One of the most important factors when it comes to choosing an exchange-traded fund (ETF) is the fees the fund charges. This is especially so with ASX index funds, which basically provide a similar service.
Fees are one of the most detrimental aspects of owning ETFs and index funds, especially over long periods of time. So minimising the fees one pays to invest in an index fund is of the utmost importance. Luckily for ASX index investors, the past week has seen something of a price war kick off.
It started off with the iShares Core S&P/ASX 200 ETF (ASX: IOZ). At the start of the week, provider BlackRock announced that its 'Core' series of ETFs, which include the iShares ASX 200 ETF index fund, would have their fees slashed.
The iShares ASX 200 ETF previously charged investors a management fee of 0.09% per annum. That's $9 for every $10,000 invested per year. But this week, this fee was slashed by more than 40% to 0.05% per annum.
iShares also reduced the fees of another index fund that tracks the bond markets. The iShares Core Composite Bond ETF (ASX: IAF) previously charged investors 0.15% per annum. But it will now only ask 0.1% per annum.
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ASX 200 index funds start ETF price war
Rival ETF provider BetaShares previously boasted the crown of having the cheapest ASX 200 ETF on the market with its BetaShares Australia 200 ETF (ASX: A200). Not to be outdone, it didn't take long for BetaShares to then announce it was reducing its fees. Its flagship index fund will go from charging 0.07% to 0.04% per annum. That's $4 per year for every $10,000 invested.
We haven't yet heard from the ASX 's most popular index fund though. The Vanguard Australian Shares Index ETF (ASX: VAS) is by far the index fund of choice for ASX investors. And by a large margin too.
The Vanguard Australian Shares ETF is a little different to the funds offered by BlackRock and BetaShares. It tracks the ASX 300 Index rather than the ASX 200. This enables it to provide a little more exposure to the bottom end of the Australian share market than the others.
But this Vanguard fund currently has a management fee of 0.1% per annum. That now puts it pretty far from the edge in terms of what other ASX-based index funds are charging. There's been no word yet as to whether Vanguard will be joining this new ETF price war. So watch this space.
