If you’re looking for the top ETFs this year, the Betashares FTSE RAFI Australia 200 ETF (ASX: QOZ) and the Vanguard Australian Shares Index ETF (ASX: VAS) could be worthy of your watchlist.
Why investors study the FTSE RAFI Australia 200 ETF and Australian Shares Index ETF
The BetaShares QOZ ETF provides exposure to a ‘fundamentally weighted’ index of 200 large Australian shares. This ETF focuses on weighting the portfolio with a focus on ‘economic importance’ rather than market capitalisation, while also aiming to outperform traditional market-cap weighted indices.
The Vanguard VAS ETF provides exposure to the largest 300 Australian shares, based on market capitalisation. This is a low-cost way to access top Australian companies through a single fund.
Want to know (lots) more? Read through our full VAS ETF review: see our VAS ETF review now.
Obviously, an easy way to analyse any ETF or fund like VAS or QOZ 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 easy and just study the fees. Based on our data for July 2021, the QOZ ETF has a management expense ratio (MER) of 0.40% while the VAS ETF’s yearly fee was 0.10%. Therefore, VAS 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.
How do they perform?
Performance matters. 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 solid return one year just to generate lacking 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 QOZ ETF had an average annual return of 9.12%. During the same time, the VAS ETF returned 11.03%.
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 QOZ is Betashares. Betashares ranks highly for our scores of ETF providers and issuers in Australia. We believe BetaShares is one of the leading providers of index and non-index style products to retail investors in Australia. VAS’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
Did you know we have free reports? View our ASX QOZ review and ASX VAS review today.
For us, the VAS ETF rates positively against our internal scoring methodology, but only just.
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…
