ASX 20 is the largest 20 companies listed on the Australian Stock Exchange. Similar to other ASX indices, ASX20 is a market capitalization index in which the total value of the index is calculated by the weight on each individual company relative to each other with the companies in the index accounting for more than 40% of the overall market size.
Top 20 ASX Companies
|1||Commonwealth Bank of Australia||CBA||Financial|
|2||Westpac Banking Corp||WBC||Financial|
|3||BHP Billiton Limited||BHP||Resources|
|4||Australia and New Zealand Banking Group||ANZ||Financial|
|5||National Australia Bank Ltd.||NAB||Financial|
|6||Telstra Corporation Ltd||TLS||Telecommunication|
|7||Rio Tinto Limited||RIO||Resources|
|10||Woolworths Limited||WOW||Consumer Staple|
|11||Macquarie Group Ltd||MQG||Financial|
|12||Woodside Petroleum Limited||WPL||Energy|
|13||Scentre Group Ltd||SCG||Real Estate|
|14||Westfield Corp Ltd||WFD||Real Estate|
|17||QBE Insurance Group Ltd||QBE||Financial|
|18||Suncorp Group Ltd||SUN||Financial|
|19||Insurance Australia Group Ltd||IAG||Financial|
ASX 20 Index ETF
Blackrock provides an index tracking ETF, iShares S&P/ASX 20 ETF (ASX:ILC). The goal of the ETF is to track the performance of the index with minimal deviations. The advantage of ILC as you would expect is the low management fee and strong intraday liquidity.
ILC management fee is 0nly 0.24% per annum and distributions are paid quarterly. For superannuation investors, the ETF can be attractive from a franking credit perspective.
As most of the earnings of the companies in the index are sourced from Australia, the dividends paid are mostly 100% franked. This means that the distribution of ILC have a higher level of franking credit than broader market indexes like ASX:STW (ASX 200 index fund).
One of the major issues in the Australia market is limited sector diversification. The ASX Top 20 is a good representation of this as it is dominated by 2 sectors, financials and resources. Almost 70% of the index is made up of these 2 sectors.
The other sectors in the index are made up of single company exposures. Telecommunication is represented by Telstra, Health by CSL and Energy by Woodside.
While investors should be aware of the concentration risk in the index. The ASX Top 20 history shows that the return of the index broadly mirrors the other major Australian equities indices.
This is due to considerable overlap between the indices as companies in the ASX20 are included in the ASX 50 and those that are in the ASX 50 are included in the ASX 100 and so on.
Hence the larger market indices are weighed down by the largest companies. The returns are driven by the same factors or sectors such as miners and banks.
ASX 20 ETF share price
Chart below shows the ASX 20 ETF share price over the last year. Note the chart shows price changes only which does not include the impact of the dividends paid.
The funds dividend yield is around 5% which can be slightly higher than broader market. This can be attributed to the heavy weighting of the banks.