Could BetaShares Australia 200 ETF (ASX: A200) be a really good investment for beginners to consider?
What’s an exchange traded fund (ETF)?
If you don’t know what an ETF is then it could be a smart idea to look at Rask’s free beginner ETF investor course.
An ETF basically lets you invest in a whole bunch of different businesses with a single investment. Very handy if you want to get good diversification, but you don’t want to buy 50, or 100 or 1,000 businesses yourself. In-fact, I’d say buying 1,000 different companies yourself would be a very poor choice for all the brokerage costs alone.
What’s BetaShares Australia 200 ETF?
This particular ETF is one of the most popular for Aussie investors. It has net assets of over $1 billion.
The idea is that it allows investors to track the 200 biggest businesses in Australia, which represents most of the ASX in market capitalisation terms. When people talk about what the ASX has done that day, the ASX 200 is often what they are talking about.
Just like the Australian economy as a whole, a big part – almost half – of the ETF is made up of financial and materials businesses, with healthcare and real estate businesses being two of the next largest industries in the ETF’s holdings.
What are the actual holdings?
At the end of December, the biggest 10 exposures in the A200 portfolio were: Commonwealth Bank of Australia (ASX: CBA), CSL Limited (ASX: CSL), BHP Group Ltd (ASX: BHP), National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ), Wesfarmers Ltd (ASX: WES), Woolworths Group Ltd (ASX: WOW), Macquarie Group Ltd (ASX: MQG) and Rio Tinto Limited (ASX: RIO).
Have the A200 returns been good?
The BetaShares Australia 200 ETF hasn’t been around very long, it was created in May 2018. Since then, the ETF has delivered net returns of an average of 6.9% per year.
To look back a bit further we can look at the returns of the ASX 200, the A200 tracks the ASX 200 index as I’ve said above. BetaShares showed that at 31 December 2020, the ASX 200 had delivered average returns of 8.7% per year over the last five years.
Are those level of returns any good? I wouldn’t say so. Many of the biggest ASX businesses have reached their growth ceiling, they can’t claim much more of their industry’s market share. They’d have to seriously diversify to grow earnings strongly from here. Recently, many banks have been selling assets. CSL, Wesfarmers and Macquarie are the only three out of the top ten that I’d be comfortable owning in my own portfolio today.
Many other global ETFs have been producing better returns than the A200 such as Betashares Global Quality Leaders ETF (ASX: QLTY) and Betashares Nasdaq 100 ETF (ASX: NDQ).
Diversified ASX dividend shares might be able to provide better long term returns than the A200 ETF like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) or Brickworks Limited (ASX: BKW). Wesfarmers is pretty diversified as well with the freedom to go into different industries.
