Exchange-traded funds (ETFs) are an increasingly popular way for Australian investors to gain exposure to the global stock market. Two of the most popular ETFs in this category are the Vanguard MSCI Index International Shares ETF (VGS) and the iShares S&P 500 ETF (IVV). Both funds offer investors exposure to large-cap companies listed in developed markets around the world, but there are some key differences between the two. In this article, we’ll compare VGS vs IVV in Australia and help you decide which one is right for you.
Overview of VGS and IVV
VGS and IVV are both index-tracking ETFs that aim to replicate the performance of a particular stock market index. VGS tracks the MSCI World ex-Australia Index, which includes large- and mid-cap companies listed in developed markets around the world, excluding Australia. IVV tracks the S&P 500 Index, which includes 500 large-cap companies listed on US stock exchanges.
VGS is managed by Vanguard, a global investment management company with a reputation for low fees and passive investing. IVV is managed by iShares, which is owned by BlackRock, one of the largest asset management companies in the world.
Fees and Expenses
One of the most important factors to consider when choosing an ETF is its fees and expenses. These costs can significantly impact your investment returns over time. In general, Vanguard is known for its low-cost index funds and ETFs, and VGS is no exception. The management fee for VGS is 0.18% per annum, which is relatively low compared to other global equity ETFs. Additionally, VGS does not charge any performance fees.
IVV’s management fee is slightly higher, at 0.04% per annum. However, investors should be aware that this fee does not include other costs, such as transaction costs and bid-ask spreads, which can add up over time. As a result, the total cost of investing in IVV may be higher than the stated management fee.
In terms of trading costs, both VGS and IVV are highly liquid and can be easily bought and sold on the ASX. However, VGS may be subject to foreign exchange costs when buying and selling shares due to the fact that it is denominated in US dollars.
Both VGS and IVV offer investors exposure to a diversified portfolio of large-cap companies in developed markets. However, there are some differences in the composition of the two ETFs. VGS includes companies from a broader range of countries than IVV, which is solely focused on US large-cap stocks. As a result, VGS may offer investors greater geographic diversification than IVV.
Additionally, VGS includes exposure to both developed and emerging markets, whereas IVV does not. This means that VGS may be more suitable for investors who are looking for a higher degree of diversification across regions and markets.
The historical performance of an ETF is not a guarantee of future returns, but it can be a useful indicator of how well the fund has performed in the past. Both VGS and IVV have delivered strong returns over the long term. However, there are some differences in their performance.
IVV has historically delivered higher returns than VGS, primarily due to the strong performance of US large-cap stocks in recent years. However, this may not be sustainable over the long term, and investors should be aware that past performance is not a guarantee of future returns.
Another important factor to consider when choosing between VGS and IVV is their investment philosophy. Vanguard is known for its passive investment approach, which means that they aim to replicate the performance of a particular index rather than actively manage the fund. This approach is designed to keep costs low and provide investors with a low-cost way to gain exposure to the market.
On the other hand, iShares takes a more active approach to investing, which means that they may adjust their holdings in response to market conditions and trends. This approach can lead to higher fees and expenses, but it may also offer the potential for higher returns.
Which ETF is Right for You – VGS vs IVV?
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Table of the differences between VGS and IVV Australia
|Global ex-US ETF
|US Large-Cap ETF
|Developed markets (ex-US)
|Number of Holdings
|FTSE Global All Cap ex US
|Apple, Microsoft, Amazon
|Apple, Microsoft, Amazon
|Technology, Healthcare, Consumer Discretionary
|Performance (5-year annualized)
Note: The above data is current as of 2023 and is subject to change over time.