Betashares A200 ETF aims to track the Solactive Australia 200 index, that is the top 200 Australian publicly traded companies by market cap. A200 is a relative newcomer to the ETF scene, having listed in May of 2018, but it has come out swinging and now (October 2019) they manage an incredible market cap of over (AUD) $2.104 Billion.
Betashares A200 was founded on the following benefits;
Low Cost – management costs of .07% p.a, the lowest cost Australian shares available on the ASXBetaShares
Portfolio Diversification – in a single ASX trade, investors gain exposure to the largest 200 companies listed on the ASX
Physically backed – funds hold physical securities that comprise the index – no derivatives used for index tracking
Transparent – portfolio holdings, value of the funds assets and net asset value per unit available daily on the BetaShares website
Liquidity – available to trade on the ASX like any share
A200 invests in accordance with the Solactive 200 Index of Australian shares. This is slightly different to the S&P ASX 300 index, in that it does not include companies from 201-300 on the index. Due to the higher weighting by market cap of financials and materials (mining) in the index, this is shown in A200’s sector allocation above. A200 also invests heavily in healthcare, industrials and real estate which are all huge parts of the Australian economy.
A200 has its top 10 holdings in Commonwealth Bank, CSL construction Limited and BHP, reflecting the sector allocation as per the index. The top 5 exposures make up just over 30% of the portfolio, and the top 10 making up 44.5%. These blue chips that make up a higher percentage of the portfolio are good, stable earners which typically produce strong dividends.
A200 has produced a 4.56% dividend yield in the year ending 31 August 2019, which I think is pretty good. For an investor following a Thornhill style dividend investing approach, this allows you to safely draw on your portfolio using the 4% rule from dividends alone (no need to sell any parcel of shares – not that that is a bad thing), plus surplus to reinvest into future shares. The Capital value of the share price of A200 will also steadily track the index, and should expect to see growth as per the index over time
Why I own A200
I own A200 because I can’t be bothered buying individual stocks. It takes too much time to value them and keep track of them all. It makes sense to buy an index fund, and ETFs for me are a massive win.I know I want to invest in the Australian Index, and I know I want to do this through both ETFs and LICs.
For me, when LICs are not looking favourable, or if there is a massive drop in the price of the ETF, then I will be choosing the ETF. A200 with its rock bottom .07% annual management expense ratio means choosing it is a no brainer.
BetaShares A200 is really leading the way with ultra low fee ETFs, and it can be seen in their massive growth that investors are voting with their feet and choosing the low cost alternative. And I will too, in line with my investment strategy of course.
Should I buy A200 or VAS?
Similar to the discussion between US ETFs VTS (Vanguard) and IVV (BlackRock iShares), there is a choice to be made in the Australian market between the Vanguard offering VAS and the Betashares offering A200. VAS historically had twice the management fee of A200, but given they recently reduced this to a MER of.10% makes it more attractive.
A200 is still over a third cheaper in terms of management fees, but I like the idea of splitting my funds across two ETFs, both in terms of “diversification” and to make sure I can buy whatever has gone down the most. I also like that I am choosing both ETFs which each track a slightly different index: VAS: S&P ASX 300 index vs A200: Solactive 200 index.
A200 is an attractive, ultra low fee Aussie ETF. It gives exposure to the top 200 Australian publicly traded companies, and passes on all dividends straight to the shareholders, and capital growth of its portfolio is reflected in the growing A200 share price. I will hold A200 for a long time to come, and enjoy the benefits of a diversified Aussie share portfolio in one simple to manage ETF. I think its well suited for someone on the path to FI. What about you?
Epilogue: I sold my VAS (Vanguard Australian shares) ETF and rolled the balance into Betashares A200 fund. This was because The management fee was cheaper with A200 than it was with VAS, and ultimately Fees are the only thing I can control – I can’t control the market!