The best thing I like about index-tracking exchange-traded funds (ETFs) is how ultra-cheap some of them are. An ETF represents an avenue to a market-equaling return. Most of us ASX investors try and beat the market in any given year. But this is hard – and having ‘the market’ in your portfolio can help balance out your returns if your portfolio has a bad year.
But when it comes to choosing an index for this end, there are still many choices. We’ll go over an obvious one, and a not-so-obvious choice.
2 ultra-cheap ASX ETFs
BetaShares Australia 200 ETF (ASX: A200)
This ASX ETF from BetaShares tracks an index we’d all be reasonably familiar with – the S&P/ASX 200 Index (ASX: XJO). This index represents the largest 200 public companies in Australia. CSL Limited (ASX: CSL) is the top stock in this index, but the big four ASX banks like Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), Wesfarmers Ltd (ASX: WES) and Woolworths Group Ltd (ASX: WOW) are also large constituents.
I like A200 because it is the cheapest Aussie ETF on the ASX today (to my knowledge anyway) with an annual management fee of 0.07%. That works out to be a cost of just $7 a year for every $10,000 you have invested. Even the famous-for-low-fees Vanguard Group offering can’t compete, with the Vanguard Australian Shares Index ETF (ASX: VAS) charging 0.1% per annum. For a simple and cheap avenue to all of your favourite Aussie companies, you can’t go wrong with this ultra-cheap ETF.
Vanguard U.S. Total Market Shares Index ETF (ASX: VTS)
As the name implies, this ETF tracks an index that covers the entire US share market. Don’t mistake this for an S&P 500 index fund. Even though the S&P 500 is a far more popular index in the ETF world, it only covers a selected group of 500 companies, rather than the 3,525 companies that VTS holds.
However, its top holdings will look very similar. You have the big tech shares like Apple Inc (NASDAQ: AAPL) and Microsoft Corporation (NASDAQ: MSFT) dominating, along with other companies like Visa Inc (NYSE: V), Johnson & Johnson (NYSE: JNJ) and even Tesla Inc (NASDAQ: TSLA), which hasn’t yet made it to the S&P 500.
The US houses some of (if not most) of the best companies in the world, so I think getting some exposure is a great idea for any investor. VTS charges a minuscule management fee of just 0.03% per annum (or $3 a year for every $10,000 invested), which I believe makes VTS the cheapest ETF on the ASX. You could do a lot worse than this ETF as a passive investment.
Foolish takeaway
There are many ASX ETFs available, but these 2 choices are by far the cheapest offerings in their respective fields. Both cover well-known and familiar indices, and so I think wither would make a top choice for any investors’ portfolio today.
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Sebastian Bowen owns shares of Johnson & Johnson, Tesla, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Apple, Tesla, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Johnson & Johnson. The Motley Fool Australia owns shares of Wesfarmers Limited and Woolworths Limited. The Motley Fool Australia has recommended Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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