If you’re looking for the top ETFs this year, the Vaneck Australian Equal Weight ETF (ASX: MVW) and the Vanguard MSCI Australian Large Companies Index ETF (ASX: VLC) could be worthy of your watchlist.
Why investors study the Australian Equal Weight ETF and MSCI Australian Large Companies Index ETF
The VanEck MVW ETF provides exposure to over 60 of the largest and most liquid Australian shares, equally weighted. By equally weighting shares, this ETF aims to reduce concentration risk in specific Australian stocks and sectors.
The Vanguard VLC ETF provides exposure to the MSCI Australian Shares Large Cap Index. This index is a ‘free float-adjusted market capitalization index’ which provides investors with exposure to the largest companies on the ASX.
Want to know (lots) more? Read through our full VLC ETF review: see our VLC ETF review now.
Obviously, an easy way to analyse any ETF or fund like VLC or MVW is with quantitative methods, such as studying the fees and past performance (keeping in mind past performance is no guarantee of future performance).
We’ll keep it basic and just study the fees. Based on our data for December 2020, the MVW ETF has a management expense ratio (MER) of 0.35% while the VLC ETF’s yearly fee was 0.20%. Therefore, VLC wins on this one. That said, a more useful metric to know is the fee quartiles that these ETFs find themselves in (note: quartile 1 is best). For example, any ETF which has a fee below 0.3% would be considered in our first (best) quartile.
Three-year return?
As Jerry Maguire said, ‘show me the money’. 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 positive return one year just to generate inferior 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 MVW ETF had an average annual return of 7.21%. During the same time, the VLC ETF returned 8.83%.
Finally, at Best ETFs Australia, we apply a rating to the ETF issuer or provider. That is, the company that starts and is responsible for operating the ETF on the ASX. There are too many considerations that go into our scoring to detail here. The issuer of MVW is Vaneck. VanEck ranks highly for our scores of ETF providers and issuers in Australia. Our team considers VanEck to be one of Australia’s leading providers of specialised ETFs and funds for retail investors and advisers. VLC’s provider is Vanguard. Vanguard ranks highly for our scores of ETF providers and issuers in Australia. We consider Vanguard to be in Australia’s top three ETF providers for retail investors, advisers and institutions.
Conclusion
Don’t forget our free reviews on ASX MVW and ASX VLC.
For us, the MVW ETF ranks fairly better for our internal scoring methodology but not by much.
We hope this article helped you analyse ETFs. Don’t forget, there’s a lot more to investing well than what we just outlined (risks, diversification, other potentially better ETFs, etc.). Our analyst team at Rask Australia spends months looking at new ASX investments (it’s our day job!). To make your life easier, you can get the name of our team’s top ETF pick for 2021 in a free report. Keep reading to find out how to get our analyst’s report emailed to you right now…
