The two ASX exchange-traded funds (ETFs) in this article are two excellent ways to get exposure to ASX shares.
The ASX many not have many tech shares or strong industrial businesses, but it does come with one advantage: bigger dividend yields.
There are two ETFs that allow you to invest in the broad ASX share market. They are fairly similar so I’m going to talk about the good points about them at the same time.
The two ASX ETFs I’m talking about are: Vanguard Australian Shares Index ETF (ASX: VAS) and BetaShares Australia 200 ETF (ASX: A200).
Cheap fees
One of the advantages about the ETFs like this is that you get the investment access for a very cheap fee.
The VAS ETF has an annual management fee of 0.10% whilst the A200 ETF has an annual management fee of just 0.07%
Those fees are almost nothing, meaning investors get to keep almost all of the returns themselves. Fund managers normally charge a lot more.
Hundreds of ASX shares in the portfolios
The Vanguard option gives investors access to the ASX 300, which is 300 of the largest businesses listed on the ASX.
The BetaShares one, if you hasn’t already guessed, gives exposure to the ASX 200.
This level of diversification is pretty useful. However, the ETFs are dominated by a few names at the top of the ASX in the resources and financial space.
Some of the biggest businesses are: BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), Rio Tinto Limited (ASX: RIO), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group Ltd (ASX: ANZ), National Australia Bank Ltd (ASX: NAB) and Macquarie Group Ltd (ASX: MQG).
Big dividend yield
You may note that many of the businesses I just mentioned themselves have high yields.
ETFs simply pass through the dividends that they receive. So, high-yielding businesses means the ETF itself has a good yield.
It’s hard to say what the next 12 months of dividends will be considering the iron ore price has been reduced so much, but I’m pretty sure it’s going to be substantially more than most other share markets. When you add in the bonus of franking credits, the yield gets pushed up even higher. However, a higher yield doesn’t necessarily mean better overall returns.
Summary thoughts on the ASX ETFs
These are two really easy ETFs to invest in.
They may not produce the best returns, but for investors looking for income then they could he decent options, but some listed investment companies (LICs) could be more effective.
