF report or VSO ETF review.
In summary, the VSO ETF ranks better against our internal scoring methodology but not by much compared to MVR.
Please, keep in mind, there is much more to picking a good ETF. That’s why you should now use these skills to find the best ETF you can. If you want the name of our team’s top ETF pick for 2021, keep reading…
