ETFs (exchange-traded funds) have ballooned in popularity over the last decade – in no small part due to the ultra-low fees they charge.
Founder of the modern ‘index fund’ – the late John Bogle – came up with the idea of an index fund after noticing that professional fund managers over in the US were charging massive fees (often over 2% p.a.) to deliver what was usually a market-matching performance. The company that he subsequently founded – the Vanguard Group – is now one of the largest ETF providers in the world.
So, which ASX ETFs offer the cheapest fees? Here are 3 ETFs with market-leading costs.
iShares S&P 500 ETF (ASX: IVV)
The S&P 500 index is probably the most watched and tracked index in the world – making it easy for BlackRock to offer an ultra-low fee of just 0.04%. This equates to $4 a year for every $10,000 invested, which is hardly a massive burden on your portfolio. The S&P 500 index tracks the largest 500 public companies in the US, which includes big names like Apple, Microsoft, Berkshire Hathaway and Exxon Mobil. This ETF isn’t currency hedged, so if our dollar falls against the US currency, the value of your IVV shares will rise (and vice versa).
Vanguard U.S. Total Market Shares Index ETF (ASX: VTS)
This ETF is similar to IVV, but tracks the total US market (not just the top 500 companies), meaning you are investing in over 3,500 stocks listed in the US. Being a Vanguard ETF, this fund by definition offers a low fee – and VTS takes the crown with a management cost of just 0.03% ($3 a year for every $10,000 invested). From my research, VTS seems to be the lowest-cost ETF on the Australian market.
BetaShares Australia 200 ETF (ASX: A200)
A200 makes the cut as it holds the distinction of being the lowest-cost ASX-tracking ETF available with a management fee of 0.07%. Sheer size and scale means that our index can never compete with the US market ETFs on volume and low cost, but Betashares’ offering is certainly a great deal for Aussie investors. A200 tracks the ASX200 index (the largest 200 Australian public companies) so you are getting everything from Commonwealth Bank of Australia (ASX: CBA) to the Reject Shop Ltd (ASX: TRS).
Honorary mention goes to the Vanguard Australian Shares Index ETF (ASX:VAS), which tracks the ASX 300 and offers a 0.10% fee.
There you have it, three of the cheapest ASX ETFs available. If you have a bias toward investing in the US markets, it looks like it’s your lucky day. But in reality, all three (or four) of these funds are extremely cheap, and (in my opinion) will serve you well for a long-term investment.
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.