Best ETF match-up: VAF Vs. IVV – Best ETFs

Could now be your opportunity to place the iShares S&P 500 ETF (ASX: IVV) and the Vanguard Australian Fixed Interest Index ETF (ASX: VAF) on your ASX investing watchlist?

Why do investors own the iShares S&P 500 ETF?

The iShares IVV ETF provides investors with exposure to the largest 500 US stocks, by market capitalisation. This is a low-cost way to access leading US companies through a single fund.

According to our most recent data, the IVV ETF had $3571.5 million of money invested. With IVV’s total funds under management (FUM) figure over $100 million, the ETF meets our team’s minimum investment criteria for FUM levels. As a general rule, our team draws the line at $100 million for ETFs in the International shares sector because we believe that, relative to smaller ETFs, achieving this amount of FUM lowers the chance that the ETF issuer will close the ETF.

Fees to consider

According to our numbers, the annual management fee on the IVV ETF is 0.04%. The issuer, iShares, collects this fee automatically.

Meaning, if you invested $2,000 in the IVV ETF for a full year you could expect to pay management fees of around $0.80. This fee is different from the fee you pay to your brokerage provider (e.g. CommSec, NabTrade, SelfWealth, etc.), which is the fee to buy or sell the ETF. In addition to a management fee charged by the issuer, be mindful to check the ‘spread‘ for the ETF.

A fee comparison

Fees aren’t the only key consideration for ETF investors, but it’s an easy thing to do. To understand if the ETF you’re looking at is too costly, compare it with other ETFs from the same sector, and against the industry average. For example, the average management fee (MER) across all of the ETFs covered by the Best ETFs Australia team was 0.5%, which is $10.00 per $2,000 invested. Keep in mind that small changes in the fees paid can make a big difference after 10 or 20 years. You should read the IVV Product Disclosure Statement (PDS), available on the ETF issuer’s website, because it will detail the fees, tax implications and the latest information.

Don’t stop here, to get our full IVV ETF review, click through to this ETF review page now.

Vanguard Australian Fixed Interest Index ETF

The Vanguard VAF ETF provides investors with exposure to a portfolio of Australian Commonwealth Government bonds, state government bonds and bonds from treasury corporations, as well as some investment-grade corporate debt.

With our numbers for December 2020, VAF’s FUM stood at $1552.46 million. Since the VAF’s FUM is over $100 million, our investing team would say the ETF has met our minimum criteria for the total amount invested, otherwise known as FUM. A very sustainable ETF in the Index sector should be able to scale well and become profitable for the ETF issuer.

Are the fees for the VAF ETF bad?

Vanguard, the ETF issuer, charges a yearly management fee of 0.20% for the VAF ETF. Meaning, if you invested $2,000 for a full 12-month period you could expect to pay a base management fee of around $4.00.

The management fee is above the average for all ETFs on our list of ASX ETFs, but keep in mind the ETF may be able to justify the higher price tag with superior performance over time.

To discover more facts about the VAF ETF, read our free ETF investment report.

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