Why investors study the Australian Shares High Yield ETF and S&P/ASX 20 ETF
The Vanguard VHY ETF provides exposure to the largest dividend-paying Australian shares, based on market capitalisation and forecast dividend yield. It tracks the FTSE Australian High Dividend Yield Index. The index excludes real estate investment trusts (REITs) and caps the total exposure to any sector/industry at 40%.
The iShares ILC ETF provides exposure to the largest 20 Australian stocks, giving you targeted exposure to Australian blue-chip companies. This is a low-cost way to access top Australian companies through a single fund.
Want to know (lots) more? Read through our full ILC ETF review: see our ILC ETF review now.
Obviously, an easy way to analyse any ETF or fund like ILC or VHY 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 simple and just study the fees. Based on our data for July 2022, the VHY ETF has a management expense ratio (MER) of 0.25% while the ILC ETF’s yearly fee was 0.24%. Therefore, ILC 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 we study past performance
Time to look at past returns. 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 attractive return one year just to generate unsatisfactory 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 2022, the VHY ETF had an average annual return of 8.35%. During the same time, the ILC ETF returned 7.00%.
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 VHY 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. ILC’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.
Conclusion
If you’d like to learn more about these two ETFs, be sure to visit our free VHY ETF report or ILC ETF review.
In summary, the VHY ETF rates higher for our internal scoring methodology but not by much compared to ILC.
Please, keep in mind, there is much more to choosing 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 2024, keep reading…
