Is 2021 going to be the year to invest in ASX ETFs like the Vanguard Global Aggregate Bond Index (Hedged) ETF (ASX: VBND) and SPDR S&P/ASX Australian Bond Fund ETF (ASX: BOND)?
How an Aussie (or Kiwi!) investor can use the VBND ETF
The Vanguard VBND ETF provides investors with exposure to government debt and investment-grade corporate debt from developed markets around the world.
According to our most recent data, the VBND ETF had $323.57 million of money invested. With VBND’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 Fixed interest – International 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 VBND ETF is 0.20%. The issuer, Vanguard, collects this fee automatically.
Meaning, if you invested $2,000 in the VBND ETF for a full year you could expect to pay management fees of around $4.00. 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 VBND 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 VBND ETF report.
Key facts about the BOND ETF
The name’s… the SPDR BOND ETF. BOND invests in Australian bonds which are investment grade and denominated in Australian dollars with maturities more than one year.
With our numbers for December 2020, BOND’s FUM stood at $48.73 million. Given it has less than $100 million invested, ask yourself (or your adviser) if the ETF is still too small (and if you should wait to buy into it). If you’re concerned the ETF might not be established enough, compare it alongside one of the other Index sector ETFs, using our full list of ETFs.
Are the fees for the BOND ETF bad?
SPDR, the ETF issuer, charges a yearly management fee of 0.24% for the BOND ETF. Meaning, if you invested $2,000 for a full 12-month period you could expect to pay a base management fee of around $4.80.
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 BOND review available on our website by clicking this link to access our report.
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