What are the Vanguard VLC and iShares IHD ETFs designed to do?
The Vanguard VLC ETF provides exposure to the MSCI Australian Shares Large Cap Index. This index is a ‘free float-adjusted market capitalization index’ which provides investors with exposure to the largest companies on the ASX.
Investors looking for exposure to 50 high yielding Australian companies may find the iShares IHD ETF of interest. This is a low-cost way to access high-yielding Australian companies through a single fund.
For more information on the VLC ETF, see our ASX VLC review.
ASX: VLC versus ASX: IHD price performance
We’ll keep it basic and just study the fees. Based on our data for December 2021, the VLC ETF has a management expense ratio (MER) of 0.20% while the IHD ETF’s yearly fee was 0.30%.So VLC 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 December 2021, the VLC ETF had an average annual return of 14.93%. During the same time, the IHD ETF returned 13.08%.
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 VLC 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. Meanwhile, IHD’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 VLC and ASX IHD.
For us, the IHD ETF rates fairly better 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 2022 in a free report. Keep reading to find out how to get our analyst’s report emailed to you right now…
