Here’s how we think about the VLC and IOZ ETFs
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.
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.
Get our team’s VLC ETF review, available free when you click this link: access the free investment report.
ASX: VLC or ASX: IOZ performance
To make this article easier to digest, we’ll just study the fees or ‘management expense ratio’ (MER). Using data for July 2022, the VLC ETF has an MER of 0.20% while the IOZ ETF had a yearly fee of 0.09%. So, IOZ wins on this metric. Keep in mind, a more informative 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.
Show me the money
It’s time to study the track record. 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 compelling return one year just to generate subpar 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 VLC ETF had an average annual return of 7.78%. During the same time, the IOZ ETF returned 6.22%.
In summary
Be sure to visit our free ASX VLC review or ASX IOZ ETF review.
For us, the IOZ ETF rates greater 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 2024 in a free report. Keep reading to find out how to get our analyst’s report emailed to you right now…
