The S&P/ASX 200 Index (ASX: XJO) has fallen 24% since the falls began. Is it time to buy BetaShares Australia 200 ETF (ASX: A200)?
The coronavirus has certainly caused a lot of volatility for the share market and across the economy. That's not to mention the huge human impacts.
What are exchange-traded fund (ETF) investors meant to do?
The whole idea of the ETF is just to be passive. Whatever happens to the underlying holdings will happen. It's not like the ETF is choosing to sell certain positions or raise cash like a fund manager might. Just ride it out.
The BetaShares Australia 200 ETF aims to track the ASX 200, so it has seen a similar fall in value over the past two months.
Is it a buy now? Let's have a quick look at some of the main elements of the ETF:
What shares does BetaShares Australia 200 ETF hold?
The performance of an ETF is entirely dictated by its underlying holdings.
Its biggest holdings include CSL Limited (ASX: CSL), Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), Westpac Banking Corp (ASX: WBC) and Woolworths Group Ltd (ASX: WOW).
Some of these large holdings are likely to keep holding up well, like CSL and Woolworths. Though others like the banks may face troubles over the rest of 2020.
What is the management fee of BetaShares Australia 200 ETF?
One of the biggest factors for an ETF's long-term performance is the management fee. The lower the management fee the more of the returns are left in an investor's pocket.
BetaShares is offering the BetaShares Australia 200 ETF with an annual management fee of just 0.07% per annum. That's almost nothing compared most fund managers which charge 1% or more (plus outperformance fees).
What is the dividend yield?
At 31 March 2020 the trailing distribution yield of the ETF was 5.3% and 7% grossed-up for franking credits.
However, I'm not sure if it's going to be the same dividend over the next 12 months because there are likely to be sizeable dividend cuts from CBA, Westpac, National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ).
Other dividend shares like Transurban Group (ASX: TCL) and Sydney Airport Holdings Pty Ltd (ASX: SYD) will also be cutting their income payments this year.
Dividend cuts would mean less income paid through to the ETF's investors.
Is BetaShares Australia 200 ETF a good investment?
I think it's always a decent idea to buy this ETF – it's the cheapest ETF to invest in ASX shares. It could be part of a regular investment plan. It's at a pretty good price considering how low interest rates are. But I like the idea of other investments even more.
