In this short article, we’ll take a look at two top ETFs: iShares Core S&P/ASX 200 ETF (ASX: IOZ) and Betashares Australian Small Companies Select Fund (Managed Fund) ETF (ASX: SMLL).
What do the IOZ and SMLL ETFs do?
The iShares IOZ ETF provides exposure to the largest 200 Australian shares, based on market capitalisation. This is a low-cost way to access top Australian companies through a single fund.
The BetaShares SMLL Fund is an ASX-listed managed fund that aims to outperform the S&P/ASX Small Ordinaries Accumulation Index and provide investors with regular capital growth and income.
If you like the look of the IOZ ETF, check out our free IOZ ETF report.
One of the easy ways we compare ETFs such as SMLL and IOZ at Best ETFs and Rask Austalia is by analysing the fees and costs of an ETF. Internally, we score ETFs based on management fees, plus indirect costs and we take into account the buy-sell spread. We like to look at the ‘all-in’ costs of buying and owning an ETF.
We’ll keep it basic and just study the fees. Based on our data for July 2021, the IOZ ETF has a management expense ratio (MER) of 0.09% while the SMLL ETF’s yearly fee was 0.39%.So IOZ comes out on top. 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 July 2021, the IOZ ETF had an average annual return of 10.55%. During the same time, the SMLL ETF returned 11.41%.
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 IOZ is iShares. iShares ranks highly for our scores of ETF providers and issuers in Australia. We consider iShares to be among the best ETF providers in Australia and globally.
Best ETFs Takeaway
Don’t forget our free reviews on ASX IOZ and ASX SMLL.
For us, the IOZ 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…
