Friday, 3 October 2008

STW Versus ASX20

Many people buy STW on the Australian Stock Exchange if they want to buy an index fund that tracks the S&P/ASX 200. While on Ninemsn, I looked at the recent five-year performance of STW and then compared it to the performance of the ASX20 index. What I found was that there is a difference but the difference is quite small, and the ASX20 actually beats STW in this instance. This makes me wonder whether it's worth it to buy an index fund like STW and pay MER of 0.29% when I can easily build up a collection of 20 stocks that replicates the ASX20 using a broker like Commsec for a lot less. If I have a lot of money invested, even if I put half in an index fund and half in direct stocks that replicate an index, I am sure I can save a considerable amount in management fees and not have that much impact on investment performance.

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