What are the Vanguard VHY and iShares ILC ETFs designed to do?
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.
For more information on the VHY ETF, see our ASX VHY review.
ASX: VHY versus ASX: ILC price 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%.
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 VHY 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, 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.
Our takeaway
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…
