When it comes to investing in ASX exchange-traded funds (ETFs), one of the most important factors in investors' overall returns is the fees that they pay.
All ASX ETFs charge an annual management fee. This goes towards the costs of providing and running the fund, which is a managed investment at the end of the day. Saying that, fees on ASX ETFs vary wildly. Some charge minuscule fees, whilst others can ask more than ten times what the cheapest ASX ETFs do.
It's my firm belief that most ASX ETF investors should prioritise a low fee above all else. Fortunately, the lowest fees on the ASX tend to be attached to high-quality index funds that are diversified, cover entire markets, and are, at least in my opinion, suitable for almost every ASX investor.
Let's talk about some of the ASX's cheapest ETFs.
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What are the ASX's cheapest ETFs?
First up, we have the iShares S&P 500 ETF (ASX: IVV). This popular fund tracks the most famous index in the world, the S&P 500. This represents the largest 500 stocks listed in the United States, and includes everything from NVIDIA, Amazon, and Apple to Exxon Mobil, Coca-Cola Co, and General Motors.
IVV is a very competitive ETF cost-wise, charging a management fee of 0.04% per annum. That's $4 per year for every $10,000 invested.
Luckily, there's another ASX ETF closer to home, that is just as cheap. For investors looking to invest in a simple ASX index fund, the Global X Australia 300 ETF (ASX: A300) is your cheapest option. A300 works in a similar manner to IVV. However, instead of the 500 largest US stocks, this fund tracks the largest 300 Australian stocks listed on our local market. That's everything from Commonwealth Bank of Australia (ASX: CBA) and Telstra Group Ltd (ASX: TLS) to JB Hi-Fi Ltd (ASX: JBH) and Ampol Ltd (ASX: ALD).
Like IVV, A300 also charges a management fee of 0.04%.
But wait, it gets cheaper
You may think that $4 a year for every $10,000 invested is as good as it gets for passive investors. But no, there is an even cheaper ETF still.
It is none other than the Vanguard U.S. Total Market Shares Index ETF (ASX: VTS). This fund works in a similar manner to IVV. However, instead of just the largest 500 US stocks, VTS covers a far larger swath of the American market. It currently has close to 3,500 individual holdings.
Of course, it is still quite top-heavy, with stocks like NVIDIA, Amazon, and Apple taking up a big chunk of room. But if you're ok with the larger portfolio of US stocks, this ASX ETF is the cheapest you can find right now. It asks a management fee of just 0.03%, or $3 per year for every $10,000 invested.
