Exchange traded funds (ETFs) don't just allow you to invest in certain sectors and indices, they also provide investors with the opportunity to focus on particularly strategies.

One of those is income. But which ASX ETFs might be best for income investors?

While best is subjective, listed below are the ETFs that offer the biggest dividend yields right now.

To be included, I have only selected ETFs that have at least $1 billion in funds under management (FUM). Here they are:

iShares Core S&P/ASX 200 ETF (ASX: IOZ)

The iShares Core S&P/ASX 200 ETF is one of the largest ETFs on the Australian share market with $4 billion of FUM. It provides investors with low-cost access to the 200 largest companies on the ASX in a single fund.

The ETF pays dividends quarterly and based on its current net asset value, trades with a trailing 6.1% dividend yield and 74% franking.

Vanguard Australian Property Securities Index ETF (ASX: VAP)

The Vanguard Australian Property Securities Index ETF seeks to track the return of the S&P/ASX 300 A-REIT Index before fees, expenses, and tax. Vanguard notes that the property sectors in which the ETF invests include retail, office, industrial and diversified. It believes the fund offers potential long-term capital growth and tax-effective income that may include a tax-deferred component.

The Vanguard Australian Property Securities Index ETF currently trades with a 4.3% dividend yield.

Vanguard Australian Shares High Yield ETF (ASX: VHY)

As its name implies, the Vanguard Australian Shares High Yield ETF gives investors exposure to a diverse group of ASX shares that have higher forecast dividend yields relative to the rest of the market.

At present, with 98.2% franking, the Vanguard Australian Shares High Yield ETF trades with an estimated forward grossed up dividend yield of 5.8%.

Vanguard Australian Shares Index ETF (ASX: VAS)

Finally, the Vanguard Australian Shares Index ETF is the largest on the ASX with $12 billion of FUM. It has been designed to mirror the S&P/ASX 300 index. This means investors will be buying a piece of large companies such as Telstra Corporation Ltd (ASX: TLS) and smaller companies like Accent Group Ltd (ASX: AX1) and Dicker Data Ltd (ASX: DDR).

At present, the ETF offers investors a dividend yield of 4.2% with 89% franking.

The post Dividend dessert: Which ASX ETFs are the sweetest for a passive income? appeared first on The Motley Fool Australia.

There are a number of ASX index exchange-traded funds (ETFs), but they're not for me personally — or my portfolio. At least, not at this stage.

Investors have probably heard about some of the ASX index ETF options that are essentially based on the S&P/ASX 200 Index (ASX: XJO) or the S&P/ASX 300 Index (ASX: XKO).

I'm referring to ones like Vanguard Australian Shares Index ETF (ASX: VAS), iShares Core S&P/ASX 200 ETF (ASX: IOZ), and BetaShares Australia 200 ETF (ASX: A200).

Each has very low management fees, allowing investors to track the market for very little.

Investors may also have seen that fees are about to come down even further.

The iShares ASX 200 ETF is going to reduce its annual fee to 0.05%. Meantime, BetaShares Australia 200 ETF has decided to reduce its annual fees to just 0.04%.

Despite that positive development, I'm not looking to invest in any of these sorts of ASX index ETFs.

ASX blue chips largely don't appeal to me

I think investors could do just fine with any of those ETFs. But I'm still a relatively young investor – I have decades of compounding ahead of me. I'm looking for investments that can provide an attractive level of capital growth. Dividends are nice too, but it's not the only important thing to me.

When I look at the biggest positions in these ASX index ETFs, I see names like Rio Tinto Limited (ASX: RIO), BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), ANZ Group Holdings Ltd (ASX: ANZ), and Woodside Energy Group Ltd (ASX: WDS).

At the right price, I wouldn't mind owning these businesses but none of the ones I mentioned appeal at the moment – so why would I want them as a large part of my ETF's portfolio?

They're already so big and I don't see how they can deliver a strong compound annual growth rate (CAGR) from here. A lot of the return from those names come in the form of dividends. As a full-time earner, that means quite a bit of the return would be reduced by tax each year.

Don't get me wrong, I do like some blue chips such as Telstra Group Ltd (ASX: TLS) and National Australia Bank Ltd (ASX: NAB). I particularly like their outlooks.

But I generally believe that there are smaller businesses, some with more defensive earnings, that could make better investments for my portfolio. I regularly write about some of the names I like as potential ASX 200 share investments.

ETFs can deliver growth

On the ASX, there are dozens of different ETFs to choose from.

Certainly, I think there are some that could deliver capital growth such as VanEck Morningstar Wide Moat ETF (ASX: MOAT) and Betashares Global Cybersecurity ETF (ASX: HACK).

Put simply, some businesses seem to have a bigger growth runway than the ASX's banks and miners, which could help deliver profit growth and share price growth.

To achieve the total returns I'm looking for, I want to find ASX shares that can achieve good profit growth, are putting their profit generation to good use, and are trading at a price that makes sense to buy.

The post Why I'm not investing in ASX index ETFs (yet) appeared first on The Motley Fool Australia.

Fees are one of the most detrimental aspects of owning ETFs and index funds, especially over long periods of time. So minimising the fees one pays to invest in an index fund is of the utmost importance. Luckily for ASX index investors, the past week has seen something of a price war kick off.

It started off with the iShares Core S&P/ASX 200 ETF (ASX: IOZ). At the start of the week, provider BlackRock announced that its 'Core' series of ETFs, which include the iShares ASX 200 ETF index fund, would have their fees slashed.

The iShares ASX 200 ETF previously charged investors a management fee of 0.09% per annum. That's $9 for every $10,000 invested per year. But this week, this fee was slashed by more than 40% to 0.05% per annum.

iShares also reduced the fees of another index fund that tracks the bond markets. The iShares Core Composite Bond ETF (ASX: IAF) previously charged investors 0.15% per annum. But it will now only ask 0.1% per annum.

ASX 200 index funds start ETF price war

Rival ETF provider BetaShares previously boasted the crown of having the cheapest ASX 200 ETF on the market with its BetaShares Australia 200 ETF (ASX: A200). Not to be outdone, it didn't take long for BetaShares to then announce it was reducing its fees. Its flagship index fund will go from charging 0.07% to 0.04% per annum. That's $4 per year for every $10,000 invested.

We haven't yet heard from the ASX 's most popular index fund though. The Vanguard Australian Shares Index ETF (ASX: VAS) is by far the index fund of choice for ASX investors. And by a large margin too.

The Vanguard Australian Shares ETF is a little different to the funds offered by BlackRock and BetaShares. It tracks the ASX 300 Index rather than the ASX 200. This enables it to provide a little more exposure to the bottom end of the Australian share market than the others.

But this Vanguard fund currently has a management fee of 0.1% per annum. That now puts it pretty far from the edge in terms of what other ASX-based index funds are charging. There's been no word yet as to whether Vanguard will be joining this new ETF price war. So watch this space.

The post There's an ETF price war on the ASX right now. Here's what you need to know appeared first on The Motley Fool Australia.

The Vanguard Australian Shares Index ETF (ASX: VAS) is a rather unique exchange-traded fund (ETF) on the ASX. For one, it is the ASX's most popular ETF, and by a mile too. More ASX investors trust this ETF with their money than any other on the market.

But something else makes this fund a unique one: its structure. Our share market is home to many different ASX-based index funds. But the vast majority of these track the ubiquitous S&P/ASX 200 Index (ASX: XJO).

There's the iShares Core S&P/ASX 200 ETF (ASX: IOZ), the SPDR ASX 200 Fund (ASX: STW), and the BetaShares Australia 200 ETF (ASX: A200). All of these ETFs mirror the ASX 200 Index, and thus hold the largest 200 shares by market capitalisation in their underlying portfolios.

But not the Vanguard Australian Shares ETF.

Instead of the ASX 200, the Vanguard ETF tracks the S&P/ASX 300 Index (ASX: XKO). As you might guess, this index adds another 100 companies to the ASX 200, meaning that it follows the largest 300 shares on the ASX by market cap. The Vanguard Australian Shares ETF is the only ASX index fund that does this.

But it's one thing to be unique and special. It's another to do things differently and get your investors a better return doing so.

So does Vanguard's unique approach pay off for investors?

ASX 200 vs. ASX 300

Well, there are certainly some benefits that are easy to identify. Vanguard's ASX 300 ETF is inherently more diversified than an ASX 200 ETF, simply by virtue of its inclusion of ASX shares in its portfolio.

Investors in an ASX 200 ETF will find they have large weightings toward our biggest banks and miners. But an ASX 300 ETF would have slightly less weighting to its top, since it has to make room for those additional 200 companies at the bottom.

We can see this in action if we check out some ETF portfolios. As of 31 December 2022, the iShares Core ASX 200 ETF's portfolio had BHP Group Ltd (ASX: BHP) as 11.4% of the fund's total holdings. Commonwealth Bank of Australia (ASX: CBA) was next up with 8.3%.

In contrast, Vanguard's Australian Shares ETF has BHP at 1.78% of its portfolio, with CBA at 8.11%. Those may seem like small differences, but they can have an impact on a portfolio's performance over time.

But let's stop beating around the bush and compare some hard numbers. That's the only real way we can judge if Vanguard's ASX 300 approach is a superior one.

Does the Vanguard Australian Shares ETF pay off?

So as of 31 December, the iShares ASX 200 ETF had returned -1.07% over the preceding 12 months. Over the three years to 31 December, it averaged a 5.5% per annum return. That rises to 7.01% per annum on average over five years, and 8.43% per annum over ten. These returns assume any dividend distributions are reinvested.

In the Vanguard ETF's case, we have a return of -1.78% over the 12 months to 31 December. But over three years, this ETF has averaged 5.58% per annum. Over five, that's 7.09%, rising to 8.54% over ten years:

So it appears that on every performance metric, aside from the past 12 months, Vanguard's ASX 300 approach has delivered better returns for its investors than a typical ASX 200 ETF.

Case closed? Well, certainly over the past ten years, it was better to have owned the Vanguard Australian Shares ETF than an ASX 200 ETF. But past performance is no guarantee of future returns, so perhaps the ASX 200 ETFs will have their revenge over the next decade.

The post Does the Vanguard Australian Shares ETF's unique structure deliver better returns than the ASX 200? appeared first on The Motley Fool Australia.

Well, it's a brand new year. So if you're looking to give your finances a new year's makeover or plan to manage your money better as a new year's resolution, then ASX 200 shares are a great place to start.

The ASX 200 is an index, the S&P/ASX 200 Index (ASX: XJO) to be exact. This index tracks the performance of the 200 largest shares on the Australian share market. You can't invest directly in the index itself. But you can invest in an index fund with a portfolio of shares that exactly mirrors the composition of the ASX 200.

One example is the iShares Core S&P/ASX 200 ETF (ASX: IOZ). This exchange-traded fund (ETF) holds all 200 shares in the Index in its portfolio. If you invest in this ETF, then you are exposed to the profits of all of these 200 companies.

That brings us to our first reason for investing in the ASX 200:

Diversification

Diversification, or not putting all of your eggs in one basket, is a concept that most financial advisers will tell you is a very good idea when it comes to ASX investing.

If you only own, say, shares of the big four ASX banks, then your fortunes are solely tied to the success of the ASX banking industry. Most experts will tell you that isn't a prudent way to invest your capital.

But with an index ETF, your money is spread out amongst 200 different companies, all operating in different corners of the economy.

You get everything from banking with Commonwealth Bank of Australia (ASX: CBA), to mining with BHP Group Ltd (ASX: BHP), to communications with Telstra Group Ltd (ASX: TLS) to groceries with Woolworths Group Ltd (ASX: WOW).

An ASX 200 index fund is instantly diversified, which removes this important consideration from the equation immediately.

Simplicity

Building on this concept, the second reason to consider investing in the S&P/ASX 200 Index is simplicity. Building a portfolio of individual shares requires a lot of research, pricing considerations for your trades, and the balancing act of diversification that we've already discussed.

But investing in just the index removes all of these barriers from your path. Knowing you are getting the top tier of ASX businesses at all times should be of enormous comfort to any investor with large exposure to the ASX 200.

ASX 200 returns

Our final reason is perhaps the best: the ASX 200 gets results.

The iShares ASX 200 ETF that we discussed earlier has been around for more than a decade. Since its inception in 2010, investors have enjoyed an average return of 7.66% per annum. Over the past 10 years, it's 8.43% per annum:

That is far better than you would have received from any savings account or term deposit.

Around half of those returns come from dividends and franking credits, giving you a nice source of income from your investments as well. This is paid out every quarter, which many investors would appreciate.

The post 3 reasons to invest in the ASX 200 in 2023 appeared first on The Motley Fool Australia.

If a company pays consistent dividends, the cash arrives in your bank account every six months (or more frequently, if you're lucky) whether you are working or not, whether you are young or old, or sick or healthy.

What's more, you can start your passive income stream with as little as $50 a week.

Now most ASX brokers charge brokerage costs on any share transaction. So depending on what your preferred broker charges you in brokerage, it might be worthwhile investing $200 every month, rather than $50 a week.

But we'll still use that as a benchmark.

ASX shares and dividends

Well, unless you hit the jackpot on selecting your shares, it will take time to build up a solid passive income from ASX shares.

Let's take a broad index fund to illustrate. The iShares Core S&P/ASX 200 ETF (ASX: IOZ) is an exchange-traded fund (ETF) that holds the largest 200 shares listed on the ASX in one simple fund.

That's everything from Commonwealth Bank of Australia (ASX: CBA), Telstra Group Ltd (ASX: TLS) and BHP Group Ltd (ASX: BHP) to Coles Group Ltd (ASX: COL), Harvey Norman Holdings Limited (ASX: HVN), and Qantas Airways Limited (ASX: QAN).

The way an ETF works is that if a company it holds in its portfolio pays out a dividend, that cash is passed straight through to that ETF's investors. Thus, it's something of a representation of all income that comes out of the Australian share market.

So over the past 12 months, the iShares ASX 200 ETF has paid out a total of $1.78 in dividend distributions per unit (shares of ETFs are called units). On the current unit price of $28.88 (at the time of writing), this means that this ETF is currently offering a trailing dividend distribution yield of 6.16%.

So how much passive income will investing $50 a week get you?

So let's assume that we start investing $50 a week into this ETF from today. In a year's time, we will have approximately $2,600 invested into the iShares ASX 200 ETF.

If this ETF pays out the same level of dividend distributions over the next 12 months as it has over the past 12, we will receive a total of $160.16 in dividend income.

Now that might not sound like much. But investing takes time and (of course) cash. Say our investor continued to invest $50 a week into this ETF over 10 years. After that 10 years, we would have a total of $26,000 invested, yielding $1,601.60 per year in passive income.

This would be even higher if our investor prudently reinvested their dividend distributions into even more units of the ETF, rather than spending it.

ASX shares also tend to increase their dividends over time. If the iShares ASX 200 ETF increases its dividend distributions by 50% over those 10 years to $2.67 per unit, we would be receiving a total of $2,402.40 in passive income.

All of these amounts can be further boosted by additional investments too.

Creating a meaningful stream of passive income from ASX shares takes time and money. But if you make it a consistent habit over a long period of time, the results can start to become very rewarding.

The post How to make passive income from ASX dividend shares with only $50 a week appeared first on The Motley Fool Australia.

A number of factors ravaged the ASX share market in 2022, including inflation, interest rates, conflict between Russia and Ukraine, and uncertainty in China.

We can see how the volatility hit the ASX with the exchange-traded fund (ETF) iShares Core S&P/ASX 200 ETF (ASX: IOZ).

But after the market has been jostled around, what might be in store for the ASX 200 this year?

Economic changes to start showing in results and trading updates

I think that a number of sectors are going to start showing changes in economic conditions.

For example, many bricks and mortar ASX retail shares may show strong year-over-year sales growth for the six months to 31 December 2022. That's because the six months to 31 December 2021 saw lockdowns in a number of cities, with many stores shut or trading with restrictions. But, the trading update for the start of 2023 could start showing the impacts of inflation and higher interest rates.

Another area of change could be for ASX 200 bank shares like Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and ANZ Group Holdings Ltd (ASX: ANZ).

With interest rates rising, the banks are passing on the hikes to borrowers more quickly than savers. I expect that banks are going to report higher lending margins and profits in 2023. This could be a boost for share prices. But, FY24 and even the second half of FY23 could show bank arrears starting to increase with how rapidly interest rates have risen.

Because the banking sector is significant within the ASX 200, it will have a key influence on whether the ASX 200 climbs or not.

Unpredictable resources sector

Another important factor for ASX 200 shares is the large resources industry.

Numerous companies on the ASX are digging stuff out of the ground, such as BHP Group Ltd (ASX: BHP), Forrtescue Metals Group Limited (ASX: FMG), Rio Tinto Limited (ASX: RIO), Mineral Resources Ltd (ASX: MIN) and so on.

If everyone knew what would happen next with resource prices, then it would be much easier to know what profits resource companies are going to report each year.

I think that Chinese demand for iron ore will grow in 2023 compared to the last few months as the Asian superpower exits COVID-19 restrictions. This could mean that the iron ore price could rise even further. But, with the commodity's price above US$110 per tonne, it's possible it has rallied ahead of itself. Time will tell.

One area that I am optimistic about is profit-producing miners that are exposed to electrification commodities such as copper, nickel and lithium. I think that the trend towards decarbonisation is going to continue regardless of a dip in the global economy.

My thoughts on ASX 200 share opportunities

Overall, I think the ASX 200 can produce a small capital gain by the end of the year, plus dividends. There will probably be more uncertainty, but I don't think things will always look this negative.

For me, I think ASX tech shares could be a good place to look for long-term opportunities, as they're now at much cheaper prices after the heavy declines in 2022.

The post Will 2023 get better for ASX 200 shares? appeared first on The Motley Fool Australia.

But, the ASX 200 has been recovering since those lows, which we can see with the return of the exchange-traded fund (ETF) iShares Core S&P/ASX 200 ETF (ASX: IOZ).

With the ASX 200 only down by 5% in the year to date, does it make sense to buy now?

ETF investing

If investors are just buying the ASX 200 as a whole, with an ETF like the iShares Core S&P/ASX 200 ETF, BetaShares Australia 200 ETF (ASX: A200), or even the Vanguard Australian Shares Index ETF (ASX: VAS) which tracks the S&P/ASX 300 Index (ASX: XKO), then I think investors could just use a regular investment plan.

An index doesn't usually change in price as much as individual shares, and it's very hard to say how an index is going to perform in the short term, or if it's good value (unless it's down heavily). Plus, with the ASX relatively highly weighted to ASX resource shares, it's even more unpredictable.

If I were investing in an ETF, I'd just put a regular amount – say $1,000 a month or $3,000 a quarter – into the ETF and not worry about 'timing' the market.

Buying individual ASX 200 shares

I think it's easier to evaluate an individual business than the whole market, so we can be a bit pickier if looking at specific names like BHP Group Ltd (ASX: BHP), Wesfarmers Ltd (ASX: WES), or Woodside Energy Group Ltd (ASX: WDS).

I'd be happier to buy resource shares when sentiment about the commodity is low.

For example, the iron ore price and BHP share price were substantially lower a few months ago, so the resource giant was more compelling compared to now.

I'm not going to run through my thoughts on 200 different businesses, but I will say that I generally think the market has been too pessimistic about retailers on a three-year view.

I have just written an article outlining my positive views on Brickworks Limited (ASX: BKW) and also pointed out that some ASX tech shares could be beaten-up opportunities because they are still growing at a solid pace. Accordingly, I named the ASX 200 tech share Xero Limited (ASX: XRO) as an idea.

Foolish takeaway

Volatility can be a great time to pick up some long-term growth businesses at cheaper prices, which can go a long way to help us outperform the market over time. But, there may well be some more dips in the coming months, particularly if inflation stays elevated for longer than expected.

The post Is now really the time to buy ASX 200 shares? appeared first on The Motley Fool Australia.

Receiving passive income from ASX dividend shares is one of the best things about investing. Dividend income is truly passive income, requiring nothing more than an investment of capital. An investor will receive their dividends, rain or shine, sick or healthy, if they own dividend-paying shares.

But knowing this is the easy part. So how does one choose the ASX dividend sources that are to provide this passive income?

Well, that's the $64 million question.

Want passive dividend income? Start with an ETF

I would start with an exchange-traded fund (ETF). An ASX index ETF like the iShares Core S&P/ASX 200 ETF (ASX: IOZ) holds all 200 shares in the ASX 200 Index. Right off the bat, this includes dozens and dozens of dividend-paying shares.

Holding the top spots are famous payers like the ASX big four banks, BHP Group Ltd (ASX: BHP), Telstra Group Ltd (ASX: TLS) and Woolworths Group Ltd (ASX: WOW). All dividends and franking credits received by an ETF have to get passed on to investors, so the iShares ASX 200 ETF always pays out dividend distributions that reflect the ASX at the time.

These tend to grow over time in line with the Australian economy too. For example, back in 2017, the iShares ASX 200 ETF paid out a total of 97.84 cents per unit in dividend distributions. Over this year, that same ETF has paid out $1.74 per unit in income.

Considering all of this, I think an ASX index fund like this is a great foundation to build a portfolio of passive income-paying investments.

But what about when it comes to individual dividend shares?

Here are two things to consider. The first is a company's strength. A strong company can usually afford to pay out strong and consistent dividend income. When I buy a share, I like to ask myself a simple question: will this company be bigger and stronger in ten years than it is today? I think the answer for many of the ASX's top companies is most certainly 'yes'.

Woolworths, for example, is the most dominant grocer in Australia. We'll all continue to need to buy food and other household essentials. And I think Woolworths is the place that most Australians will continue to use to this end. Thus, Woolworths is the kind of ASX dividend share I would consider for a portfolio to provide growing passive income.

The past can tell us what to expect in the future

The second is a company's dividend history. I believe that if a company can demonstrate a solid track record when it comes to dividend payments, it bodes well for the potential of a future investment. Take Washington H. Soul Pattinson and Co Ltd (ASX: SOL).

Soul Patts has one of, if not the, best dividend streak on the ASX 200. It has increased its annual dividend payment every single year since 2000, a feat no other ASX 200 share can match today. That alone gives me a great deal of confidence in including this ASX share as part of a passive dividend income portfolio.

So that's where I would start if I wished to build a passive income portfolio of ASX shares from scratch. The key is to find investments that you can make a reasonable assumption will be able to fund a growing dividend well into the future.

The post How I'd aim to generate a growing passive income from dividend shares appeared first on The Motley Fool Australia.

Here at The Motley Fool, we are obviously big fans of active investing and trying to beat the market. After all, what is the point of owning your own shares if not to try and achieve outsized returns. And yet, I still think that every investment portfolio should include at least one ASX exchange-traded fund (ETF).

An index ETF is designed to track an index as closely as possible. As such, a good ETF will never outperform the index it is tracking. But it will also give you the returns of said index. If an active investor fails to beat the market with their portfolio, then they would have been better off just owning the market in the form of an index ETF.

The best thing about an ASX share portfolio is that we can include all kinds of assets. There's nothing stopping anyone from having a mix of (hopefully) market-beating shares and ETFs that track the markets.

So I view an index ETF as an insurance policy of sorts.

Why ETFs can improve an ASX share portfolio

Say an investor has 50% of their portfolio in individual shares and 50% in an ASX index fund like the iShares Core S&P/ASX 200 ETF (ASX: IOZ).

If that investor's individual shares outperform the market, then the investor still has a market-beating portfolio. If they don't, then the losses are cushioned by the half of their portfolio that tracks the market. Either way, the investor wins in my view.

It doesn't have to be an ASX ETF either. There are a number of quality funds on the ASX that track markets outside the ASX. The iShares S&P 500 ETF (ASX: IVV), for example, follows the most-tracked index in the world: the S&P 500. The Vanguard MSCI Index International Shares ETF (ASX: VGS) is a similar fund but adds exposure to other advanced economies, such as Japan, Canada, and the United Kingdom.

This would add geographic and currency diversity to one's ASX portfolio – even more insurance. Not to mention some of the best companies in the world, such as Apple and Amazon.com.

ETFs are simple, easy to invest in and cheap. So unless an investor is supremely confident in their ability to consistently pick shares that outperform the market over time, then I think having an index ETF in a portfolio is always a good idea. Especially for a beginner investor.

The post Why I think every investment portfolio should include at least one ASX ETF appeared first on The Motley Fool Australia.

The iShares Core S&P/ASX 200 ETF (ASX: IOZ) has been rangebound today and currently trades less than 1% higher at $28.20 a share

This is around the same as the index the fund tracks. The benchmark S&P/ASX 200 Index (ASX: XJO) is also up less than 1% on the day so far, tracking 0.66% higher at the time of writing.

Big exit for one large player

Now reports have surfaced of what's been labelled as the "single largest trade" of an exchange-traded fund (ETF) in the asset class's history.

ASX trade data from August reveals that one institutional investor, a superannuation fund, sold down $830 million of its position in the ASX 200 ETF on 19 August, as reported by The Australian.

"It is understood the client held the ETF for several years before selling, with some suggestion the withdrawal proved the fund's positive performance," it wrote.

The trade has been the single largest on the ASX for an ETF and marks a large collection of cash for the super fund.

What this means for the super fund looking ahead, or where it intends to reallocate the capital, is unknown at this stage.

While there's been a number of macro-variables plaguing the benchmark index in the new financial year, price action since the trade [shown via the red dashed line] has headed lower, as seen below.

The move is in contrast to net fund flows into Australian investment funds for the past month, with nearly US$1.2 billion in net inflows to ETFs during that time.

Meanwhile, the iShares Core S&P/ASX 200 ETF has lost around 9% in the past 12 months. As expected, it's in line with the benchmark index's near 8% drop over the same period.

The post $830 million sale: Is the iShares ASX 200 ETF a record holder now? appeared first on The Motley Fool Australia.

AFIC is a listed investment company (LIC) and one of the oldest LICs on the ASX at that. It first started trading way back in 1928.

Like all LICs, AFIC is not a typical company that sells goods or services. It instead functions more like a managed fund, investing its capital into other shares and assets on behalf of its investors.

LICs were around before anyone had ever heard of an exchange-traded fund (ETF). Today, LICs like AFIC compete with ETFs for the dollars of the 'passive investor'. Both vehicles can offer a hands off investing approach to retail investors.

ETFs, especially index funds, have surged in popularity over the past decade or two. Investors love the low fees that ETFs can offer, as well as the 'if you can't beat it, join it' approach an index fund offers investors.

An index fund like the iShares Core S&P/ASX 200 ETF (ASX: IOZ) will always deliver the returns of the S&P/ASX 200 Index (ASX: XJO). As such, investors who choose this ETF never have to worry about 'underperforming the market' since this investment is, for all intents and purposes, the market.

AFIC doesn't have this luxury. Since it doesn't just blindly track the ASX 200 index, it will always be put up against the returns of indexes like the ASX 200.

Why I would choose AFIC over an ASX 200 ETF today

But I think AFIC is still a superior choice to an ASX 200 ETF today. It's not because of fees though. Yes, AFIC 's current management fee of 0.16% per annum is slightly higher than many ASX index funds, For example, IOZ charges a fee of 0.09% per annum.

No, it comes down to sheer performance.

As of 31 July, IOZ units have returned an average of 7.89% per annum over the past five years, and 9.19% per annum over the past ten. Those metrics include dividend distribution returns.

In contrast, AFIC shares have returned an average of 13% per annum over the past five years (to 30 June 2022), and 13.1% per annum over the past ten. If we take the LIC's net assets per share growth, rather than share price returns, these figures are 8.4% per annum and 10.5% per annum respectively. These returns also reflect dividends.

So as you can see, in both cases, AFIC's returns come in comfortably above those of an ASX 200 index fund like IOZ.

As such, I think AFIC is a superior investment choice for a passive investor, and I would prefer to use AFIC rather than an index ETF for this purpose today.

The post Why I prefer AFIC shares to an ASX 200 index fund today appeared first on The Motley Fool Australia.

The ASX 300 is similar to the far more popular and widely-tracked S&P/ASX 200 Index (ASX: XJO). Many ETFs on the ASX track the ASX 200, but only VAS mirrors the ASX 300.

The ASX 200 and ASX 300 both track the 200 largest shares on the ASX by market capitalisation. But the ASX 300 (you guessed it) adds another 100 of the smaller shares on the ASX. Thus, this gives VAS a slightly larger and more diverse underlying portfolio of ASX shares.

Here at the Fool, we've looked at how this has given VAS a performance edge over other ASX 200 index funds before. But today, let's see how the dividends from the Vanguard Australian Shares Index ETF stack up against an ASX 200 ETF.

VAS vs ASX 200 ETFs: Whose dividends are bigger?

So, like most index funds, VAS paid a dividend distribution every quarter. Its last four distributions have totalled approximately $6.26 in dividend distributions per unit. On the current VAS unit price of $87.13, this gives the ETF a trailing dividend distribution yield of 7.18%.

Let's now compare that trailing yield to a popular ASX 200 index fund in the iShares Core S&P/ASX 200 ETF (ASX: IOZ).

So, like VAS, IOZ also pays out quarterly distributions. Its last four payments amounted to approximately $1.61 per unit. On the iShares ASX 200 ETF's last unit price of $28.27, this grants the ETF a trailing yield of 5.7%.

So VAS has come out on top in terms of yield over the past 12 months, at least against IOZ. But let's look at another ASX 200 ETF, just to make sure.

This time, we'll turn to the SPDR S&P/ASX 200 ETF (ASX: STW), one of the oldest index funds on the ASX. So again, we have four dividend distributions to tally up, which in this case gives us a total of $4.18 in distribution per unit over the past 12 months.

On the current unit price, this gives us a trailing yield of 6.58% on STW's last pricing.

The differing yields between these various ETFs come down to a number of different factors. But what is clear is that the Vanguard Australian Shares Index ETF certainly comes out on top when assessing dividend income over the past 12 months.

The post Is the VAS ETF providing a bigger dividend yield than other ASX 200 index funds? appeared first on The Motley Fool Australia.

The Australian Foundation Investment Co Ltd (ASX: AFI), or AFIC for short, is one of the oldest companies on the ASX. It was founded way back in 1928 as a listed investment company (LIC) and has been doing pretty much the same thing ever since. That would be investing in a portfolio of (mostly) ASX shares on behalf of its investors.

But given this style of passive investing is today dominated by the index exchange-traded fund (ETF), how does AFIC differ? What is the point of investing in a LIC over a simple market ETF?

Well, unlike an ETF, which is duty-bound to exactly mirror the index it tracks, AFIC has portfolio managers that construct the company's investment portfolio as they see fit. This means that AFIC can pick and choose winners from the S&P/ASX 200 Index (ASX: XJO) just like any individual investor. In contrast, an index ETF has to hold all 200 shares of the ASX 200 in the exact same proportions as the index.

This gives AFIC scope to outperform (or underperform) the ASX 200 over time.

How does AFIC's share portfolio compare to an ASX 200 ETF?

Let's check out the data to see this in action. So as it currently stands (as of 8 April anyway), the top five holdings of the iShares Core S&P/ASX 200 ETF (ASX: IOZ) and their weightings are as follows:

1. BHP Group Ltd (ASX: BHP) with an index weighting of 11.8%
2. Commonwealth Bank of Australia (ASX: CBA) with a weighting of 8.07%
3. CSL Limited (ASX: CSL) with a weighting of 5.71%
4. National Australia Bank Ltd (ASX: NAB) with a weighting of 4.72%
5. Westpac Banking Corp (ASX: WBC) with a weighting of 3.79%

So let's compare these to AFIC's portfolio. Here are AFIC's current (as of 31 March) top five holdings and their portfolio weightings:

1. Commonwealth Bank of Australia with a portfolio weighting of 9.2%
2. BHP with a weighting of 8%
3. CSL with a weighting of 7%
4. Macquarie Group Ltd (ASX: MQG) with a weighting of 5%
5. Transurban Group (ASX: TCL) with a weighting of 4.3%

So even with just those five shares, you can tell these two investments have quite a different composition (albeit with some overlap). That probably explains why AFIC shares have returned an average of 13.2% over the past decade (including dividends and franking). The ASX 200 Index has returned an average of 11.7% (also including divided and franking) over the same period.

Thus, an investment in AFIC is not the same as an investment in an ASX 200 ETF like IOZ. In this case, AFIC investors seem to have done better than index investors over the past decade.

At the current AFIC share price, this ASX LIC has a market capitalisation of $10.16 billion, with a dividend yield of 2.92%.

The post How is AFIC different from an ASX 200 ETF? appeared first on The Motley Fool Australia.

Perhaps unfortunately for this Listed Investment Company (LIC), that is no longer the case in today's modern investing world. With the rise of the exchange-traded fund (ETF), there are many investors today, inspired by the teachings of great investors like Warren Buffett and the late Jack Bogle, who simply look to index funds to fulfil this role. Why try and compete with the market, when you can just invest in the market, goes the logic. And perhaps fair enough too. If you've tried your hand at investing in individual shares yourself, you probably know how difficult it is to beat the market over a long time frame.

But that doesn't mean AFIC is irrelevant now. After all, on its latest performance data, this LIC has managed to slightly outperform the S&P/ASX 200 Index (ASX: XJO) over the past 5 years. It has returned an average of 10.6% per annum over this period, against the ASX 200's flat 10%. 

But what of dividends? There might be many investors who choose AFIC as an investment over an ETF because of its history of delivering strong, fully franked dividend income. 

So let's see how AFIC compares to the ASX 200 in this regard. 

AFIC vs ASX 200: dividend showdown

So AFIC's last two dividend payments were an interim dividend of 10 cents per share that investors saw last month. And a final dividend of 14 cents per share that was paid out last August. Both dividends were fully franked. Those two dividends give AFIC shares a trailing yield of 2.94% on current pricing. 

Let's compare that to an ASX 200 ETF like the iShares Core S&P/ASX 200 ETF (ASX: IOZ). IOZ pays out quarterly dividend distributions. Its last four payments total roughly $1.08 in distributions per share. On today's unit price, that gives this ETF a trailing yield of 3.63%. However, not all shares in the ASX 200 pay fully franked dividends, so this yield only comes partially franked. But even so, it clearly outstrips AFIC.

But a caveat. AFIC is a LIC. That means it can hoard its dividend payments in order to smooth them out over time. In contrast, most ETFs are trust structures, which means they are compelled to pass on any dividend income to their shareholders almost immediately.

That might explain why AFIC was able to keep its dividends at 2018 levels over 2020 and 2021 – both years where many ASX shares were forced to slash their dividends compared to prior years' levels. On the other hand, we saw IOZ's distributions fluctuate wildly over the past few years. So AFIC might appeal to some income investors out there for this reason.

But that's how AFIC as a LIC compares to an ASX 200 ETF in terms of dividend income. 

The post Does the AFIC (ASX:AFI) dividend beat the ASX 200? appeared first on The Motley Fool Australia.

According to the new Australian ETF Review from ETF provider BetaShares, ASX ETFs have indeed had a rough start to 2022. Although inflows towards ASX ETFs were still positive over January 2022, it wasn't enough to stem the outflowing tide from global markets. According to BetaShares, total funds under management for the sector fell 3.7% over January. That represents a loss of $5.1 billion in funds under management. That left the ASX ETF sector with a total of $131.8 billion in funds under management at the end of January.

That was despite the launch of two new active ASX ETFs during the month, bringing the total number to 282 on the ASX. As an aside, BetaShares is expecting active ETF launches to remain "very frequent" throughout the rest of the year.

ASX ETFs suffer as global markets fluctuate

But even though ASX ETFs had a rough January overall, the sector has still grown by 36%, or $35.5 billion, over the past 12 months.

BetaShares also noted that monthly trading value over January increased by a hefty 26% to $10.3 billion. That's reportedly the second-highest monthly level on record.

So which ETFs were investors buying and selling over January? The research tells us that the BetaShares Australia 200 ETF (ASX: A200) was the most popular ETF by inflows over the month that was. A bit over $300 million found its way into A200. Next up was the Vanguard Australian Shares Index ETF (ASX: VAS), with slightly more than $220 million. Following that, we had the Vanguard MSCI Index International Shares ETF (ASX: VGS) with roughly $118 million in inflows.

Conversely, the iShares S&P/ASX 200 ETF (ASX: IOZ) saw the largest outflows over January, with more than $353 million leaving that fund. Other ETFs experiencing outflows were mostly bond, or fixed-interest funds. Those included the iShares Core Composite Bond ETF (ASX: IAF) and the iShares Treasury ETF (ASX: IGB). 

So another interesting month for ASX exchange-traded funds over January. The sector is clearly not immune from the market volatility we have seen over 2022 thus far. But it arguably is also showing resilience too. It will be interesting to see what the rest of 2022 brings to ASX ETFs. 

The post What's going so wrong for ASX ETFs in 2022 so far? appeared first on The Motley Fool Australia.

There are now more exchange-traded funds (ETFs) on the ASX boards than you can poke a stick at. From their emergence as simple index funds, ETFs have taken the investing world by storm over the past decade or two.

Ten years ago, you'd have been pressed to find more than a handful of ETFs on the Australian share market. But today, there are dozens and dozens of them.

You can find an ASX ETF for almost anything. Be that palladium bullion, global mining shares, cryptos, crude oil futures, or inflation-linked government bonds.

But looking at the most popular ASX ETFs, it's clear that the humble index fund remains king of the hill.

As it stands today, the ASX's most popular ETF is the Vanguard Australian Shares Index ETF (ASX: VAS).

VAS's provider Vanguard tells us that this fund had $9.59 billion in funds under management (FUM) as of 31 October. That's miles ahead of its closest rival, the iShares S&P 500 ETF (ASX: IVV), which has approximately $5.3 billion in FUM today.

So, what makes this ETF so popular?

Why is VAS our most popular ASX ETF?

Well, one possible explanation is its unique structure. Most index ETFs that track the ASX share market mirror the S&P/ASX 200 Index (ASX: XJO). This flagship ASX index tracks the performance of the Australian share market's 200 largest companies. But VAS instead mirrors the S&P/ASX 300 Index (ASX: XKO).

As you can probably guess, this index includes an additional 100 companies outside the ASX 200. This gives VAS a diversification boost and more exposure to the small-cap market.

It has also given VAS a performance edge over its ASX 200 rivals. Over the past 10 years, VAS has returned an average of 9.91% per annum. In contrast, the iShares Core S&P/ASX 200 ETF (ASX: IOZ) has given investors an average of 9.75% per annum over the same period.

Another factor that could be at play is Vanguard's reputation, something our chief investment officer Scott Phillips recently discussed.

Many investors know that Vanguard is a not-for-profit company. This can give Vanguard ETFs a pricing edge as they don't have to give their providers the same kind of margin as a for-profit provider. We can see this in VAS's annual management fee of 0.1%. That's $10 a year for every $10,000 invested.

In the vanguard of reputations…

It probably doesn't hurt that the great investor Warren Buffett once described Vanguard's late founder Jack Bogle as doing more for the average investor than anyone else. Here's what Buffett said in one of his letters to shareholders a few years ago:

If a statue is ever erected to honor the person who has done the most for American investors, the hands-down choice should be Jack Bogle… he has the satisfaction of knowing that he helped millions of investors realize far better returns on their savings than they otherwise would have earned. He is a hero to them and to me.

That is a tough act to follow.

So, it's probably a combination of these factors that make VAS the ASX's most popular ETF.

At the time of writing, units in VAS are going for $92.92, down 0.33% for the day so far.

The post Why is the Vanguard Australian Shares Index ETF (ASX:VAS) the most successful Aussie ETF? appeared first on The Motley Fool Australia.

The rise in popularity of the exchange-traded fund (ETF) as an investment vehicle on the ASX is not a new one. We have covered ASX investors' seemingly insatiable appetite for ETFs many times here on the Fool.

But the age of the ETF might only be getting started, going off of the latest data.

According to ETF provider BetaShares, the ASX just had its best month ever in terms of ETF inflows. BetaShares' latest Australian ETF Review covers the month of September, and it makes for some interesting reading for any ETF (or investing) enthusiast.

The report found that September ended up experiencing the highest monthly net inflows on record for the ETF industry, with the entire ETF sector swelling by an unprecedented $2.9 billion over the month just passed. There are now $125.3 billion in ETF funds under management on the ASX, another record high.

Incredibly, BetaShares reckons the ETF market in Australia has grown by a compounded average growth rate of 46% per annum between July 2001 and September 2021. The growth rate over the past 12 months to September alone was 76%.

September also saw $9 billion in trading activity alone, matching the previous highs seen in March 2020. If you remember, March 2020 saw the worst of the COVID crash that dominated investor sentiment last year.

Which ASX ETFs got the most love from investors?

The ETFs which experienced the highest fund inflows in September were:

1. BetaShares Australian High Interest Cash ETF (ASX: AAA) with $361.68 million in inflows
2. iShares Core S&P/ASX 200 ETF (ASX: IOZ) with $313.01 million
3. Vanguard Australian Shares Index ETF (ASX: VAS) with $195.41 million

Meanwhile, the top-performing ETFs over September were:

1. ETFS Ultra Short Nasdaq 100 Hedge Fund (ASX: SNAS), up 14.1% over the month
2. BetaShares US Equities Strong Bear Hedge Fund (ASX: BBUS), up 11.4%
3. BetaShares Crude Oil Index ETF (ASX: OOO), up 9.8%

Interestingly, the top two performers were geared (leveraged) inverse ETFs, which are designed to rise in value when the broader markets fall. That makes sense since the US markets had a pretty dreadful month over September, as did the ASX 200. BetaShares characterised this trend as investors "buying the dip" using ETFs.

If the ETF sector keeps growing even when markets are falling, it certainly bodes well for its future.

The post ASX ETF sector continues to boom and hit record highs appeared first on The Motley Fool Australia.

ASX lithium shares are surging across the board on Friday.

Heavyweights including Galaxy Resources Ltd (ASX: GXY) and Orocobre Ltd (ASX: ORE) are both rallying into record territory, up 6.44% and 6.27% respectively.

Unfortunately for Pilbara Minerals Ltd (ASX: PLS), its shares have been suspended, pending the outcome of a court hearing after the company failed to disclose the issuance of new shares.

Elsewhere, emerging lithium players and explorers including Piedmont Lithium Ltd (ASX: PLL) and Liontown Resources Ltd (ASX: LTR) are also trading higher, up 1.36% and 8.88% respectively.

What's driving ASX lithium shares to new highs?

There has been a lot of hype around the lithium sector, driven by the rising popularity of electric vehicles and the global focus on decarbonisation.

On Friday, Reuters reported that the "White House has told US automakers it wants them to back a voluntary pledge of at least 40% of new vehicles sales being electric by 2030 as it works to reduce greenhouse gas pollution". Yet another possible tailwind for ASX lithium shares.

According to the International Energy Agency (IEA), a record 3 million new electric cars were registered in 2020, a 41% increase from the previous year.

Encouragingly, the IEA cited that electric car sales in the first quarter of 2021 have lifted "nearly two and a half times their level in the same period a year earlier".

Looking ahead, the IEA believes the electric vehicle industry is poised for significant growth over the coming decade.

"Based on current trends and policies, it projects the number of electric cars, vans, heavy trucks and buses on the road worldwide to reach 145 million by 2030. But the global fleet could reach 230 million if governments accelerate efforts to reach international climate and energy goals".

Lithium prices rally to 2-year highs

Both ASX lithium shares and lithium prices are making a comeback after a two-year bear market between 2018 to 2020 where prices tumbled more than 70%.

Orocobre released its June quarterly results on 22 July, where it highlighted that lithium prices have increased by nearly 170% over the last nine months.

The company was receiving an average realised price of US$8,376/tonnes, up 45% quarter-on-quarter.

A recent update from Fastmarkets said that "lithium prices in China domestic market rise amid consumer restocking activity" and "European and US prices remain largely stable, with technical-grade lithium hydroxide narrowing upward slightly".

The post ASX lithium shares are surging this Friday. Here's why. appeared first on The Motley Fool Australia.

Here's the data:

Zip Co Ltd (ASX: Z1P)

This buy now pay later (BNPL) provider was far and away the most traded share on the CommSec platform last week. Its shares were involved in 4% of trades, with buyers accounting for almost two-thirds of the volume. This followed the release of the company's fourth quarter update. The Zip share price ended the week marginally lower after investors reacted negatively to the update.

Betashares Nasdaq 100 ETF (ASX: NDQ)

This ETF was popular with investors once again during the five days. The Betashares Nasdaq 100 ETF was attributable to 2% of trades on CommSec, with a sizeable 90% of the volume coming from buyers. The technology-focused ETF rose 2.3% last week, stretching its 2021 gain to ~18%. Investors may have been buying the ETF in anticipation of a strong US earnings season.

BetaShares Global Sustainability Leaders ETF (ASX: ETHI)

Investors were piling into this ethical ETF again last week. The ETF was involved in 1.7% of trades during the week, with 92% of the volume coming from the buy side. This led to the ETF gaining 1.6% last week, bringing its year to date gain to 15%. Increased interest in ethical investing has been driving this ETF higher.

iShares Core S&P/ASX 200 ETF (ASX: IOZ)

ETFs certainly were popular last week. A third ETF among the top five was the iShares Core S&P/ASX 200 ETF, which was responsible for 1.5% of trades on CommSec. As with the other ETFs, the majority of these trades were from buyers. A total of 88% of the volume was from the buy side. These investors appear to believe the ASX 200 index can keep on climbing over the remainder of 2021 despite hitting a record high.

Commonwealth Bank of Australia (ASX: CBA)

This banking giant's shares were popular with investors and were attributable to 1.2% of trades on the platform. The buying and selling was largely flat, with 53% of the volume coming from buyers. The CBA share price rose 1% over the five days. Investors may be confident that a solid full year result is coming from Australia's largest bank next month.

The post CBA and Zip were among the most traded ASX shares last week appeared first on The Motley Fool Australia.