Is the BetaShares Australia 200 ETF (ASX: A200) the best ASX ETF?
I'm not asking if it's the best ETF that we can buy on the ASX, that honour may belong to iShares S&P 500 ETF (ASX: IVV) due to the ultra low cost, quality underlying holdings, diversification and good returns.
I am also not suggesting it's the best value ETF available on the ASX, I think Vanguard FTSE Asia Ex Japan Shares Index ETF (ASX: VAE) may be the best value today.
But, in terms of getting access to ASX shares, the BetaShares Australia 200 ETF could well be the best option.
As the name might suggest, the ETF tracks the returns of the ASX 200. Getting exposure to 200 businesses is pretty good diversification. The largest holdings are shares like Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), Westpac Banking Corp (ASX: WBC) and Telstra Corporation Ltd (ASX: TLS). The ASX 200 is a pretty similar list to what it was a decade ago, but CSL Limited (ASX: CSL) is now the third biggest in the index.
One of the key differences between BetaShares Australia 200 ETF and Vanguard Australian Share ETF (ASX: VAS) is the cost. BetaShares offers ASX exposure for 0.07% per annum whereas Vanguard's management cost is 0.10% per annum. Does 0.03% make that much of a difference?
In terms of fees, 0.03% is almost nothing. But the bigger difference is the underlying holdings. The Vanguard ETF offers exposure to the ASX 300, so you get added diversification from another 100 shares, but the actual exposure to these is very small compared to CBA, BHP and others.
But diversification just for the sake of it isn't necessarily a good idea. If it improves diversity without reducing returns then it's a good idea. Over the past year to the end of August the gross index returns of the ASX 200 and ASX 300 have been 9.15% and 9.14% respectively. But fees boosted the BetaShares ETF outperformance to 0.06% over the year.
Foolish takeaway
If I had to pick one of the two ETFs I probably would pick the BetaShares one. Small fee differences can compound to a sizeable difference over longer time periods such as a decade.
