Could SPDR S&P/ASX 200 (ASX: STW) be a really great long-term buy idea?
What is SPDR S&P/ASX 200?
The exchange-traded fund’s (ETF’s) goal is to match the returns of the S&P/ASX 200 Index.
The businesses in the ASX 200 are 200 of the biggest ASX shares around. It essentially measures most of the ASX share market.
As you’d expect, it owns around 200 holdings. The biggest exposures are to the largest businesses in Australia.
The biggest ten are: Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), CSL Limited (ASX: CSL), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group Ltd (ASX: ANZ), Wesfarmers Ltd (ASX: WES), Woolworths Group Ltd (ASX: WOW), Macquarie Group Ltd (ASX: MQG) and Rio Tinto Limited (ASX: RIO).
I’m sure you’ve heard of most, if not all, of the above businesses.
As you can probably guess from the biggest holdings, financials and materials makes up around half of the whole STW ETF portfolio.
Is it a good long-term buy idea?
One of the most important things to know about each ETF is the management costs – this has an annual fee of 0.13%. That’s attractive because it means that investors get to keep most of the returns, rather than handing it over to fund managers.
However, an ETF can only perform as strongly as its underlying holdings. STW ETF has done okay, but not great, over the last five years. It has made an average net return per annum of around 10% over that 5-year period.
Due to the composition of the holdings, a substantial portion of the returns each year are from dividends.
If you’re just wanting low cost exposure to the ASX blue chip shares then STW ETF is one of the best ways to get it. But the current holdings are not likely to produce strong returns over the next few years.
There are other ETFs that may be able to provide strong returns and capital growth, even if the income isn’t as good initially.
