Exchange-traded funds (ETFs) are an extremely popular investment vehicle these days. 2020 saw record fund inflows for the ETF sector, continuing a trend that has been building for years. But these days, there is an ETF for everything and more. So how does one decide which ones are the best? Well, one factor that is highly influential on overall returns is the fee that an ETF charges. A difference of 0.5% for a fee can sound trivial. But that can make a dramatic difference to your returns over a number of years.
With that in mind, let’s check out 3 of the cheapest ASX ETFs available on the market today:
iShares S&P 500 ETF AUD (ASX: IVV)
This ETF from iShares covers the US S&P 500 (INDEXSP: .INX), which is an index covering the largest 500 companies over in the United States. That’s everything from Apple Inc (NASDAQ: AAPL) and Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL) to Coca-Cola Co (NYSE: KO) and American Express Company (NYSE: AXP). The S&P 500 is one of the most popular indexes in the world for ETFs and for good reason. It simply houses most of the world’s largest and best businesses.
The IVV ETF that covers the S&P 500 charges a management fee of just 0.03%. That makes it one of the cheapest ASX ETFs on the market today, representing an annual cost of $3 for every $10,000 invested.
BetaShares Australia 200 ETF (ASX: A200)
There are many ETFs that cover the S&P/ASX 200 Index (ASX: XJO). But this fund from BetaShares is the cheapest on the market today, with a management fee of 0.07%. That represents an annual cost of $7 a year for every $10,000 invested. As an ASX 200 fund, this ETF gives exposure to 200 of the largest public companies in Australia. That includes everything from Commonwealth Bank of Australia (ASX: CBA) and Telstra Corporation Ltd (ASX: TLS) to Afterpay Ltd (ASX: APT) and JB Hi-Fi Limited (ASX: JBH. A200 pays out dividend distributions quarterly as well. It currently has a trailing yield of 2.3%, which also comes with some franking credits.
Vanguard US Total Market Shares Index ETF AUD (ASX: VTS)
VTS is our final ETF to examine today. It is very similar to IVV in terms of coverage. But rather than tracking the S&P 500, this ETF instead follows the CRSP US Total Market Index, which covers more than 3,780 American companies. As such, you get exposure to a far larger and diverse portfolio of US businesses.
VTS also charges a management fee of 0.03% per annum. This makes it, along with IVV, the cheapest ETF available on the ASX (to this writer’s knowledge, anyway).