ETFs or Exchange Traded Funds is a name given to a bundle of assets where the entire fund can easily be traded on the stock exchange like any ordinary share. ETFs are available across a range of asset classes and each have unique goals and holdings. As such it is important to ensure the fund’s goals and holdings align with your own. For example, there are a total of over 200 different ETFs available on the ASX.

Since ETFs hold a bundle of assets they are highly sought after as an efficient form of diversification. As many ETFs use a passive indexing investment strategy the management costs can be reduced. With 86.69% of actively managed funds failing to outperform the ASX 200 index in a year (Check out the SPIVA-S&P indices versus active), this makes ETFs a very valuable part of any portfolio, but which ones do we recommend?

ETF’s We Recommend

Here at Prophet Invest, we believe in broad market ETFs, this means ETFs which track indices such as the S&P 500 or ASX 200 rather than things like technology sector ETFs.

Australia is simple there are three ETF options we recommend: VAS, A200, IOZ. All of these are very low-cost options ranging from 0.7%-0.1%. Picking any one of these is a good option for an Australian index ETF.

VGSVan. MSCI Index Int. shares World ex AUS1.7B0.18%U
IWLDiShares Core MSCI World All Cap ETF90.7M0.16%U
VTSVan. US total Market Shares Index ETF1.7B0.03%U
IVViShares S&P 500 ETF3.1B0.04%U
IHOOiShares Global 100 AUD Hedged45.7M0.43%H
IOOiShares Global 100 ETF1.6B0.4%U
IHVViShares S&P 500 AUD Hedged ETF195M0.10%H
WXOZSPDR S&P World ex Aus.192.2M0.30%U
VGADVan. MSCI Index Int. Shares Hedged632.5M0.21%H
VDHGVan. Diversified High Growth Index ETF175.3M0.27%H
QUALVanEck Vectors MSCI World Ex Aus Quality633.1M0.40%U
Prophet Invest’s International ETFs

Depending on your desired area of exposure any of these can be a good idea. From these, here are our favorite three in more detail.

 VGSVTSIVV
Fee0.18%0.03%0.04%
Turnover rate0.674.05.0
Inception201420092000
Market Cap2.1B1.9B3.5B
Share Price$82$237$468
ExposureUS-68.1% EUR-21.4% Asia-10.4%US-100%US-100%
Top 10 holdings14.2%19.6%22.34%
No of Holdings15913525500
DistributionsQuarterlyQuarterlyQuarterly
1 Year23.77%24.56%25.04%
5 Year13.08%15.88%16.12%
10 Year16.91%16.81%
DomicileAusUSAus
VGS, VTS, IVV Analysis

However, it fully depends on your preference. For full disclosure we hold VAS and IVV.

Whichever ETF you’re looking at run it through our ETF checklist:

The ETF Checklist:

Does the ETF capture the exposure and companies you are hoping to achieve?
Consider how the index is weighted (Market-capitilsation, fundamentally weighted, equally weighted or other), does this match with your needs?
Are the indexes holdings clearly documented?
Are the fees reasonable and competitive?
How long has the fund existed?
What is the market capitalisation/assets under management of the Fund?
Does the funds returns mirror the returns of the Index it is tracking?
Are the underlying holdings representative of the index it is tracking?
Does the fund hold the individual companies or is it holding derivatives or synthetics? (these can add risk)
Is the turnover/rebalancing of the fund relatively small? Excessive rebalancing can incur further tax burdens
Is the bid-ask spread relatively narrow?
Are there any hidden additional fees?
Does the fund have a large amount of average daily volume?
Is the ETF provider well known and experienced?
Does the company have many resources and education products available to assist the investor where needed?
The Ultimate ETF Checklist

Some of this information including our ETF checklist was sampled from our book; PROPHET Invest: The Gateway to Investing. For this and more information check it out today.

ETF Where to Buy?

Check out the CHESS Sponsored brokers we recommend:

Best Share Trading Platforms Australia

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