Now could be the right time to run the rule over the SPDR MSCI Australia Select High Dividend Yield Fund ETF (ASX: SYI) and Vanguard MSCI Australian Small Companies Index ETF (ASX: VSO). Using our internal quantitative analysis, these ETFs appear to offer good exposure to the Australian shares sector.
What do they do?
The SPDR SYI ETF invests in a diversified portfolio of high-yielding ‘blue chip’ Australian companies – excluding real estate investment trusts (REITs). This ETF tracks the MSCI Australia Select High Dividend Yield Index.
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.
To learn more about the SYI ETF, read our free ETF investment report once you’re done with this article.
To make this article easier to digest, we’ll just study the fees or ‘management expense ratio’ (MER). Using data for July 2021, the SYI ETF has an MER of 0.35% while the VSO ETF had a yearly fee of 0.30%. So, VSO wins on this metric. Keep in mind, a more useful metric to know is the fee quartiles that these ETFs find themselves in (note: quartile 1 is best). Meaning, we take all the Australian shares ETFs in our database and divide them into 4 quartiles, based on their fees. For example, any ETF which has a fee below 0.3% would be considered in our first (best) quartile.
Performance analysis
Performance is important. 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 good return one year just to generate poor 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 SYI ETF had an average annual return of 9.91%. During the same time, the VSO ETF returned 16.73%.
Lastly, we need to consider the issuer or provider of the ETF. There are too many factors that go into our internal scoring of fund providers to detail here (you’d get bored pretty quickly). So here’s the quick version. As you guessed, the issuer of 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.
Our takeaway
To keep reading about these two ETFs, be sure to visit our free SYI ETF report or VSO ETF review.
In summary, the VSO ETF ranks better against our internal scoring methodology but not by much compared to SYI.
Please, keep in mind, there is much more to picking a good ETF. That’s why you should now use these skills to find the best ETF you can. If you want the name of our team’s top ETF pick for 2021, keep reading…
