In this post we look at the performance of the lowest cost diversified ETF portfolio available on the ASX, and compare it to the performance of a similar managed fund in 2015.
2015 certainly was not a year to remember for most investors with global share markets ending the year pretty close to where they started. Nevertheless, last year we put together our Lowest cost ETF portfolio available on the ASX. This showed that a diversified ETF portfolio could be invested in with management fees between 0.21% and 0.27% depending on the risk tolerance selected.
Now that we’ve got through 2015 it’s time to look at how that portfolio performed in 2015. The chart below shows the 2015 performance of each of our 5 diversified portfolios.
There we have it, total performance of the portfolios ranged from 3.25% to 4.16%, the majority for all portfolios coming from the income yields rather than growth in a fairly lacklustre year.
Of course, these portfolios have been modelled as closely as possible on index portfolios developed by Colonial First State through their Multi-Index products. Below we take a look at the performance of these funds, note that the Multi-Index Moderate fund was less than a year old so has been excluded.
The interesting observation with the Colonial First State funds is the divergence between the yield and growth of the portfolios. All have a large capital loss but also a large yield, each much bigger than the ETF portfolios. To us this indicates higher turnover of the investments than the ETF portfolios, and something to consider for those on a high tax bracket, as tax must be paid on the income yield (although some of the yield will likely be discounted capital gains and franked dividends).
Below we take a look at the comparative overall performance of the two portfolios.
It can be seen that the ETF portfolio outperformed across all risk profiles (the CFS Moderate fund is less than a year old so was not included). Most interesting is the fact that the performance of the ETF portfolio increased as the asset allocation became more aggressive, but the CFS portfolio performance decreased as the allocation became more aggressive. We’re not sure of the reason for this, but can only assume it is somewhat to do with the fact that the ETF portfolio does not include an allocation to global infrastructure, due to no fund being currently available on the ASX. It will be interesting to see if this difference converges over time. Of course as per what we said in our initial post, there’s other factors to weigh up when deciding whether to invest in an ETF portfolio or a managed fund which should be considered by investors and of course one year’s performance means very little in the grand scheme of things.
We’ll continue to keep an eye on the performance of our Lowest Cost ETF Portfolio and report back periodically how it is going.