You might be sitting back and considering the SPDR S&P/ASX Small Ordinaries Fund ETF (ASX: SSO) and thinking that April could be as good of a time as any to take closer look. Here’s how we would start our research.
Find out what the ETF does
The SPDR SSO ETF provides exposure to a diversified portfolio of Australian companies and tracks the S&P/ASX Small Ordinaries Index. SSO is designed to capture the performance of the top 200 Australian small companies based on market cap, ranking from 101 to 300.
The SPDR SSO ETF could be used to invest in Australian companies outside the top 100, which are likely to grow their profits over time. Navigating away from the largest ASX companies removes a lot of the exposure to the financial sector and could diversify your Australian portfolio allocation.
SSO’s FUM does not meet our minimum hurdle
The SPDR SSO ETF had $32.85 million of money invested when we last pulled the monthly numbers. With a funds under management (FUM) or ‘market cap’ figure of less than $100 million, it’s important to consider if this ETF is still too small.
We say an ETF with more than $100 million invested is typically more sustainable than one with less than $100 million (at least). This is because if an ETF is too small, it may not be sustainable for an ETF issuer/provider, such as SPDR, to continue to operate it.
That said, there are exceptions to this rule of thumb, especially if the ETF issuer is committed to growing the ETF’s FUM to the point where it becomes profitable.
Pay attention to yearly costs & fees
SPDR charges investors a yearly management fee of 0.50% for the SSO ETF. This means that if you invested $2,000 in SSO for a full year, you could expect to pay management fees of around $10.00.
For context, the average management fee (MER) of all ETFs covered by Best ETFs Australia on our complete list of ASX ETFs is 0.51% or around $10.20 per $2,000 invested. Keep in mind, small changes in fees can make a big difference after 10 or 20 years.
Our takeaway
If you’re thinking about investing in SSO, bear in mind that this is just an introductory glance at the ETF. To explore further, check out our free SPDR SSO report. And for good measure, search our complete list of ASX ETFs for similar ETFs in the Australian shares sector to do a good comparison.
