On the ASX, the Vanguard MSCI Australian Small Companies Index ETF (ASX: VSO) and iShares Core S&P/ASX 200 ETF (ASX: IOZ) might be worth digging into in 2021.
What are the Vanguard VSO and iShares IOZ ETFs designed to do?
The Vanguard VSO ETF provides exposure to a diversified portfolio of Australian small caps and tracks the MSCI Australian Shares Small Cap Index. This is a low-cost way to access the performance of Australian small-cap shares through a single fund.
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.
For more information on the VSO ETF, see our ASX VSO review.
We’ll keep it basic and just study the fees. Based on our data for July 2021, the VSO ETF has a management expense ratio (MER) of 0.30% while the IOZ ETF’s yearly fee was 0.09%. Therefore, IOZ 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 July 2021, the VSO ETF had an average annual return of 16.73%. During the same time, the IOZ ETF returned 13.10%.
Okay, one final thing. Let’s talk about the company responsible for the ETF. There are too many factors that go into our internal scoring of fund providers to step through in this article. The provider behind the VSO ETF 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. . Meannwhile, IOZ’s provider 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.
Our takeaway
Don’t forget our free reviews on ASX VSO and ASX IOZ.
For us, the VSO 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…
